Advantages & Disadvantages of E-Procurement

by Dan Blacharski - Updated September 26, 2017
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Mistakes in purchasing can be both embarrassing and costly, such as the recent mistake by French train operator SNCF. At a cost of €15 billion, the train company purchased 2,000 new trains too wide for most train platforms. E-procurement can simplify purchasing, save money, and improve the entire supply line. Despite its many advantages though, e-procurement can result in constraints and limited options for buyers if not approached correctly. For sellers -- especially SOHO businesses with limited resources -- it may come with significant hurdles, such as implementation of vendor-specific software and compliance issues.

Changing the Culture

Purchasing has always been a hands-on, person-to-person task, with purchasers cultivating relationships and, over time, building a sphere of influence among trusted partners. Breaking into that sphere can be difficult for a new vendor, and corporate buyers accustomed to older methods are resistant to change. Even more daunting to the customer than the e-procurement technology is the culture required. In the government sector, for example, procurement officers under pressure to save tax dollars are implementing e-procurement but still meet resistance from the rest of their organization. In the ASEAN region for example, a mandate to use e-procurement to cut waste and fraud met general resistance and a unwieldy bureaucracy.

Getting on Board

Fortunately for small businesses with fewer resources, the technical and organizational hurdles in e-procurement are becoming easier to overcome, and giving small vendors a leg up in getting new business. A two- or three-person operation would have faced enormous challenges selling to major big-box retailers in the past, but simpler, cloud-based e-procurement tools are making it easier to get on board, even for smaller providers. The cloud systems allow smaller vendors to avoid the sometimes complex step of deploying an in-house compliance system and instead provide an easy Web-based portal for breaking into a major customer's supply line.

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Keeping with the Trend

The automation involved with e-procurement does not mean that person-to-person contact is completely left by the wayside, and selling a product to a large client will always take a little schmoozing. But, the days of Rolodexes full of index cards, three-martini lunches, and gaining favor via golf course outings are over. Earlier and more complex systems kept a lot of smaller businesses out of the loop, but today's cloud-based portals smooth out the path towards inclusion. Furthermore, more companies and government agencies are making e-procurement a mandate in an effort to curb corruption and graft, promote efficiency, and save money.

Deploying B2B Exchanges

Not all e-procurement requires sophisticated software. Another new trend is the B2B exchange, an online marketplace that is quickly taking the place of the old-fashioned sales call. Often deployed for only a minimal subscription fee and very suitable for smaller businesses, these exchanges let buyers and sellers alike meet, make deals, and sometimes even conduct safe financial transactions through an associated escrow system. Whether they use an open B2B exchange or a proprietary system of a single large buyer, e-procurement gives smaller businesses unprecedented access to seats at the table.

About the Author

Dan Blacharski is CEO of Ugly Dog Media, a full-service marketing and PR firm focusing on emerging technology and disruptive trends. A "dotcom boom" veteran and graduate of University of California, he is at the forefront of the next wave of innovation that is driven by new cloud enabling tech.

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