E-procurement is the term used to describe electronic methods of conducting business transactions.

The 'e' in e-procurement stands for electronic. E-procurement can be used in every stage of the process. It can begin with the actual sale coming through to the purchaser and end with the customer's invoice and payment. E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business-to-business or business-to-consumer or Business-to-government purchase and sale of supplies, Work and services through the Internet as well as other information and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning.[1] E-Procurement is more than just a system for making purchases online. Because a properly implemented system can connect companies and their business processes directly with suppliers while managing all interactions between them. This includes management of correspondence, bids, questions and answers, previous pricing, and multiple emails sent to multiple participants. E-procurement is done with a software application that includes features for supplier management and complex auctions. The new generation of E-Procurement is now on-demand or a software-as-a-service. Main parts of e-procurement There are seven main parts of e-procurement as mentioned below;
a)

Web-based ERP (Enterprise Resource Planning): Creating and approving purchasing requisitions, placing purchase orders and receiving goods and services by using a software system based on Internet technology.

b)

E-MRO (Maintenance, Repair and Overhaul): The same as web-based ERP except that the goods and services ordered are non-product related MRO supplies.

c)

E-sourcing: Identifying new suppliers for a specific category of purchasing requirements using Internet technology.

d)

E-tendering: Sending requests for information and prices to suppliers and receiving the responses of suppliers using Internet technology. May or may not involve e-auctions or eRFx functionality.[2]

e)

E-reverse auctioning: Using Internet technology to buy goods and services from a number of known or unknown suppliers.

f)

E-informing: Gathering and distributing purchasing information both from and to internal and external parties using Internet technology.

g)

E-market sites: Expands on Web-based ERP to open up value chains. Buying communities can access preferred suppliers' products and services, add to shopping carts, create requisition, seek approval, receipt purchase orders and process electronic invoices with integration to suppliers' supply chains and buyers' financial systems.

Therefore, e-procurement value chain consists of Indent Management, e-tendering, e-auctioning, Vendor Management, Catalogue Management, and Contract Management. Indent Management is the workflow involved in the preparation of tenders. This part of the value chain is optional, with individual procuring departments defining their indenting process. In works procurement, administrative approval and technical sanction are obtained in electronic format. In goods procurement, indent generation activity is done online.

Goals & Objectives

Efficiency in handling public procurement by the Government is enhanced through automation and process re-engineering wherein the e-Procurement system shall enable the Government maintain a clear/ unambiguous picture of its procurement activities on a real-time basis. Through e-Procurement in public procurement, our prime objective is to introduce transparency, cost savings and reduced inventory cost. E-Procurement ensures that the Government and the supplier community shall have an equal, fair and unbiased access to opportunities advertised online.

(ii)

How e-procurement Works

E-Procurement platforms are set up by either one large buying enterprise or group of purchasers seeking to capitalize on bulk purchasing power. Alternatively one or more supplying companies or an independent third party may set up an e-procurement site.

Suppliers either load their catalogues, complete with photos, specifications, price-points and bulk purchase discounts into the system, or integrate the system with their own electronic catalogue. (iii) The purchasing company's staffs are given pre-determined access rights to the system to purchase anything from pencils to airline tickets, depending on the supplier and terms negotiated. (iv) The system creates electronic requisitions for approval then routes the order through to the supplier ensuring payment and distribution are arranged accordingly all via the Web. (v) Suppliers look to integrate their supply chains with the e-procurement platform and invite approved purchasers to participate. (vi) Delivery of the products can also be tracked on most e-Procurement systems.
(ii)

Who should consider e-procurement? Medium to large sized organizations and government departments regularly purchase the same products from a limited number of companies are ideal candidates for e-procurement. Many businesses turn to e-procurement systems to control, simplify, and automate the purchase of goods and services from multiple suppliers. The key is to find the right products from the most right supplier at the right time and the best price as well as ensuring the responsiveness and service levels are appropriate for your business purchasing needs. Often one company might find itself a niche with a proven set of customers and encourage others in a similar field to join them on-line as the business case is proven. Concurrently they may find their client base grows with more customers keen to capitalize on the benefits as savings and efficiencies become obvious .As the e-procurement model matures it is embracing more than simply office supplies and goods that might be required for maintenance and repair purposes. A much wider range of goods and services including raw materials, parts and components for manufacturing are included. E-procurement systems E-procurement systems are applications designed to allow businesses use the Internet in order to acquire the necessary goods and services, are not all created equal. The term itself is quite broad and actually includes several varieties of applications. Part of a successful implementation involves choosing the appropriate application. In general, there are three main categories of e-procurement systems;
One type focuses on improving the transactions and the decision-making capabilities of

the company. Businesses may deal with hundreds of transactions weekly, but these applications simplify the process and help foster stronger relationships between buyers and suppliers.

