Mon, 14 Aug 2000

E-Procurement helps firms cut down on purchasing costs

Are the employees in your company still using the old, paper- based procurement procedure? Does Ina still have to obtain seven signatures before she can get a new ink cartridge for the inkjet printer on her desk? Does Tommy often get angry because his PO for fax paper always gets lost in the office labyrinth? Then your company is still living in the New Order era. This is the Web era.

Imagine how many ballpoint pens a large bank like BCA has to buy every month. Imagine also how many reams of photocopy paper the entire bank organization uses up every month. Or how many paper clips? Or staples?

If your company buys only two dozen pens, you may not get a discount. But if your entire organization buys thousands of pens every month, ballpoint pen salesmen will be more than eager to offer you attractive discounts. Incidentally, in the New Order era -- and we are still struggling to eliminate the practice -- "discount" was just another world for "kickback" or "commission". In today's business scene -- or the post-New Order era -- discounts should once again mean savings to the buying company.

In the cutthroat competition of today's business, cutting costs is one of the few effective ways to remain profitable. One of the ways costs can be lowered is to ensure that the company gets huge discounts, and the discounts are not converted into commissions for the pockets of the purchasing managers. How can this be done? The answer is e-Procurement (sometimes also written eProcurement).

E-Procurement service allow employees, staff or anybody in an organization that has implemented it to make their requisitions electronically. As the volume is larger than if the items were brought by individual purchasing managers, the discounts can be tremendous and the savings to the buying company can be very substantial. Besides, the authorization process is streamlined and made transparent. When the e-Procurement application is connected to the company's ERP or financial system, invoice matching can be made to occur seamlessly and automatically. It also helps reduce financial losses by eliminating duplicate ordering, lost requisitions and maverick buying.

Features of a typical e-Procurement include facilities to send RFI (request for information) and RFQ (request for quotation). The authorization process is also made simple and quick. The application can also accommodate electronic catalogs submitted by participating suppliers that have been preselected. A user can browse the contents of the catalogs, make his selections and drag and drop the selected items he wants to order into the requisition form.

E-Procurement is not a new concept, but in the New Order era, the majority of purchasing managers rejected the e-Procurement idea, as it would eliminate kickbacks and commissions.

Today, dozens of companies have been offering the necessary software to build e-Procurement application in your enterprise. One of them is PurchansingNet ( Two of its major customers are the famous Warner Bros and Black & Decker. The e-Procurement application at Black & Decker, for example, relieves the employees from the headache of having to obtain seven layers of approval before their requisition for office supplies and MRO (maintenance, repair and operation) items reach the Purchasing Department.

So, if you want your organization to leave the New Order era behind and become a truly low-cost producer or provider, then you should seriously consider signing a deal with one of the reputable e-Procurement vendors. (Zatni Arbi)

Upcoming topics for IT Superhighway: Technology

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