E-Procurement and Its Growing Importance

Procurement: Procurement is the process whereby companies purchase goods and services from various suppliers. These include everything from indirect goods like light bulbs, uniforms, toilet paper, and office supplies, to the direct goods used for manufacturing products. Procurement also involves the purchase of temporary labor, energy, vehicle leases, and more. Companies negotiate discount contracts for some goods and services, and buy others on the spot. Procurement can be an important part of a company's overall strategy for reducing costs.
Historically, the individuals or departments responsible for purchasing a company's goods and services relied on various methods for doing so. The most basic included placing orders via telephone, fax, or mail.
Electronic procurement methods, generally referred to as e-procurement, potentially enable the procurement process to unfold in a faster, more efficient manner, and with fewer errors.
These methods include
There are seven main types of e-procurement:

1. 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.
2. 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.
3. e-sourcing: Identifying new suppliers for a specific category of purchasing requirements using Internet technology.
4. e-tendering: Sending requests for information and prices to suppliers and receiving the responses of suppliers using Internet technology.
5. e-reverse auctioning: Using Internet technology to buy goods and services from a number of known or unknown suppliers.
6. e-informing: Gathering and distributing purchasing information both from and to internal and external parties using Internet technology.

7.        e-marketsites: 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

In a January 2001 Works Management article, a report from e-Net revealed that 70 percent of companies in the finance and retail sectors used the Internet for some purchases. The adoption rate was much less among manufacturers, where only 17 percent used formal e-procurement systems. Besides varying from industry to industry, different companies use different blends of traditional and electronic procurement methods, and individual e-procurement systems themselves may incorporate traditional capabilities like telephone or fax.