The second category of e-procurement systems involves managing assets. Systems in this category provide inventory management, maintenance scheduling, in-house product availability, as well as other similar services. These applications are useful for businesses that need to keep a close idea on the quality of their direct materials in stock. operations. Many of these applications deal with the entire production cycle, including the procurement of materials when the inventory runs low, the management of supplier contracts, and the production scheduling. Because of the differences between the systems, it is important for companies to choose the one that is most appropriate for their industry. However, the decision isn't as difficult as one might at first think. For example, businesses involved with manufacturing, such as automobile makers, would be more likely to use systems from the third category. Those types of applications would allow them to maintain a specific amount of direct materials in their inventory but they also need to have a system which helps them plan and forecast their production. On the other hand, companies that deal with repair and/or maintenance, such as automotive repair shops, would be more likely to use e-procurement systems from the second category. Since they need to keep track not only of their inventory of car parts, but also of helping them set repair schedules. Regardless of the type of e-procurement system a company chooses, the company can expect to receive similar benefits including saving money on purchases, improving the timeliness of the purchasing process, and eliminating waste. In addition to these benefits, companies can also improve the efficiency of their supply chain.

The third category, this includes systems designed to optimize a company's production

Benefits of e-procurement 1. Transactional Benefits E-procurement enables the purchase-topay process online. A typical example uses a Web-based transacting tool whereby items are selected predominantly from pre-sourced catalogs and submitted for electronic approval. This tool is then linked to the back end ERP system for entry, payment of invoices, and collation of management information. Electronic processing (including the automation of p-card purchasing) leads to great time savings and efficiency due to: a) Global, automated processes incorporating best practice and eliminating unnecessary activities; b) Electronic enabled relationship with suppliers, which speeds procurement cycle times and facilitates supplier performance improvements; and c) Greater data accuracy, which minimizes ordering inaccuracies and provides the essential foundation for better management through measurement and analysis. 2. Compliance Benefits

In many cases within an organization, compliance and maverick spending is a significant issue, not because employees deliberately purchase outside of preferred arrangements, but rather through lack of awareness. E-procurement addresses this through tools such as catalogs and standard order processing and approval processes. Compliance will be achieved due to: a) a simple and quick requisition-to-payment process including a user-friendly interface and pre -sourced catalogs tailored to the requirements of the individual user; b) a simple and quick strategic sourcing process with standard procurement processes and tools, as well as easily accessible information; and c) the e-procurement system, the only purchasing mechanism available. 3. Management Information Benefits The fact that key information (cost center, commodity codes, etc.) is hard coded against the user dramatically reduces coding errors and provides highly detailed and easily accessible data. This is essential to maximize the financial benefits of strategic sourcing. A successful e-procurement implementation will provide high quality, detailed management information and will negate the need for data warehousing or resource-heavy data mining. 4. Price Benefits The ability to prove to your suppliers that you are using e-procurement as a tool to ensure end users do honor their contract status will enhance ability to negotiate down prices through: a) greater enhanced capture and therefore, reliability of spending information; and b) Increased confidence that spending volumes can be guaranteed from increased compliance with the system, thus allowing volume price breaks and discounts to be achieved. 5. Payment Benefits The successful operation of the first four benefits enables electronic payment of invoices. This includes the ability to better control the business cash flow and to manage the efficient payment of suppliers due to more streamlined procurement processes providing more timely and accurate information to the accounts payable department. Potential benefits include reduced manpower (a hard benefit only if improvements lead to head count reduction) and reduced spending on postage and stationery. During negotiations the procurement manager can more credibly guarantee the supplier a level of prompt payment, which was not possible prior to eprocurement. As well, e-invoicing benefits are often under-assessed and ignored.

