E-PROCUREMENT

E-Procurement

Table of Contents

Introduction…………………………………………………..…………………………..1

Discussion……………………………….…………..….…….…………………………..2

Conclusion……………………………….………………...……………………………..6

Reference Lists…………………………………………….……………………………7

Executive Summary

The paper discusses e- procurement, along with its advantages and disadvantages. There are two methods for e- procurement; EDI and online marketplaces. E- procurement reduces costs and adds value to the organization.

Introduction

The process of procurement is one where companies purchase goods and services from different suppliers. The goods and services can be direct or indirect, depending on the nature and requirements of the business. Some examples of indirect goods include light bulbs, office supplies, uniforms, and toilet paper. The direct goods are the ones necessary for manufacturing products. Procurement comprises of the purchase of energy, temporary labor, vehicle leases and much more. Costs of procurement can be very high; therefore, companies negotiate with their suppliers for discount contracts. When a company is devising a strategy to reduce its costs, procurement takes an important part of the strategy. In the past, the concerned departments used various methods for purchasing the goods and services needed by the company. The most basic of these methods was placing the orders for goods and services over the phone, mail, or fax. In the past few decades, the advent of Electronic Procurement has changed the way companies purchase their goods and services. The e- procurement process helps companies in cutting their costs and adding value.

The process of procurement has become much more efficient, fast and effective with e- procurement. The methods of e- procurement result in less errors than the contemporary methods. There are two methods of e- procurement; electronic data interchange (EDI) and online marketplaces. Some companies use a method that is a combination of the two methods.

Discussion

Research has shown that majority of companies have shifted to e- procurement in the retail and finance sector. They make use of the Internet to make their purchases. However, it was seen that the manufacturing sector was slow in adopting e- procurement. In 2001, only about 17 percent of manufacturers were using e- procurement. The methods that companies use are not all the same and usually vary from industry to industry. E- procurement does not mean that the traditional methods cannot be incorporated, like the telephone and fax.

The Electronic Data Interchange (EDI) is one of the methods used in e- procurement. It has been around for more than 50 years. EDI pertains to the way information is communicated during procurement. This means that it is the electronic exchange of business information. The business information includes invoices, purchase orders, bills of lading, various types of confirmations and inventory data. EDI is used between organisations and within the organisation for the transfer of data. The different departments in the organisation like finance, shipping, and purchasing. The file being exchanged can be translated through EDI. These files can be sent over the Internet through file transfer protocol or e- mail. Companies find it more cost effective, because access to the Internet is not as expensive. Companies can use open EDI, which allows for more participation from a larger number of ...