Huge gain with e-Procurement that supports adequate strategies

2020-03-31

In the private sector, procurement is viewed as a strategic function working to improve the companys profitability. Procurement is seen as helping to optimize supplier management, streamline processes and obtain better prices to reduce the bottom line.  In the public sector, the concept of a bottom line is less well defined - there are no shareholders dividends to be paid out or publicly declared profit (or loss) announcements. There is however a need to maximize the output, in terms of teaching and research, within the available funds.  

Procurement Strategies

Procuring specialized products and services (e.g., stock exchange’s bid-ask system, derivatives trading system) is far harder to source and compare than procuring standardized products and services (e.g., iPhones, PC servers).  To an extreme, a company may decide to undertake a single sourcing procurement strategy that involves obtaining excellent dedicated products and services from a single vendor for procuring very specialized products and services. To the other extreme, the same company might use a totally different strategy that may include such choices as making procurement savings by using centralized purchasing which is concentrating the entire procurement activities within one principal source of authority for procuring its standardized products and services.  

A company may use a procurement strategy of using a core purchasing cycle.  This is where it orders from a group of regular vendors via standing-offer or forward-auction and use outsourcing procurement for its larger and ad-hoc purchases.  The same company may seek short-term material and labor for their projects or use reverse-auctions in terms of routine used materials and services such as office supplies and cleaning to get the best prices. 

A company that has project-oriented businesses will need project-based procurement to obtain all of the materials and services that are required for the project. Project-based procurement management encompasses the processes used for making sure project procurement is successful and procurement accounting and project accounting are properly done. 8Manage projedct management is used together with 8Manage e-Procurement system, one can perform pre-procurement, procurement and post-procurement project management to ensure the underlying projects are aligned with the pre-procurement, procurement and post-procurement objectives and strategies.

Supplier Management Strategies

In additional to the procurement strategies mentioned above, the following strategies are commonly used for supplier management:

Supplier recruitment and optimization -- The company chooses an optimum mix of new and old suppliers who can provide the best prices and terms. This process usually means that the company keeps recruiting new suppliers and at the same time discarding the less able suppliers who cannot provide a quality service at the terms and prices required.  Most older procurement systems and ERP can’t support this strategy since the older systems were based on Henry Ford’s collaborative-planning supply-chain model rather than the continuously recruitment and optimization model.  But this is also a commonly used strategy in modern enterprises.

Risk management -- As more companies obtain their supplies offshore, they are more concerned with the risk management of this supply chain. Whilst these countries can supply products at very competitive prices, these advantages can be negated by country risk.

Leveraging Technology

Because e-Procurement technology solutions such as 8Manage e-Procurement system allow end-to-end supplier-management and procure-to-pay to be automated, including supplier recruitment, pre-qualification, qualification, evaluation and selection, sourcing request, purchase requisition, tendering and bidding, contracting, delivery and acceptance, invoicing and payment, your company can operate more effectively and efficiently. The more you can do without human intervention, the less room for potentially costly error. And, the more you can do without a human, the more time the humans have to focus on the tasks that cannot be automated, such as strategic sourcing or contract management.

Moving Forward with e-Procurement

Regardless of the size of the company, it commonly needs more than one or several procurement strategies to cover its different procurement needs.  An adequate e-Procurement system must be able to support a range of commonly used procurement strategies such as the ones mentioned above. e-Procurement system such as 8Manage e-Procurement can support all strategies mentioned above. Try for free Now!