E-procurement has many benefits for companies when the systems are implemented properly. However, not all companies fully receive these benefits because they end up falling into some common pitfalls that end up making their system work less effectively than it optimally could work. Unfortunately, for most of these companies, these pitfalls could have easily been avoided.
One common pitfall is that a company does not always consider the extra costs which may be involved in switching suppliers or the change in available goods. For example, many companies use reverse auctions to purchase per-project temporary help. Because the company must switch suppliers each time a new project comes up, the cost each time is essentially the same as establishing an ongoing business relationship with a single supplier who charges a higher price. Plus, because all suppliers cannot provide the same goods and services, the business will have to continually adjust to the offerings available.
Another pitfall many companies fall into is employing the wrong e-procurement technique for the intended purchase. For instance, most companies have at least some necessary goods which would be considered bottleneck items. These items are those that few suppliers provide, so buyers must often stock up on so they are not left with none in their inventory and none available from suppliers. Purchasing these types of items via reverse auctions would be a major mistake since the supplier, not the buyer, has the power. The cost of the goods could be driven upward, thus the buyer would end up actually paying more than he would without the use of e-procurement.
A third and final common pitfall involves the business's relationship with a supplier. Many companies mistakenly assume that e-procurement will repair or negate a bad relationship between the buyer and the supplier, but this is simply not the case. E-procurement does make it easier to purchase necessary items, but it cannot do anything about the human elements involved on both sides of the purchasing equation. Because long-term relationships and high quality goods/services are often critical to a business's success, no company should ever rely on e-procurement to solely manage those important buyer/seller connections.
There are ways to avoid these pitfalls. For one, businesses must carefully analyze and weigh the cost benefits of switching between suppliers because of price differences. Many times the cost of switching is greater than the savings the company experiences as a result, particularly when there is also a change in the goods/services available through the supplier. Buyers and their businesses must be careful in selecting the appropriate e-procurement technique for their needs. Not all techniques will work for all goods, services, sellers, or buyers so these decisions must be made only after considering all factors. Also, businesses need to work on building solid and stable relationships with key suppliers. No amount of savings or convenience can make up for the benefits of having a loyal, quality supplier of the goods or services which are essential to a business's success.
While the steps mentioned above may seem daunting, the reality is that businesses can find assistance. Epiq's software can make it easier for companies to make those important technique decisions, to foster strong supplier relationships, and to fully analyze the costs and the benefits of switching suppliers. The software can help buyers manage auctions, pre-screen suppliers, and track the costs of all purchases easily.
Overall, many businesses do fall into some common traps that may hinder the success of their e-procurement strategies, but these traps can be avoided with the assistance of Epiq's software. Strong supplier relationships, careful analysis of purchase costs, and solid strategies for choosing the best e-procurement techniques can mean the difference between a successful system and the less beneficial alternative.