E-procurement

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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]

Contents

The e-procurement value chain consists of indent management, e-Informing, e-Tendering, e-Auctioning, vendor management, catalogue management, purchase order integration, Order Status, Ship Notice, e-invoicing, e-payment, 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. The end result of the stage is taken as inputs for issuing the NIT. [2]

Elements of e-procurement include request for information, request for proposal, request for quotation, RFx (the previous three together), and eRFx (software for managing RFx projects). [3]

Alongside with increased use of e-procurement, needs for standardization arise. Currently, there is one globally developed open extensible markup language based standard framework built on a rich heritage of electronic business experience. It consists of five layers - messaging, registry and repository, collaboration protocol, core components and business processes. [4]

History

It was first used by IBM in the year 2000, when the company launched its Replenishment Management System and Method, [5] designed by Mexican communications engineer Daniel Delfín, [6] who was then the procurement director at IBM's largest production plant, and programmed by Alberto Wario, an IT programmer. [7] The system was designed to solve IBM's complex procurement process for the plant in Guadalajara, Mexico, then the largest personal computer production plant in the World, with a production value of 1.6 billion dollars a year. Three years after the system was implemented, the production of the plant grew to 3.6 billion dollars, [8] after which, the company used the system in its secondary production plants, and later sold licenses to external companies around the World. [9]

Jari Tavi identified three stages in the evolution of e-procurement technology: initial systems were functional for procurement professionals but did not address user need; a second generation used web-based technology and aimed to support end-users as well as meeting procurement teams' needs but lacked flexibility and usability. The third generation secured more of the user-focused flexibility and usability which had previously been lacking. [10]

In the European Union, e-procurement for the public sector was first introduced with the Directives 2004/17/EC and 2004/18/EC of 31 March 2004. These directives, which were subsequently revised in 2014, [11] [12] set up the framework for transparent and equal opportunities for public procurement including the mandatory use of electronic communication for publishing opportunities, the standardization of procurement processes, electronic tender submission procedures, handling of objections etc. for all public procurement made in the EU above certain thresholds.

e-Informing

E-Informing does not directly take part in the purchasing process, this process rather precedes the purchasing. It is the process of gathering and distributing purchasing information both from and to internal and external parties, using the internet technology.[ citation needed ]  Information sharing refers to the extent to which critical and proprietary information is communicated to one's supply chain partner thus more efficiency and high performance of the supply chain. In information sharing, also information quality is considered. That includes accuracy, timeliness, adequacy, and credibility of information exchanged. [13]

This process occurs especially in Enterprise Resource Planning (ERP).[ citation needed ]

e-Tendering

Electronic tendering ("e-Tendering") is a process for sending and receiving tenders by electronic means, rather than the old paper-based method. Instead of inserting documents into an envelope and posting them, we - and you - will now exchange them securely via the Internet. It also reduces the time and streamlines tendering operations, making the process faster. It is a business-to-business process. [ citation needed ]

e-Auctioning

E-auction is the process of conducting an auction to sell assets, natural resources or other goods through online competitive bidding. Compared to physical auction, electronic auction provides complete transparency and enables more parties to take part. [14]

Vendor management

It occurs when contracting authority aims to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the procurement process. Contract management departments are often established in order to ensure the most effective deal. [15]

Catalogue management

Catalogue management is a strategic process that starts when suppliers publish their product portfolio electronically and products are made available to buyers in order to procure goods and services electronically, and appears while managing the product catalog to ensure the quality of the product data across the sales channels. The product content can be hosted either by the supplier or buyer. [16]

e-Purchasing

As opposed to e-Tendering, e-Purchasing is used in procurement of goods and services that are of low value and high volume. It electronically simplifies the purchasing process of such goods and services. For this type of procurement, catalogues are one of the key components that often occurs. Key components of this system are often complex and thus system development is often needed. The process starts from publication of items online by the suppliers, and continues to the electronic selection, order, reception, and finishes with payment by the purchasing side. [17]

e-Ordering

Process of creating and approving purchasing requisition, both placing purchase orders and receiving goods and services ordered, while using a software system based on internet technology which greatly improves the supply chain performance. When talking about e-ordering, ordered goods and services are generally non-product related, in other words - indirect. In case of Enterprise Resources Planning (ERP) the goods and services ordered are product related. Both the supporting software system as well as ordering catalogue system are designed to be used by all employees of an organization.[ citation needed ]

e-Invoicing

E-Invoicing is any method by which an invoice is electronically presented to a customer for payment. [18] In larger companies, accounts payable departments are responsible for the invoices to be approved, processed, and paid. [19]

e-Contract Management

This type of management consists of management of receivables, payments, contract settlements, contract variations, performance securities, and auditing and control activities, and as opposed to its classical form, e-Contract Management is its electronic improvement. [17]