E-procurement disadvantage

One of the main challenges for an e-Procurement project is the establishment of an appropriate and context tailored strategy. Every project or initiative needs to be rooted in a very careful, analytical and dynamic strategy. This seems to be a very difficult task, requiring a focus on many aspects and processes, a holistic vision, long-term focus and objectives. Many public institutions limit their activities to a simple transfer of their information and services online without taking into consideration the re-engineering process needed to grasp the full benefits. Some other disadvantages and constraints of e-procurement include the following. a) Time for delivery of physical products. It is possible to visit a local music store and walk out with a compact disc or a bookstore and leave with a book. E-procurement is often used to buy goods that are not available locally from businesses all over the world, meaning that physical goods need to be delivered, which takes time and costs money. In some cases there are ways around this, for example, with electronic files of the music or books being accessed across the Internet, but then these are not physical goods.

b) Perishable goods. Forget about ordering a single gelato ice cream from a shop. Though specialized or refrigerated transport can be used, goods bought and sold via the Internet tend to be durable and non-perishable: they need to survive the trip from the supplier to the purchasing business or consumer. This shifts the bias for perishable and/or nondurable goods back towards traditional supply chain arrangements or towards relatively more local e-procurement based purchases, sales and distribution. In contrast, durable goods can be traded from almost anyone to almost anyone else, sparking competition for lower prices. In some cases this leads to disintermediation in which intermediary people and businesses are bypassed by consumers and by other businesses that are seeking to purchase more directly from manufacturers.

c) Limited sensory information. The Internet is an effective conduit for visual and auditory information: seeing pictures, hearing sounds and reading text. However it does not allow full scope for our senses: we can see pictures of the flowers, but not smell their fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when we pick up and inspect something, we choose what we look at and how we look at it. This is not the case on the Internet. If we were looking at buying a car on the Internet, we would see the pictures the seller had chosen for us to see but not the things we might look for if we were able to see it in person. And, taking into account our other senses, we can't test the car to hear the sound of the engine as it changes gears or sense the smell and feel of the leather seats. There are many ways in which the Internet does not convey the richness of experiences of the world. This lack of sensory information means that people are often much more comfortable buying via the Internet generic goods - things that they have seen or experienced before and about which there is little ambiguity,

rather than unique or complex things.

d) Returning goods. Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods get back to their source? Who pays for the return postage? Will the refund be paid? Will I be left with nothing? How long will it take? Contrast this with the offline experience of returning goods to a shop.

e) Privacy, security, payment, identity, contract. Many issues arise - privacy of information, security of that information and payment details, whether or not payment details (e.g. credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply.

f) Defined services & the unexpected. E-commerce is an effective means for managing the transaction of known and established services, that is, things that are every day. It is not suitable for dealing with the new or unexpected. For example, a transport company used to dealing with simple packages being asked if it can transport a hippopotamus, or a customer asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such requests need human intervention to investigate and resolve.

g) Personal service. Although some human interaction can be facilitated via the web, ecommerce cannot provide the richness of interaction provided by personal service. For most businesses, e-commerce methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This also means that feedback about how people react to product and service offerings also tends to be more granular or perhaps lost using e-commerce approaches. If your only feedback is that people are (or are not) buying your products or services online, this is inadequate for evaluating how to change or improve your e-commerce strategies and/or product and service offerings. Successful business use of e-commerce typically involves strategies for gaining and applying customer feedback. This helps businesses to understand, anticipate and meet changing online customer needs and preferences, which is critical because of the comparatively rapid rate of ongoing Internet-based change.

h) Size and number of transactions. E-commerce is most often conducted using credit card facilities for payments, and as a result very small and very large transactions tend not to

be conducted online. The size of transactions is also impacted by the economics of transporting physical goods. For example, any benefits or conveniences of buying a box of pens online from a US-based business tend to be eclipsed by the cost of having to pay for them to be delivered to you in Australia. The delivery costs also mean that buying individual items from a range of different overseas businesses is significantly more expensive than buying all of the goods from one overseas business because the goods can be packaged and shipped together. b). Way forward. The government must have a clear strategy to overcome the barriers to change. Part of the strategy is to engage in a rigorous assessment of the current situation, the reality on the ground and the inventory of projects, articulate costs, impacts and benefits of programme as well as continuously monitor and evaluate the project upgrading. Borrowing a lesson from the private sector, e-Procurement must be customer-driven and service oriented. This means that a vision of e-Procurement implies providing greater access to information as well as better, more equal services and procedures for public and businesses.