Welcome to the second and concluding part of our series covering the ever-evolving world of E-Procurement. In Part 1, we started with an introductory overview of the E-Procurement concept, and considered the state and trends of the current E-Procurement market. In this follow up post, we are going to 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 set up for company employees.
As covered in Part 1, the Acquity Group’s ‘2014 State Of B2B Procurement Study’ identified that the E-Procurement market is most definitely on the rise, with 68% of B2B buyers making electronic purchases last year, compared to 57% in 2013. What is more, 46% of the 500 procurement officer’s surveyed said that their companies will definitely be increasing purchasing this year via electronic means. Of these, 41% said that they would be happy purchasing any product category in this fashion, meaning that this growth will positively affect all product categories going forward.
Only a mere 4% of respondents expected their corporate electronic spending to decrease in 2015, and, of these, only 13% cited the reason for this being that they do not see any major advantages to ordering this way.
Procurement, just as with so many other industries, is starting to find its future in the digital world, and, as such, it is important that both B2B suppliers and CPOs alike should be seeking to adapt to the changes in order to engage and capture the increasingly savvy electronic B2B buyers and sellers, and thus increase revenue through capitalizing on this new opportunity of digital growth.
The Key Differentiators
‘The Forrester Wave’ E-Procurement report for 2014 identifies usability, flexibility, and vision as the key differentiators for CPOs who are seeking to gain more visibility and control through E-Procurement software:
“Low adoption of legacy procurement software is the main obstacle to getting this visibility and control. CPOs should therefore favor products with enticing shopping experiences and simple configurable approval workflows. They also need vendors with the vision and ability to combat the growing adoption threat from sell-side E-Commerce sites.”
Improving Visibility And Control
The often lengthy and complex procure-to-pay (P2P) process (also known as the requisition to pay (R2P) process) – identifying a lack of goods of services, selection of a product from a catalog, etc., attaining purchase approval, placing the purchase order with the supplier, receipt of the goods, validation of the invoice, and eventual payment to the supplier – can be made a lot more efficient and streamlined with the implementation of appropriate E-Procurement software.
The Business Benefits Of E-Procurement
The Forrester Report identifies these as being three-fold:
- Employees’ Time Saved When Buying Goods And Services: Instead of staring at an office screen for hours while they could be serving customers, employees can quickly utilize the E-Procurement software tool to order any goods or services that they could possibly need very quickly online – perhaps even using their own smartphone to do so. This is enabled by…
- Engendering Pre-negotiated Contracts From Pre-approved Suppliers: CPOs can work behind the scenes to negotiate the best prices with a few suppliers, through which the employee will know to place his or her order. Also, aggregating volume orders with only a select few suppliers can make further savings. One CPO told Forrester: “We saved tens of thousands of dollars on bottled water, simply by making everyone buy from one supplier. The savings soon add up when you do that for many categories.”
- Improving Visibility And Control By Capturing Liabilities Early: Projects can have a tendency to go over budget, but it is often the case that by the time this shows up in the accounts, it is too late to take corrective action. But with E-Procurement, Forrester reports that “finance groups can match up to 80% of incoming invoices as soon as the suppliers issue them, with POs, contracts, receipts, work tickets, or other supporting vouchers. They can monitor spend and liabilities closer to real time instead of having to wait weeks for invoices to get through manual approval processes.”
Usability, Flexibility, And Automation
Despite the fact that the E-Procurement market is slowly growing, E-Procurement adoption rates are still rather sluggish in taking off. The market is growing, but it’s growing slowly, and this is proving to be the biggest obstacle to realizing the true value from E-Procurement.
In addressing this problem, the Forrester Report cites that focusing on usability, flexibility, and adoption as being the answer to reducing users’ resistance to a wider adoption of the E-Procurement initiative.
Usability: Companies’ E-Procurement initiatives must be based around easy to use and intuitive applications that should require little to no training to use. This will enable them to buy goods and services quickly and efficiently while on the job, and not have to waste any time in front of computer screens or making phone calls to various suppliers and management personnel to seek approval for purchase orders.
Flexibility: Anything and everything must be able to be sourced through E-Procurement – not just water bottles or office supplies. Therefore, it is essential that the applications that your company implements should not be limited to only enable the easy procurement of items that aren’t really causing you that much difficulty in the first place. You will need to find out which types of transactions are currently causing the most difficulties in terms of process inefficiencies and unmanaged spend, and integrate those as a priority into your E-Procurement initiative. These more complex purchase categories will be the differentiators that will iron out your critical business-flow anomalies.
Automation: Accelerated delivery is the main benefit that should be sought by streamlining your procurement processes. E-Procurement minimizes the manual steps that need to be taken to get a requisition under way. Not only does this reduce administration costs, but the requisition is quickly converted into an actual PO and is in the supplier’s system.
E-Procurement is at the heart of maximizing the future success of B2B E-Commerce. Automation and digitization of shopping experiences are almost as essential now in the B2B segment – and this includes all the specialty requirements of employees using systems along the P2P process – as they have been for the past decade or more in B2C. A slow rising adoption rate is still proving to be the biggest obstacle for E-Procurement, but if companies can start to focus more on the usability, flexibility, and automation of their systems, and provide a true end-to-end flow that includes final payment and settlement, then it shouldn’t be long before a more wide spread adoption will be seen, and the true value of E-Procurement can be released.