In the public sector

E-procurement in the public sector is emerging internationally. Hence, initiatives have been implemented in Bangladesh, Mongolia, Ukraine, India, Singapore, Estonia, United Kingdom, United States, Malaysia, Indonesia, Australia, European Union. [20]

Public sector organizations use e-procurement for contracts to achieve benefits such as increased efficiency and cost savings (faster and cheaper) in government procurement [21] and improved transparency (to reduce corruption) in procurement services. [22] [23] E-procurement in the public sector has seen rapid growth in recent years. Act 590 of Louisiana's 2008 Regular Legislative Session requires political subdivisions to make provisions for the receipt of electronic bids.

E-procurement projects are often part of the country's general e-Government efforts to better serve its citizens and businesses in the digital economy. For example, Singapore's GeBIZ was implemented as one of the programmes under its e-Government masterplan. [24]
The Procurement G6 leads the use of e-procurement instruments in Public procurement.

An example of successful reform is shown by Ukraine Prozorro. The result of collaboration between Ukrainian government, business sector, and civil society. This system was developed by the international anti-corruption organization, Transparency International Ukraine, with the help of volunteers, NGOs, business community and state bodies of Ukraine, the WNISEF fund, the EBRD and other partners. [25]

Vendors

This field is populated by two types of vendors: big enterprise resource planning (ERP) providers which offer e-procurement as one of their services, and the more affordable services focused specifically on e-procurement.

Benefits and Disadvantages

Benefits

Implementing an e-procurement system benefits all levels of an organization. E-procurement systems offer improved spend visibility and control and help finance officers match purchases with purchase orders, receipts and job tickets. [26] An e-procurement system also manages tenders through a web site. An example is the 'System for Acquisition Management (SAM)' which on July 30, 2013, combined information from the former Central Contractor Registration and Online Representations and Certifications Application (ORCA), [27] in the United States. [28]

In the case of government procurement, the benefits might be efficiency, transparency, equity, fairness and encouragement of local business. Because e-procurement increases competition, lowers transaction costs, and has potential to minimize time and errors in the bidding process, efficiency is achieved. Because of easier accessibility and openness of the internet, more people can attain earlier pieces of information, which increases transparency. Neutrality to location and time ensures equity and fairness. [29]

Disadvantages

Because the vendor is obtaining more information about the customer than in case of normal supply chain management structure, major disadvantage of e-procurement might be incentive of the vendor to take advantage of the customer. [30]

See also

Related Research Articles

UN/CEFACT is the United Nations Centre for Trade Facilitation and Electronic Business. It was established as an intergovernmental body of the United Nations Economic Commission for Europe (UNECE) in 1996 and evolved from UNECE's long tradition of work in trade facilitation which began in 1957.

A request for proposal (RFP) is a document that solicits a proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service, or valuable asset, to potential suppliers to submit business proposals.

Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obligation to "procure", i.e. to "ensure" that something is done. When a government agency buys goods or services through this practice, it is referred to as government procurement or public procurement.

<span class="mw-page-title-main">Purchase order</span> Commercial document

A purchase order, often abbreviated to PO, is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services required. It is used to control the purchasing of products and services from external suppliers. Purchase orders can be an essential part of enterprise resource planning system orders.

An invoice, bill or tab is a commercial document issued by a seller to a buyer relating to a sale transaction and indicating the products, quantities, and agreed-upon prices for products or services the seller had provided the buyer.

Universal Business Language (UBL) is an open library of standard electronic XML business documents for procurement and transportation such as purchase orders, invoices, transport logistics and waybills. UBL was developed by an OASIS Technical Committee with participation from a variety of industry data standards organizations. UBL is designed to plug directly into existing business, legal, auditing, and records management practices. It is designed to eliminate the re-keying of data in existing fax- and paper-based business correspondence and provide an entry point into electronic commerce for small and medium-sized businesses.

Strategic sourcing is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price. It expands upon traditional organisational purchasing activities to embrace all activities within the procurement cycle, from specification to receipt, payment for goods and services to sourcing production lines where the labor market would increase firms' ROI. Strategic sourcing processes aim for continuous improvement and re-evaluation of the purchasing activities of an organisation.

Procurement software refers to a range of business software designed to streamline and automate purchasing processes for businesses and organizations. By managing information flows and transactions between procuring entities, suppliers, and partners, procurement software aims to cut costs, improve efficiency, and boost organizational performance.

