Why E-Procurement Is The Most Strategic Business Tool

The goal of any procurement process is to obtain the right product or service, at the right place, price and time, in the most efficient way while minimizing risks.

However, the procurement profession is faced with challenges such as short product life cycles, increased fixed costs, increasing customer satisfaction levels, and technology explosion.

Technology has proven to be very efficient and cost reducing hence the emergence of E-procurement, a business-to-business, business-to-customer, business-to-government purchase and sale of supplies,work,and services through the internet as well as networking systems like electronic data interchange and enterprise resource planning. A good example of E-procurement is OLX that operates as a national online market place for used goods, property and much more.

In Kenya the adoption of E-procurement via the government’s portal IFMIS is the first in Africa, after the procurement and disposal bill was approved into the law.

The E-procurement technology has a lot of benefits when applied to business.

• Reduced transaction costs, through relieving staff of automating key tasks that save time and paper minimizing human error. This also frees up supply management personnel time for strategic value-creation work.
• Delays in procurement are due to paper based requisitions that have to be authorized manually. E-procurement process is streamlined, automated and checked against pre-configured settings and electronically authorized.
• Elimination of wild purchase (purchase of materials and services outside the standard procurement process) and increase contract compliance, which is maximized to ensure buying only from approved suppliers, thus eliminating uncompetitive price leakages.
• Save inventory costs: the duplication of items within a supply chain environment is minimized as an entire organization uses one item master, hence no duplication of items.

The main drivers of E-procurement in organizations are the reductions in tendering prices, procurement turn around, administrative costs, elimination of transaction procurement staff, competitive advantage of organizations, improved communication, better decision making, market intelligence and general reduced operational costs.

Through E-procurement an organization can get benefits through promotion 24 hours availability of the system and out-of-office access to system.