Welcome to the first of our two-part series that delves into the world of E-Procurement. In this first installment, we will be introducing the concept of E-Procurement, and consider the current state and trends of the market. In Part 2, we will be focusing our attention on E-Procurement software solutions, the importance of usability, and the protocols that Chief Procurement Officers (CPOs) should be looking to establish for company employees.
What Is E-Procurement?
Sometimes known as “supplier exchange” or “electronic procurement”, E-Procurement refers to the B2B, B2C, B2G, or G2B sales and purchases of work, supplies, and services over the internet. It can also refer to the procurement of other sorts of information, such as electronic data or enterprise resource planning (ERP), provided that this information is either sourced or sold over the internet.
Most E-Procurement takes place via dedicated E-Procurement software platforms, which enable registered and qualified users to browse for suppliers or buyers of goods and services.
Some of these platforms are set up for E-Auctioning, where users are invited to bid against one another in their efforts to procure the items that they want. Other sites take a different approach and simply have “take it or leave it” specified prices attached to all services and supplies (though of course, many returning customers will qualify for volume discounts or special offers on these solutions).
The Rise Of The E-Procurement Market
As B2B continues to look more like B2C, many procurement officers around the globe are increasingly turning to E-Procurement methods – i.e., searching, identifying, and purchasing over the internet – as the prime sourcing route for their respective businesses.
According to the Acquity Group’s ‘2014 State Of B2B Procurement Study’, for which 500 U.S. procurement officers with annual purchasing budgets in excess of $100,000 were surveyed, B2B buyers are spending more company dollars online than ever before, with a significant volume rise of 11% over 2013.
The key findings from the survey are as follows:
- 68% of B2B buyers now purchase goods online
- 18% of B2B buyers spend more than 90% of their budget online (doubling from 9% in 2013)
- 30% of B2B buyers research at least 90% of products online before making a purchase
- 44% of B2B buyers research company products on a smartphone or tablet
Suppliers Currently Under-Equipped To Capture Market Share
Even though it is certainly evident that buyers are researching items and spending more online, suppliers have yet to manage to truly keep up with this change, and, as a result, are failing to capture the entire market share that’s up for grabs. According to the Aquity Group’s report:
“Fifty-seven percent of business buyers have made an online purchase of $5,000 or more in the last year, and 66 percent of business buyers say they make a major purchase of $5,000 or more (online or via print, or telephone) at least once per month. But less than half (48 percent) of respondents purchase goods online directly from suppliers, opting instead for third-party websites and other purchasing channels.”
Buyers Want Visibility And Control
What is clear from this report is that, more and more, procurement officers are seeking to become more independent when it comes to making purchases – and this means that B2B suppliers need to drastically update their websites and E-Procurement platforms to accommodate more self-service elements and robust search capabilities if they want to enable the transition from legacy, high-touch, high-cost methods.
A very telling statistic from the report shows that only 12% of buyers now want to meet in-person with a sales representative, and only 16% want to discuss their purchasing options over the phone. Suppliers therefore must seek to empower their customers with the ability to independently browse, research, compare, and purchase products online if they are to keep up with the current trends in E-Procurement.
The Forrester Report
The Aquity Group’s research is backed up by ‘The Forrester Wave’ E-Procurement report for 2014, which cites that sourcing professionals are seeking more visibility and control in their procurement efforts as a key takeaway:
“More and more chief procurement officers (CPOs) are seeking global solutions for their procure-to-pay (P2P) processes so they can cut costs while saving employees’ time. ERP vendors have all improved their search-and-compare shopping front ends, but face strong competition from a new group of SaaS platforms and some established ePurchasing suites.”
The main obstacle of obtaining this visibility and control, according to Forrester, lies in the low adoption E-Procurement software, which provides a system for the complete purchasing process for goods and services.
With an E-Procurement software solution, CPOs can set up systems whereby suppliers can be approved and contracts pre-negotiated, so that employees of a company can make direct purchases themselves quickly and efficiently, without being held up by the delays and inconveniences of requisition forms and the like – and this is what we’ll be exploring more of in Part 2 of this E-Procurement miniseries.