The global procurement software market is expected to rake in revenue of about $5.14 billion in 2017. So, should you opt to use a cloud-based procurement software solution for your business needs? The answer to this query depends on your security needs and the industry you are operating in. E-procurement software does offer benefits such as improved flexibility and instant access. However, there are a few downsides. This article details the pros and cons of e-procurement to help you make the right decision.
Pros of e-procurement
1. Improved organization
Many companies are haunted by disorganization as they struggle to place orders and manage purchases according to schedule. This disorganized process can be hard to change and can lead to exceptions. E-procurement is the answer as it can streamline purchasing and also reduce the risk of exceptions in your buying process. Another advantage is you can centralize purchasing.
2. Enhanced control
Online procurement helps you to be flexible in what you wish to include as well as provide access restrictions in an agile manner. With the right e-procurement software, you can limit a host of issues including accepted prices from each vendor, ordered items, selected vendors, and kind of purchases done. By tightly controlling these important elements you can maintain consistency in order times and minimize rogue spending. In addition, the online procurement software can integrate smoothly with your existing systems to boost efficiency.
3. Reporting and reconciliation
A key problem in procurement is mismatch between purchases and invoices. However, this reconciliation issue tends to be pushed in the background as businesses tend to focus on main tasks. Plus, it is difficult to generate reports on procurement as well as gather data on historical approvals using a manual system. E-procurement software can help to resolve this issue as it offers customizable reporting.
4. Cost saving
You can do proper research and find a cost-effective online procurement software solution. Reliable vendors offer pricing packages that enable you to pay only for what you use and typically there are no user licensing charges or hidden fees. In addition, your employees can save time with this software and spend it productively on important tasks.
5. Fast implementation and updates
The best e-procurement software platforms are easy and quick to implement. You can effortlessly switch over to the system without taxing your IT staff too much. Plus, the cloud vendor automatically updates and upgrades the software on a regular basis, so you don’t have to worry about doing them manually.
6. Integration with existing software
As mentioned earlier, top e-procurement software solutions can integrate seamlessly with your existing business process automation platforms. Many online procurement software vendors also provide modules to streamline financial tasks and handle capital projects. You can select one such provider to ensure all the software tools work together which will make it simpler to implement the e-procurement product.
Cons of e-procurement
1. Micromanagement
E-procurement software tools offer features for detailed data analytics and classification. However, the danger is you can get carried away by the multiple customization options. There may be a high number of fields which can be confusing and could reduce the platform’s reporting efficiency. The solution is to find the customization level that is suitable for your enterprise.
2. Time-consuming approval chains
The benefit of detailed insight can also be a drawback. Your company’s reviewers may get bogged down by it and can take longer to review procurement details and pass them to the next reviewer. Therefore, it is essential to eliminate such bottlenecks to ensure the approval chain does not get blocked.
3. Not ideal for direct materials
E-procurement works best for purchasing catalog-based indirect materials such as office supplies. You are sure to get good ROI for purchases like these. However, e-procurement may not be ideal when purchasing direct services and materials. Therefore, it would not be advisable to use it for negotiating purchases that are part of large and expensive deals.
4. Supplier onboarding problems
Older vendors may struggle to understand new online procurement software systems. Small businesses can have a hard time updating catalogs and other info with the platform. Therefore, it is important to select tech-savvy suppliers to fully benefit from e-procurement.
Conclusion
Keep track of the latest procurement trends and apply them in your company to enhance efficiency and productivity.
FAQs
Advantages of e procurement include increased efficiency and transparency, as well as cost savings. Disadvantages can include decreased competition, longer implementation times, and inadequate oversight.
What are the pros and cons of procurement? ›
Direct procurement offers advantages in terms of speed, flexibility, relationship building, and potential cost savings. However, it also poses risks related to limited competition, bias, pricing uncertainty, and compliance issues.
What are the advantages and disadvantages of technology in procurement? ›
Pros of E-Procurement
- Enhanced Organization. Numerous organizations are spooky due to the disorganization. ...
- Improved Control. ...
- Reporting and Reconciliation. ...
- Cost Saving. ...
- Reconciliation with Existing Software. ...
- Micromanagement. ...
- Not Ideal for Direct Materials. ...
- Provider Onboarding Problems.
E-sourcing and e-procurement offer several benefits, including increased efficiency, reduced manual errors, better supplier relationship management, data-driven decision-making, cost savings, and the ability to explore new markets and materials.
What are advantages of e-procurement? ›
What are the benefits of e-procurement?
- Efficiency and cost savings. E-procurement systems create enhanced efficiency and cost savings for businesses of all sizes. ...
- Increased transparency and accountability. ...
- Improved supplier relationship management. ...
- Data-driven decision making.
Lack Of Adequate Training: One of the first challenges companies face when implementing e procurement is a lack of adequate training on how to use the technology. Without proper understanding and instruction, it can be difficult to navigate the system and purchase the correct items.
What are the advantages of proactive procurement? ›
Proactive purchasing enables better planning, risk mitigation, and long-term supplier partnerships, contributing to improved operational efficiency and long-term value creation.
What are the pros and cons of using technology to help negotiate procurement contracts? ›
Reduced Human Bias: AI models operate based on algorithms and data, minimizing the impact of human bias in decision-making. This can contribute to fairer and more transparent procurement processes, promoting equal opportunities for suppliers and reducing the risk of favoritism.
What are the disadvantages of procurement manual? ›
Aside from the additional labor costs, relying on a manual procurement process costs your organization more money. If after research is completed the AP clerk cannot verify the legitimacy of an invoice, they have to pay the vendor anyway. Late payments often come with fees and penalties that will cost even more money.
What are the disadvantages of e-procurement to both buyers and sellers? ›
Over reliance on technology and the disabling of due diligence. This often leads to devastating shortages, delays, and supply chain disruptions. Lack of buy in and resistance to change from employees. This often leads to circumvention of eProcurement Systems, loss of process control, back door buying, and theft.
The first disadvantage is that people can use technology for negative reasons. Secondly, technology has a few limitations, such as nuclear weapons. Third, technology has increased people's dependency on it. Lastly, technology has increased the financial spending of most people since most are very costly.
What is the role of technology in e-procurement? ›
E-procurement systems have revolutionized the traditional procurement processes by automating tasks such as vendor sourcing, purchasing, and invoicing. These optimized digital platforms enhance speed, accuracy, and transparency in procurement, facilitating real-time collaboration between buyers and suppliers.
What is the difference between e sourcing and e-procurement? ›
In other words, eSourcing can be used strategically to ensure that the best pricing and value are locked in the contract, while eProcurement is strictly tactical to ensure the optimal flow of goods and services based on the contract.
What are the three main benefit of e sourcing? ›
Benefits of electronic sourcing
Cost reductions and better performance likelihood from reaching more eligible vendor candidates and comparing e-bids or quotes and vendor risk profiles. Complete and unbiased vendor scoring, vendor risk management, and evaluation process.
Which of the following is considered an impact of e-procurement? ›
As a result, the number of suppliers from which buyers procure might increase as a result of electronic procurement adoption. Concluding, electronic procurement enables companies to use markets more efficiently, as it lowers search and evaluation costs and gives access to a larger number of potential suppliers.
How does e-procurement reduce costs? ›
1 Cost reduction
For example, e-procurement can automate and streamline the procurement process, reducing the need for manual tasks, paperwork, and staff. It can also enable you to compare and negotiate prices from different suppliers, access discounts and bulk deals, and monitor and control your spending.
What are the 5 types of e-procurement? ›
That is, e-sourcing, e-tendering, e-auctioning, e-ordering, and e-informing.
