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eProcurement – What is it? What’s in it for the Buyer? (Part I)

By Rusty Zosel on Thu, Aug 11, 2011 @ 09:30 AM


iStock_000001263418XSmall-resized-600In past blogs I’ve referred to Patronizing Partnership as the highest level of eProcurement Evolution, a Buyer/Vendor relationship marked by trust, cooperation, and mutual support. Let’s discuss this in more practical terms which go beyond the platitudes and attitudes, first by defining what is eProcurement Evolution, specifically, complete procurement automation. (In Part II, I’ll illustrate the benefits of eProcurement with a plausible ROI scenario.)

The Automated Procurement Process – removing the barriers to communication

Let’s start with that which lies at the heart of eProcurement Evolution – open communication between Buyers and Vendors facilitated by the automated procurement process. What are the essential features of a fully-functioning automated procurement process?

The automated procurement process essentially is comprised of the following three elements:

  • A user interface to support configuration of custom business rules, vendor management, and item management
  • An automated exchange of transactions with vendors and buyer systems
  • Application logic to check all configuration and business rules against vendor transactions and buyer systems

For the user of Procurement Partners, transaction automation embraces:

  • A customer-specific and customized application access point for all users
  • A corporate access point for enterprise customers, enabling corporate staff to view procurement activity at all levels of the organization from the corporate level to the individual facility
  • Order approval workflow and tracking
  • Electronic Transactions: purchase orders, acknowledgements, confirmations, updates and invoices
  • Contract and item maintenance with vendors

Automated exchange of transactions with vendor and buyer systems insures an open two-way conversation, including:

  • An online communication protocol with vendors and service providers
  • Custom integration into vendor order processing and item database systems and buyer ERP/accounting systems using their best practices
  • Transaction processing with update/change notifications
  • Electronic invoicing for all types of invoices
  • Invoice approval workflow and tracking
  • Contract price and freight reconciliation
  • Custom alerts at multiple steps in the procurement process

Application logic is the “secret sauce” that really makes procurement automation work.  Here are a few of the ingredients:

  • Customized business logic
  • A vendor product catalog with content maintenance capability
  • Contracted item maintenance, analysis, and reporting
  • Enterprise user administration and management
  • Price reconciliation for contracted items
  • General ledger structure, assignment, and processing support
  • Budget support, tracking, and alerts
  • Intelligent reporting


The two major benefits that Buyers experience from a fully-automated procurement system include:

  • Improved contract compliance – getting the consistent value and price they negotiated with their Vendors.
  • A tangible ROI – leveraging the contract compliance process for real savings. This is what I’ll address in the next blog

Question: What features would you like to see in a fully-automated procurement process?

Topics: order approval workflow business commerce evolution eProcurement ROI automated procurement process partnership


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