E-procurement benefits ….fact or fiction?

It has been difficult to find anything recent in the academic world on e-procurement. What was once the doyenne of the procurement world does seem to have become very much business as usual.

However, it really does depend on how you define the term. 

So, prior to running off at speed discussing an array of e-procurement related elements, let’s make sure that we discuss the right technology platform.

In 2016, I sat in on an EU conference that had a presentation session on “e-procurement”.   Having implemented an end-to-end B2B procure to pay platform, I had considered that it was pretty much a common technology - and well understood.  I was wrong.    I was treated to an hour on e-procurement as an RFP (request for proposal) and optimisation tool.   Not the e-procurement I was expecting.   The (real) e-procurement, from my perspective, is the good old shopping cart and payment process.  So, let’s stick with that definition for now.

At the turn of the millennium, e-procurement and the sister product e-marketplaces, were being implemented at a furious speed.  However, as fast as the companies were starting up and creating e-procurement systems, the dot.com era brought the entire edifice down and left very few players standing.   I was amazed recently to discover that startups are still creating these platforms.  So much for the concept of a mature market.

For those that have little experience with e-procurement systems, the simplest analogy is that it’s a little like a single organisation implementation of Amazon.   The hoster (the buy side) will have access to the range of catalogues and suppliers like any Amazon user.   However, these are only generally only contracted suppliers.  The supplier makes available their catalogue and goods to organisational buyers.  If you do not work for the client company you cannot see or interact with this environment.   The supplier can have their own website catalogue (termed as “punch out”) or use third party or software vendor supplied catalogues.   Once a PO has been raised and goods despatched, invoices can be submitted, matched and paid.  All automated.

Sounds like a transactional nirvana.  However, just how successful has e-procurement actually been?

Independent academic research appears to have started to fizzle out from 2007 as the e-procurement technology wave passed and moved on – as most technologies do eventually.    This article does not suggest that e-procurement is a failure or is declining – it merely suggests that little real evidence exists to suggest that it is an outstanding success.   One may assume that if it was a major success – there would be many (and wide ranging) articles that vaunt the case for investment.

However, e-procurement software vendors are still going and new development companies still seeking a new angle.   There have been many variations – from free systems (with revenues made on services), to the more expensive, fully integrated ERP suites.    However, none of these options are cheap to implement – and can be notoriously difficult to embed in to the culture of organisations.    We can hypothesise and speculate on some of the reasons for this:

  • E-procurement has often been touted as the panacea for all procurement department ills. Stops maverick spending, controlled approvals and extensive workflow;
  • This is correct to some extent. However, this focuses on a small slice of spend (i.e how much of procurement effort is actually spend under management?).
  • Many procurement teams write large contracts but rarely take the time or effort to check compliance to contract. No one ever said that vendor catalogues and associated pricing were always correct and accurate.   Automated PO processing cannot fix compliance if the core vendor source catalogue pricing is simply wrong;
  • Spend analysis is still lacking as a core skill in many procurement teams – so validation and compliance checking of pricing to invoice compliance still seems to be a low priority agenda item. Therefore, e-procurement provides no better protection for contract compliance than any other process in many cases.
  • The generic nature of indirect spend activity remains in many cases. Simply, this means that in some categories, the variation in process to specify, order and pay means that a “one size fits all” process platform simply will not work.   There are Purchasing cards and a range of other specialised P2P options available – but the advent of products like SAP Fieldglass for temporary labour and service time recording has started to erode the value of e-procurement investment in some categories.   All-encompassing E-procurement capability is simply being picked off at a category level.    The purists will argue that it should all be on one system.  However, the pragmatists are busy creating applications that deliver value.

Could it be that e-procurement has simply passed its apogee?    Perhaps. 

However, do problems with purchase to pay in many organisations simply reside with procurement cultures? 

There is little or no doubt that many procurement departments see the entire gamut of purchasing activity as their domain to control.   Many procurement executives still initiate major P2P investment projects on the basis that this will provide an entire control platform - and that business teams will simply comply.    That assumption is flawed as many imposed P2P initiatives run counter culture and are doomed to fail - or at best simply ignored.

It can also take time to set vendors up on e-procurement, maintain workflow using cost centre files, approve POs, set spend limits etc.   There are many variations on a theme in the e-procurement space – many systems will now claim to resolve a range of category-based issues.   However, many business unit buyers have considerable market knowledge, good commercial evaluation skills and translate their domestic purchasing skills in to the workplace very effectively i.e.  specify requirements, create opportunities and evaluate responses from multiple suppliers - and place an order.   They also can save companies money.   As the old Chinese proverb suggests, “give a person a fish, feed them for a day, give them a fishing rod, feed them for a lifetime”.

It may simply be that the majority of e-procurement platforms are designed, in many cases, to pander to the notion of total control desired by procurement teams – not commercial pragmatism around the way the purchasing and business world really works.

However, there are alternatives.

Tony Bridger is the Consulting Sales Director for Glooberry Ltd and has extensive procurement experience with a number of large overseas corporations and governments including World Bank.   He can be contacted on 07928 500746 or tony.bridger@glooberry.com    For those in the North Wales area, a networking event is being held at the new Wrexham Enterprise Hub on the 2nd August (0930-1200) – contact us for a seat.   Tony is also the managing Director of Data-TrainingWorx Ltd.