What is e-procurement?

What does e-procurement mean?

E-procurement, or electronic procurement, is the use of software and online platforms to run an organisation’s purchasing. It covers finding suppliers, running tenders, awarding contracts, issuing purchase orders, recording receipts and processing invoices and payments, with every step and document held in one system rather than in paper files and email.

The term is used in two slightly different ways. In private companies, e-procurement often means the buying tool employees use to raise requests and orders against catalogues and contracts. In the public sector, it more often means the tendering portal where a government publishes notices and receives bids, sometimes called e-GP, for electronic government procurement. Both are correct; they describe different halves of the same cycle.

Spelling varies without changing the meaning: e-procurement, eProcurement, eprocurement and electronic procurement all refer to the same practice.

How is e-procurement different from e-sourcing and procure-to-pay?

E-procurement is the umbrella term. E-sourcing covers the steps up to the award of a contract; procure-to-pay covers the steps from the request to the payment of the invoice. E-tendering is the public-sector form of e-sourcing, governed by procurement law.

What modules does an e-procurement system include?

An e-procurement system is usually assembled from modules, bought together as a suite or separately. Few organisations deploy them all at once; the order depends on where the current process loses the most time or control.

• Supplier management holds supplier registration, qualification documents, bank details and performance records.
• Spend analysis classifies past spend by category and supplier to show where sourcing effort will pay off.
• E-sourcing runs requests for information, proposals and quotations, and electronic reverse auctions.
• E-tendering, in the public sector, publishes notices, distributes tender documents, receives sealed electronic bids and records the evaluation.
• Contract management stores contracts, their prices, dates and obligations, and alerts on renewals.
• Catalogues and punchout let requesters buy from approved items and prices, either from internal catalogues or from supplier websites that return a basket to the system.
• Requisitions and purchase orders route requests through approval and send purchase orders to suppliers, by email, portal or structured message.
• Receiving records what arrived or what work was accepted against each order line.
• E-invoicing receives structured invoices, matches them to orders and receipts, and routes exceptions.
• Reporting gives spend, savings, cycle times and compliance figures from the data the other modules capture.

How does public e-procurement differ from private e-procurement?

Public e-procurement exists first to apply procurement law openly and fairly; private e-procurement exists first to control cost and process. The technology overlaps, but the requirements differ, and a system designed for one rarely fits the other without changes.

In the European Union, Directive 2014/24/EU requires that communication and information exchange in the procedures it covers, in particular the submission of tenders, use electronic means. Member States could postpone this until 18 October 2018, and until 18 April 2017 for central purchasing bodies. The same directive regulates dynamic purchasing systems, electronic auctions and electronic catalogues, and a separate Directive 2014/55/EU makes it mandatory for public buyers to receive and process electronic invoices that comply with the European standard EN 16931.

India illustrates the two halves of public e-procurement side by side. The Central Public Procurement Portal, designed and hosted by the National Informatics Centre with the Department of Expenditure, publishes tenders, corrigenda and award results of central government bodies. The Government e-Marketplace, GeM, launched on 9 August 2016 by the Ministry of Commerce and Industry, handles the online purchase of common goods and services by government buyers.

Governments that want their tender data reused often publish it in the Open Contracting Data Standard, which gives the notices, awards and contracts from an e-GP portal a common structure.

What are the benefits of e-procurement?

The benefits of e-procurement come from two things: every transaction becomes structured data, and the system can refuse a step that breaks the rules. Without those two, an online process is a scanned version of the paper one.

• Control: approvals follow the delegation of authority automatically, and a purchase order cannot be issued without an approved request.
• Compliance with contracts: requesters buy from catalogues at negotiated prices instead of finding their own suppliers.
• Visibility: spend is classified as it happens, so reports no longer depend on cleaning accounts payable data after the fact.
• Faster invoice processing: structured invoices that quote a valid PO can be matched automatically, leaving people to deal with the exceptions.
• Wider competition in the public sector: notices published online reach suppliers outside the buyer’s usual circle, including foreign bidders.
• Audit trail: every bid, decision, change and approval is time-stamped and attributable, which supports audits and challenges.

Published savings figures for e-procurement vary widely with the starting point, the scope and the method used to count them. Treat any single percentage, including a vendor’s, as a hypothesis to test on your own spend data.

What are the risks of e-procurement?

The risks of e-procurement are mostly organisational, not technical. They are well known from past deployments and each one has a mitigation that has to be decided before go-live, not after.

• Supplier exclusion: small suppliers without digital skills or reliable connectivity may stop bidding; registration help, training and a helpdesk reduce the drop.
• Automating a poor process: approval chains, forms and controls copied from paper keep their delays; redesign the process before configuring it.
• Weak integration with finance: if supplier records, budgets and invoices live in two systems that disagree, matching fails and users return to email.
• Outages at deadlines: a portal failure in the last hour before a tender closes can invalidate a procedure; publish a rule for extending deadlines when the system is unavailable.
• Data lock-in: tender history and contracts held in a vendor’s format are hard to move; require exports in open formats, such as OCDS for public tenders, in the contract.
• Security and bid confidentiality: sealed bids must stay unreadable until opening, with access logged; test this, do not assume it.
• False confidence: software records collusion and conflicts of interest, it does not prevent them; analysis of the data and human review still matter.

How do you start with e-procurement?

Starting with e-procurement means choosing the first process to move online, not choosing a vendor. The sequence below applies to public bodies and companies alike.

1. Map the current process from need to payment, with volumes: number of requests, orders, tenders and invoices per year, and where they wait.
2. Pick the first scope where volume and pain meet: tendering for a public body with legal duties, ordering and invoicing for most companies.
3. Clean the master data that scope depends on: suppliers, items and prices, cost centres and approval limits.
4. Write requirements as scenarios the system must run, including exceptions, and ask vendors to demonstrate them on your data.
5. Plan supplier onboarding as a project of its own, with registration support and a fallback for the first months.
6. Agree on a few measures before go-live, such as the share of spend on purchase orders or the time from request to order, so that progress can be shown.