- Have you ever felt overwhelmed with the number of documents that you need to fill in and then track their flow?
- Do you get this feeling that your work life would be much simpler and effective if you didn’t have to check and validate everything by yourself?
- How many times have your most important business transactions been endangered because purchase orders or invoice got stuck in someone’s mailbox?
- Maybe you are just looking for answers about e-procurement, or are trying to find some guidelines to help you understand many e-procurement systems?
If you deal with procurement processes in your professional life and you can relate to these situations, you should definitely dive into information about the e-procurement process and its benefits gathered in this article.
What is e-procurement?
E-procurement is the electronic management of all activities in the procure to pay process, which is done through online platforms. It enables the exchange of business documents between a company’s internal ERP systems and all parties involved in this procedure. All documents are sent and received in electronic format, and the whole procurement process is automated.
Nowadays, it is crucial that e-procurement solutions should also include integration with a centralized platform established by governments for e-invoicing and e-reporting in countries of relevance (such as KSeF in Poland and PPF in France). They should be legally compliant as well.
What are the steps of the procurement process?
The procurement process is a far more complex than just purchasing goods and services. The challenges for well-organized procurement teams vary by industry. There is a need to monitor purchase requisitions, to negotiate business transactions with beneficial contract terms, to maintain vendor relationships and, of course, it is all about the balance of expenses and investments – to name just a few of the difficult tasks which are part of procurement process.
One may say that the traditional procurement cycle starts with creating purchase orders based on the company’s needs, and ends with invoice payment. However, the whole procurement process also includes demand monitoring, contract management, strategies implementation, purchasing process and budget control, and reporting. All these actions are steps in the procure to pay cycle (P2P).
What is more, all of them require a significant number of documents which need to be exchanged on a daily basis, such as order proposals and purchase orders, dispatch advices, invoices, vendor details, inventory reports, and so on.
With digital transitions rapidly happening across global economies, we are now in a situation where procurement processes and all involved documents were moved into electronic format and the whole procedure is automated. Hence, the term electronic procurement – e-procurement – has become widely used.
What is the link between the procurement department and supply chain management?
The procurement department in a company has to be in direct contact with supply chain management. It requires perfect coordination of internal processes and cooperation of both departments.
We may define supply chain as a sequence of all activities that are relevant for a company’s products and services to get to their end-users.
Understandably, supply chain management ensures that the whole process of manufacturing goods and delivering them to final customers is conducted as efficiently as possible.
From this angle, you may perceive the procurement cycle as one of the aspects of supply chain management. The traditional procurement process focuses on the acquisition of supplies necessary to run business activities.
Supply chain, on the other hand, takes care of transforming these supplies into ready products and of distributing them to customers.
Supply chain activities and procurement processes are similar in many ways. Both of them can be seen as digital processes nowadays.
What are the triggers for e-procurement?
It is easily understood that e-procurement is part of the dynamic digitization of business processes. Much has already been said about digitization. Here, I would like to answer a seemingly simple question: why digitize procurement processes?
1. Quality pressure
To start with, the issues that are the closest to everyone in the professional environment, regardless of the business branch, depend strongly on the effective exchange of information between business partners – ranging from master data synchronization, through order and contract management, all the way to delivery, receipt, invoice processing and payments.
The more you want your business to grow, the more relations you need to maintain with a high level of quality and professionalism. It can be ensured by error proofing at each step of the business process. This is why companies are seeking electronic systems which help them to validate the accuracy of each document and support various communication channels between a variety of partners.
2. Higher efficiency and cost savings
Let’s think of the manual process of such a critical activity for every company as issuing an invoice:
- The buyer creates the purchase order
- The invoice needs to be sent by email to a supplier
- The supplier manually enters this order and creates an invoice
- In many cases, such an invoice needs to be approved by different departments, such as the head of accounting or finance
- Only afterwards can the invoice be sent to a buyer
Without digital procurement, this procedure engages several people, and is time consuming and error-prone.
Hence, another trigger for digitization is the need to increase efficiency and speed up internal processes, while ensuring cost savings through bureaucracy reduction and automation.
3. Global business requirements
Taken from a wider perspective, electronic procurement can also be seen as part of the trend of e-invoicing and e-reporting which is spreading worldwide. More than 50 countries have already implemented e-invoicing and/or e-reporting. We can predict that this trend will expand in the near future. It has already caused some serious business challenges for companies.
4. Legal obligations
E-invoicing standards and requirements differ in each country. It is challenging to stay up to date with changing rules. VAT and legal compliance are among the most difficult processes for international companies. This triggers the need to choose a solution for electronic data interchange which will meet and maintain compliance requirement.
How are EDI and e-procurement connected?
Taking into consideration all of the above, it is obvious that electronic procurement and electronic data interchange are similar. Historically speaking, EDI services came before e-procurement tools and were developed to cover every step of the procure to pay process as we know it today. Currently, with the right electronic data interchange provider, it is possible to digitize all procurement procedures. Including e-invoicing and e-reporting.
Benefits of e-procurement
Procurement processes are as vital as they are challenging for every company. Any improvement in this area should be very welcome. Here are the main benefits to gain by implementing e-procurement:
- Automation of procurement processes and paperless flow of documents means cost reduction
- Increased liquidity and efficiency through faster document processing
- Fraud protection through numerous automated validation steps
- Improved business relations thanks to the high level of quality of documents and faster exchange of information
- Legal compliance
What should you consider when looking for e-procurement solutions?
To ensure that your e-procurement system will always be perfectly adjusted to your company’s needs and optimized, the support of an experienced and proven provider is highly recommended. Here are some features that every company should consider essential in their e-procurement solutions:
- The chosen e-procurement platform should definitely have capability and flexibility to grow together with your business. It would be best if your e-procurement system guarantees smooth accommodation of requirements which tend to change over time and/or across the globe. This includes continued legal compliance.
- For your organization to benefit from electronic systems for the exchange of documents, automatic verification of data correctness is obligatory.
- The core purpose of e-procurement tools is seamless communication within business to business processes. This is exactly why the solution for your company should allow any-to-any format translation.
- Integration via multiple communication channels, according to your and your counter-party needs.
- You may also want to make sure that your provider will support you during onboarding of data and partners with high expertise and best practices.
Needless to say, there is a lot at stake for your organization when choosing the most suitable e-procurement application. Comarch is fully aware of this responsibility. Our platform is the result of 30 years of experience in providing electronic data interchange services to our customers. Comarch EDI has proven its features and reliability through a number of successful projects and satisfied customers.
Consider your company’s needs and find a way to digitize your procurement process which accommodates all of them.