In procurement technology, ERFx is an acronym for electronic request for [x], where x can be Proposal (RFP), Quotation (RFQ), Information (RFI) or Tender (RFT). Other pseudonymous acronyms include ITT and PQQ. All relate to a similar activity: a buyer requesting information from potential suppliers for the purpose of evaluation and comparison. Often this is part of a tendering exercise. The more structured this information is, the easier it is to compare the suppliers. For example, it is more effective to ask 20 multiple choice questions than it is to ask 2 essay questions, as long as suppliers have an opportunity to provide commentary to qualify their answers. Therefore, eRFX software should help the buyer to compare suppliers in useful ways – e.g., apples vs. apples.

Government procurement or public procurement is undertaken by the public authorities of the European Union (EU) and its member states in order to award contracts for public works and for the purchase of goods and services in accordance with principles derived from the Treaties of the European Union. Such procurement represents 13.6% of EU GDP as of 2018, and has been the subject of increasing European regulation since the 1970s because of its importance to the European single market.

<span class="mw-page-title-main">Government procurement</span> Purchases by a government body

Government procurement or public procurement is the procurement of goods, services and works on behalf of a public authority, such as a government agency. Amounting to 12 percent of global GDP in 2018, government procurement accounts for a substantial part of the global economy.

Supplier evaluation and supplier appraisal are terms used in business and refer to the process of evaluating and approving potential suppliers by quantitative assessment. The aim of the process is to ensure a portfolio of best-in-class suppliers is available for use, thus, it can be an effective tool to select suppliers in the awarding stage of an auction. Supplier evaluation can also be applied to current suppliers in order to measure and monitor their performance for the purposes of ensuring contract compliance, reducing costs, mitigating risk and driving continuous improvement.

The term Public eProcurement refers, in Singapore, Ukraine, Europe and Canada, to the use of electronic means in conducting a public procurement procedure for the purchase of goods, works or services.

Government procurement in Russia relates to the public procurement in Russia by all governmental, regional and local authorities. The government procurement in Russia represents a big segment of the budgetary expenses. The volume of government purchases makes about 25 trillion rubles in 2015 and 30 trillion rubles in 2016. The government purchases system is constantly modernized due to changes in legislation, technical components and information.

Procure-to-pay is a term used in the software industry to designate a specific subdivision of the procurement process.

<span class="mw-page-title-main">Reverse auction</span> Auction with one buyer and many potential sellers

A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers. In an ordinary auction also known as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.

<span class="mw-page-title-main">Invitation to tender</span> Business process

An invitation to tender is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works, supply, or service contracts, often from companies who have been previously assessed for suitability by means of a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ).

<span class="mw-page-title-main">Prozorro</span> Ukrainian public electronic procurement system

Prozorro is a public electronic procurement system where state and municipal customers announce tenders to purchase goods, works and services, and business representatives compete for the opportunity to become a state supplier.

<span class="mw-page-title-main">OpenProcurement</span> Open-source procurement software

OpenProcurement is an open source procurement software toolkit that automates procurement processes. It provides tools to design and build a transparent and competitive procurement process backed by strong data collection, electronic documents, and detailed reporting.

At around £290 billion every year, public sector procurement accounts for around a third of all public expenditure in the UK. EU-based laws continue to apply to government procurement: procurement is governed by the Public Contracts Regulations 2015, Part 3 of the Small Business, Enterprise and Employment Act 2015, and the Public Contracts (Scotland) Regulations of 2015 and 2016. These regulations implement EU law, which applied in the UK prior to Brexit, and also contain rules known as the "Lord Young Rules" promoting access for small and medium enterprise (SMEs) to public sector contracts, based on Lord Young's Review Growing Your Business, published in 2013.

