This article should provide you with a clear insight into the pros and cons of implementing eProcurement. If you’re interested in eProcurement, you should know why you want it, how it’s going to benefit you and improve the running of your company. After reading this, you’ll be able to evaluate your options, so whatever decision you make is fully informed. You’ll also understand the low-level risk involved and how to mitigate that risk effectively.
Why it’s becoming more mainstream
We all know that eProcurement is being adopted by SMEs.
By October 2018, all public sector organisations had to have switched over to eProcurement instead of manually managing purchasing. This change in law was driven by increasing demand for transparency and increased auditability. However, the new systems also meant that costs could be reduced further, and the process became more streamlined.
Think of the impact Amazon has had on the way you purchase personally…
Although the benefits speak for themselves in terms of improving the general running of businesses and the financial impacts, a list of pros and cons are listed below so you can obtain a well-rounded and unbiased picture of what implementing eProcurement means in terms of positive and potentially negative impacts.
What are the pros of implementing eProcurement?
- You’ll make significant savings in your procurement process. Using eProcurement should lead to significant savings, not just in costs but also in terms of process efficiency. In some organisations these savings have been as high as 42%-65%.
- There’s less of a need for middle-management in eProcurement, as fewer stages require spend approval. This could save your business a lot of money if you need less staff for the same or even more productivity, and a reduction in middle-management roles also results in a reduction in process time.
- The value of transactions without supervisor approval can also increase drastically. However, an increase in risk is also introduced and this needs to be addressed.
- Provides greater visibility into spending at the contract management phase.
- It’s an effective way to maintain a supplier list and compare supplier prices, service levels, and product quality.
What are the cons of implementing eProcurement?
- eProcurement might not immediately meet your expectations: With the long list of benefits, it’s easy to assume that switching to eProcurement will solve all of your problems. A recent study suggested implementing IT in procurement rarely fulfils expectations. However, a lot of the benefits come through long-term sustainable improvements.
- The headline “big-offer” of 42%-65% savings through eProcurement are obviously a big attraction. However, bear in mind eProcurement accounts for 25% of the total value of procurement. So only a quarter of your total procurement should be reduced by 42%-65%. Of course, if your already running a tight ship then the savings will be less…
- Fewer middle-management people engaging in the process means potential risks including fraud, and mistakes made by procurement workers might not be picked up on.
These pros and cons should give you an overview of why so many businesses, and an increasing number of SMEs, are implementing eProcurement over the traditional manual approach to Purchasing.
If you want to improve the running and bottom line of your company by implementing eProcurement, get in touch with us to see how to make the most of your procurement practises.