E-procurement and purchasing involve supply exchange of goods and services through the internet and the transaction may be from business to business, business to government or business to consumer. Network systems that help make e-procurement and purchasing possible are enterprise resource planning and electronic data exchange.
Enterprise Resource Planning (ERP)
ERP is a business management software essential in electronic procurement and purchasing and managing other business activities. Collecting, storing and managing the organization data are some of its uses.
Electronic Data Exchange (EDI)
Purchase orders and invoices that were previously sent through hard copy documents can be sent electronically through electronic data exchange. Electronic business communications have been made possible by EDI. EDI has been in use since the early 70s with some customised to certain standards like X12 and ODETTE meant to satisfy the needs of specifics industries.
History of E-purchasing and Purchasing
In the year 2000, e-procurement was first used by the International Business Machines Corporation (IBM). The American international company launched the system that had been launched by Daniel Delfin, a Mexican engineer. The reason for designing it was to solve the lengthy procurement process at IBM. E-procurement was later introduced to the EU via the directives 2004/18/EC and 2004/17/EC of 31st March 2004.
Constituents of E-procurement
E-procurement involves a chain of activities that contribute towards the business getting quality supplies and getting value for its money. The categories involved in e-procurement are indent management, e-Auctioning, e-Tendering, e-Informing, catalogue management, vendor management, contract management, Order Status, Purchase Order Integration, Ship Notice e-invoicing and e-payment. Some of the constituents are discussed below.
1. Indent Management
This involves tenders awarded in business, specifically the preparation of tenders. When procuring goods, indent management is done online.
This is also referred to as electronic billing and the e-invoicing methods are useful to trading partners. They include suppliers and customers and they use it to exchange and monitor transaction documents and also ensure the trading terms are being followed. The documents being monitored are invoices, debit notes, purchase orders, credit notes, remittance slips and payment terms.
These are online banking platforms used for making payments and thus making the e-procurement and purchasing possible. This has cut all physical transactions between parties, saving time and it is very efficient.
4. Contract Management
Businesses award contracts to suppliers of goods and services. Awarding contracts is part of e-procurement and it is also done through the internet.