- 1 - Understanding the benefits of e-Procurement Andy Gueritz, Jan 2001 © 2001 Sixhills Consulting Ltd & Author Understanding the benefits of e-Procurement Over the last twenty years information technology has radically changed the way most businesses operate. Those that have implemented it successfully have enjoyed the benefits of substantial increases in operating efficiency. More recently, network technology has enabled fast and low cost communications and, increasingly, the ability to carry out commercial activity through relationships forged over computer networks including the Internet. The application of technology is usually focused on a business's core profit generating activities. However, the costs of many secondary activities, in support of an organisation’s primary business, can often also be greatly reduced by the introduction of appropriate technology. In particular, our own experience shows conclusively that traditional procurement processes and cycles harbour substantial inefficiencies that can be removed by the introduction of network-based electronic procurement (e-Procurement) systems. In financial terms, the benefits of introducing e-Procurement systems in appropriate areas can be significant. Who can benefit from e-Procurement? Our experience shows that organisations of almost every size or structure suffer from inefficiencies in traditional procurement processes. This is true regardless of the type of commercial activity involved and the actual nature of the goods and services being procured. These inefficiencies occur at stages throughout the procurement process, from the point when goods or services are initially needed to the moment of delivery to the end user and beyond into the payment for those goods and services. Traditional Procurement Cycle InefficienciesInefficient Vendor Management (info/Methods/Monitoring)Low Value ActivitiesLittle Compliance Renegade BuyingLong Cycle TimeHigh Error RateEmployee NeedSelect ItemMailing the OrderDeliver Product/ServiceRoute to RecipientReceivingPhone PurchaseWriting the order ReceivingChecking Storage in Legacy System Mailing the InvoiceSupplier FulfillmentPayment LogisticsNo Seamless Track and TraceMulti-Stage LogisticsNeed for Three-w ay MatchSources of inefficiencyTraditional Procurement Cycle InefficienciesInefficient Vendor Management (info/Methods/Monitoring)Low Value ActivitiesLittle Compliance Renegade BuyingLong Cycle TimeHigh Error RateEmployee NeedSelect ItemMailing the OrderDeliver Product/ServiceRoute to RecipientReceivingPhone PurchaseWriting the order ReceivingChecking Storage in Legacy System Mailing the InvoiceSupplier FulfillmentPayment LogisticsNo Seamless Track and TraceMulti-Stage LogisticsNeed for Three-w ay MatchSources of inefficiency
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