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10 point Guide to E-procurement

Apparently, you do not need to be a technologist or even have an e-commerce strategy to make e-procurement successful in your organisation.

Portum  Europe's leading neutral intermediary and provider for strategic sourcing and negotiation has provided us with a 10 point guide to e-Procurement .This is by no means a definitive guide, and it should be tailored according to a specific company’s needs.

e-Procurement Guide

1. Identify any ‘inefficiencies’ in your existing procurement process
Conduct a study to identify any areas of the procurement process that can be improved. Is it too timely or too costly? – use benchmarking and comparative studies based on historical cost and supplier behavior. Create your own supplier ratings based on a matrix of what is important to you: price, speed of delivery, method of transit, quality of product, payment terms, payment method, customer care or after sales support.

2. Determine if the inefficiencies are based on price or process 
Price efficiency is solely focused on driving the purchase price as low as possible. This is the key driver for the SME who may not be able to increase the buying power that is enjoyed by the larger company. Savings of a few percent on raw materials or other high-value spend can have an immediate impact. A saving of 10% on procurement costs can be equal to a 12% increase in sales. Although the traditional supplier base may become uneasy as their margins are strained, e-procurement will open up channels to many new buyers

Process efficiencies are more complex and harder to quantify. The aim here is to lower the cost of the transaction, but not just through price. The large, relatively price-efficient firms will be most attracted to this area as they strive to shave a few percent more off the cost of transaction and will be more rigorously measured on the results they achieve. In streamlining the process, it may become apparent that the business unit will become much more dependent on IT, technology and other areas of the business for support.

3. Setting objectives - what are you hoping to achieve? 
Are you looking to cut the purchase price or for better returns across an entire process or area? In either case, it is very important to determine which products are suitable for e-procurement. It may be those which have long cycle times, complex attributes and specifications, are prone to price change, price manipulation or simply expensive compared to your peer group. 

4. Allocate resources
To undertake a project in e-procurement it will be necessary to allocate adequate resources to ensure its success. These resources will be both human and financial and it is important to get a strong commitment from all areas. In the early stages of development of an e-procurement initiative most of these resources should be available in-house

5. Set timelines, responsibilities and set a target ‘ROI’
Aside from the initiator, it is important to also gain support from the financial, technology and IT departments as well. Set up a steering group with a reporting structure and establish an e-procurement strategy that reflects your ambitions. Meet regularly to monitor your progress and allocate responsibilities with timelines. As part of the strategy, you should set a target ‘Return on Investment’ that covers not only any capital expenditure such as the cost of technology, but also any internal resources and time allocated. A project manager should be appointed to drive the initiative and champion the cause internally - they should also look outside of the organisation to gather knowledge and information about e-procurement practices and peer group activity

6. Determine a selection criteria for technology providers
Providers of e-procurement solutions should not just be focused on technology. To be successful, they must have an implicit understanding of the supply chain and existing methodologies employed within large companies. Depending on your strategy and goals, it may be important for you to consider several of the following attributes: speed of implementation, price and payment structure, external hosting / hardware infrastructure (ASP), ability to integrate with existing technologies (e.g. ERP), future development plan, existing customer installations, stability / financial standing.

7. Will you only need the technology or will you also need professional services?
Larger companies will probably have established IT infrastructures, strong in-house expertise or access to consulting firms for implementation. Others will be more dependent on the solution provider not only for implementation, but also for a customer service capability in running and monitoring e-procurement events and training the supplier base. They should also be able to draw on their previous customer experience to advise on the best transaction structure and methodology to determine the best results

8. Conduct pilot testing
It is important to ‘test drive’ any new application. The best way to do this is for the provider to host a pilot program of e-procurement events with real suppliers and non-essential products. This is definitely worthwhile as it identifies required features and functionality as well as highlighting any potential problems. Also, it allows the suppliers to get used to dealing with you online. A pilot event can be set up and run in 7-14 days from initiation to delivery. A well-run pilot event is likely to yield a ROI in its own right before you have implemented a full solution across your organisation

9. Assess user friendliness
Not only must the system be easy and functional to use for those who are using it but it must also work well for the supplier base too - if it is clumsy or difficult to operate, you will not get the best out of them. Seek their input and make them feel part of the decision-making process to get their ‘buy-in’.

10. Assess the scalability of the platform
Choose a provider whose applications are built on a scalable architecture that can be rolled-out on a large scale if necessary. Also, if you intend to implement a common solution across a number of countries, do they have the resources to support your local initiatives in those regions? Finally, look at their development plan and ensure that it is compatible with your own future e-procurement strategy and likely future requirements.