Since the late 1990's and the Internet boom, the promise of e-procurement as a way of saving companies as much as 60% on their bottom line has been much discussed but rarely achieved. However, most companies can see results that live up to those expectations if they use specific implementation strategies and avoid falling into some common e-procurement pitfalls that may undermine their implementation.
E-procurement refers to the purchase of goods, and even services, via the Internet for business purposes. For example, if a company needs a new fax machine, a representative could go to the local office supply store and purchase the equipment, but he may end up paying more than necessary and his purchase would be more difficult to track, particularly if that business is part of a larger company with multiple offices. With an e-procurement system, purchases can be regulated and tracked more efficiently so unnecessary or extravagant purchases are nearly eliminated. Plus, an e-procurement system streamlines the purchasing process because employees no longer have to take time away from their schedule to go to the store and shop around. Instead, they can go online, place the order, and get back to work. Some companies that have put e-procurement systems in place have seen as much as a 25% decrease in waste and a savings of millions of dollars annually.
While the benefits of an e-procurement system may be significant, companies must carefully adopt the system if they want it to be successful. One adoption strategy that has worked for other businesses is simply to take it slowly. Instead of attempting to bring all business purchases online immediately, companies bring different categories of purchases online one at a time. For instance, a business may begin by buying its stationary supplies over the Internet, then its computer equipment, and eventually its temporary staff.
The incremental approach to e-procurement implementation has several benefits. For one, the approach allows the staff to become familiar with the system and with using the system for necessary purchases. Additionally, it gives suppliers the chance to adopt the appropriate technology.
Another important implementation strategy is to determine beforehand the specifications for all of the products and services required by the business. Generally, this process involves determining what type of ink cartridges the printers require, what brand of ink pens are used, what style of desk chairs are needed, etc. While this step may seem time-consuming, it prevents employees from using the e-procurement system to make unnecessary purchases for items such as palm pilots, leather chairs, or expensive writing instruments.
Despite taking these precautions when implementing an e-procurement system, many companies still find that they must also work hard to avoid some common pitfalls. One of the biggest problems these companies have found is that employees simply refuse to use the system. Implementing the system slowly and providing the necessary training can help employees feel more comfortable with e-procurement and more inclined to make sure of the system. Another common problem is that many companies do not have a plan in place to deal with purchasing items that are not available through the online suppliers. When this occurs, these businesses usually fall back on using the corporate credit card and the local office supply store which undermines the benefits of e-procurement. Instead, these businesses could explain to their existing online suppliers what goods or services they require, then allow those suppliers the opportunity to meet those needs for them.
The bottom line is that e-procurement systems can be effective at reducing waste and saving money, but special steps must be taken to effectively implement the system and to avoid the types of problems that can hinder the successful adoption of e-procurement systems.