References

  1. ↑ EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT. Are you ready for eProcurement?: Guide to Electronic Procurement Reform. 2015.
  2. ↑ LAKSHWADEEP E-PROC AND NIC. Bids and Tenders. 2018 [cit. 2019-04-22]. Retrieved from http://www.tenderbidding.com/lakshwadeep-e-proc-and-nic.php
  3. ↑ "What's the difference between an RFI, an RFP, and an RFQ?". Humboldt State University. Archived from the original on 2015-07-21. Retrieved 2015-07-28
  4. ↑ United Nations, Asian Development Bank, & Korea (South). (2006). E-procurement. [Bangkok]: United Nations Publications. pp. 22-23.
  5. ↑ ,"Replenishment management system and method",issued 2000-11-14
  6. ↑ "Daniel Arturo Delfin Farias Inventions, Patents and Patent Applications - Justia Patents Search". patents.justia.com. Retrieved 2021-08-26.
  7. ↑ "Replenishment management system and method". Daniel Arturo Delfin Farias, Ruben Alberto Wario Romo, International Business Machines Corp. 2000-11-14.{{cite journal}}: Cite journal requires |journal= (help)CS1 maint: others (link)
  8. ↑ "Expansión Magazine. Compras Inteligentes". 20 September 2011.
  9. ↑ Otundo Richard, Martin (2021-06-19). "Automating Procurement (E-Procurement) and Its Benefits during the COVID-19 Pandemic". Rochester, NY. doi:10.2139/ssrn.3870248. S2CID   235693856. SSRN   3870248.{{cite journal}}: Cite journal requires |journal= (help)
  10. ↑ Tavi, J., 7 Steps to Increasing Adoption through the Ultimate User Experience, Supply & Demand Chain Executive , published 29 September 2008, accessed 21 November 2022
  11. ↑ EUR-Lex, Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, accessed 17 March 2019
  12. ↑ EUR-Lex, Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC, accessed 17 March 2019
  13. ↑ Li, Suhong; Rao, S. Subba; Ragu-Nathan, T.S.; Ragu-Nathan, Bhanu (September 2005). "Development and validation of a measurement instrument for studying supply chain management practices". Journal of Operations Management. 23 (6): 618–641. doi:10.1016/j.jom.2005.01.002.
  14. ↑ BHAGAT, Rasheeda. All you wanted to know about: e-Auctions. Business Line. 2014 [cit. 2019-04-22]. Retrieved from: https://www.thehindubusinessline.com/opinion/columns/All-you-wanted-to-know-about-e-Auctions/article20913564.ece
  15. ↑ Jacques, Samantha; Watson, Aimee (1 March 2017). "Proactive Vendor Management for Healthcare Technology". Biomedical Instrumentation & Technology. 51 (2): 116–119. doi:10.2345/0899-8205-51.2.116. PMID   28296451.
  16. ↑ CATALOGUE MANAGEMENT. KB manage . 2018 [cit. 2019-04-22]. Retrieved from: https://www.kbmanage.com/concept/catalogue-management
  17. 1 2 United Nations, Asian Development Bank, & Korea (South). (2006). E-procurement. [Bangkok]: United Nations Publications. p. 14.
  18. ↑ Tieto. (2009). The future of E-invoicing, Pg. 5. Retrieved from https://web.archive.org/web/20121021043042/http://www.digitdoc.hu/downloads/e_invoicing.pdf
  19. ↑ Accounting Tools. (2013). Accounts Payable Controls. Retrieved from accountingtools: http://www.accountingtools.com/accounts-payable-controls Archived 2013-06-13 at the Wayback Machine
  20. ↑ Soylu, Ahmet; Corcho, Oscar; Elvesæter, Brian; Badenes-Olmedo, Carlos; Martínez, Francisco Yedro; Kovacic, Matej; Posinkovic, Matej; Makgill, Ian; Taggart, Chris; Simperl, Elena; Lech, Till C.; Roman, Dumitru (2020). "Enhancing Public Procurement in the European Union Through Constructing and Exploiting an Integrated Knowledge Graph". The Semantic Web – ISWC 2020. Lecture Notes in Computer Science. Vol. 12507. pp. 430–446. doi:10.1007/978-3-030-62466-8_27. ISBN   978-3-030-62465-1. S2CID   226229398.
  21. ↑ "Government procurement news from FutureGov". FutureGov. Archived from the original on 2011-08-20. Retrieved 2011-08-18.
  22. ↑ "Combating corruption in the EU through e-Procurement".
  23. ↑ Mettler T, Rohner P (2009). "E-Procurement in Hospital Pharmacies: An Exploratory Multi-Case Study from Switzerland" (PDF). Journal of Theoretical and Applied Electronic Commerce Research. 4 (1): 23–38. doi: 10.4067/S0718-18762009000100004 .
  24. ↑ "Singapore E-Government Action Plan I Programmes". Archived from the original on 2011-09-05.
  25. ↑ "Ukraine\'s economy ministry to launch state property lease system in 2019". www.thepaypers.com. Retrieved 2019-02-19.
  26. ↑ ""What is e procurement?"". Archived from the original on 2019-03-21. Retrieved 2019-03-21.
  27. ↑ "CIRAS - Government Contracting CCR and ORCA". Iowa State University Extension and Outreach. Retrieved 27 June 2013.
  28. ↑ "CCR Moving to SAM". U.S. Department of Health and Human Services, Health Resources and Services Administration. Retrieved 27 June 2013.
  29. ↑ United Nations, Asian Development Bank, & Korea (South). (2006). E-procurement. [Bangkok]: United Nations Publications. pp. 6-7.
  30. ↑ Chen, I. J.; Paulraj, A. (January 2004). "Understanding supply chain management: critical research and a theoretical framework". International Journal of Production Research. 42 (1): 131–163. doi:10.1080/00207540310001602865. S2CID   11562474.
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