RS’s Simon Roberts explains why eProcurement is a logical step for most organisations and what to consider when making the switch

Procurement purchases can generally be split into two categories – traditional, paper-based requisitions, and electronic, or eProcurement, where organisations use a business-wide digital platform to procure goods.
 
I believe there are a number of factors, particularly when it comes to organisations’ indirect spend on maintenance, repair and operations (MRO), that make a compelling case to introduce eProcurement, and I have listed the ‘big five’ below:
 
1. Improved process efficiency
Paper requisitions are time-consuming, prone to human error and take employees away from operational tasks. By switching to a digital procurement system, it’s possible to remove virtually all this inefficiency and improve the procurement process.
"Switching to eProcurement has been shown to reduce order-processing costs by between 50% and 70% on each order"
2. Reduced process costs
The average non-digital purchase order costs £50 [1], which really mounts up if your organisation is making thousands of purchases over the course of a year. Switching to eProcurement has been shown to reduce order-processing costs by between 50% and 70% on each order [2], which is a significant help to your bottom line.
 
 
3. Improved data insight
One of the massive benefits of switching to an electronic system is the data it can provide you. Where you have employees across your organisation making thousands of purchases on a variety of items, using an eProcurement system provides you with quality data on both micro and macro trends. This data will then form the basis for an ongoing procurement strategy, and allows you to benchmark performance and improve it over time.
"By having a procurement system that’s simple to use, your engineers can spend more time focusing on maintenance and less on purchases"
4. Reduced maverick purchasing
One of the biggest costs in maintenance procurement comes from ‘off-contract spending’, where people make purchases from non-approved suppliers, and end up paying more and getting worse service. Currently around 18% of all MRO spend is off-contract[3]. An eProcurement system allows you to have greater visibility of spending across the organisation and to identify maverick spending.
 
 
5. Reduced inventory costs
The data that eProcurement delivers helps to drive your organisation’s working capital strategy. In practice, this means that by having transparency over what you purchase on a regular basis and when, it’s possible to create a stock profile based on your actual consumption. This means you can avoid having costly stock sitting on shelves that doesn’t get used and focus on the stock you really need, which will greatly help with unplanned maintenance.
 
How to switch to eProcurement
When it comes to implementing an eProcurement system in your organisation, there are a couple of approaches you can take. Traditionally, eProcurement has been a bolt-on module of a back-office enterprise resource planning (ERP) solution, which an organisation will invest in to manage their overall business, and procurement can be effectively plugged into this. This is still the option many businesses will go for, but it takes a significant upfront investment, which is then repaid over time through the efficiencies that result from the new system.
 
There is now, however, the emergence of an alternative cloud-based technology, which gives organisations a new option when it comes to eProcurement. These disruptive new systems acknowledge the fact that many organisations are not in the position to spend upwards of £1m upfront on an ERP system, so instead offer new cloud-centred, often subscription-based technology, which lets organisations focus purely on front-end eProcurement, rather than needing all the other back-end operations.
 
Whichever system you choose to use, it’s vital you have suppliers that can easily integrate with the eProcurement technology. At RS, one of our main priorities is to ensure our technology and customer interface work with as many systems as possible, so that organisations can benefit from all the advantages that come with eProcurement and we can help them to make efficiencies and save money.
 
Think about suppliers
Another consideration when it comes to suppliers is to look at the user interface they provide for your employees to use. At RS, we’ve found that although people are making B2B purchase decisions, they tend to expect a more B2C customer journey simply because they are used to websites like Amazon.
 
As such, we put a lot of focus on UX (user experience) so that people across our customers’ organisations can easily use an eProcurement system linked to our offering, which helps when it comes to getting employees engaged and using a new system. By having a procurement system that’s simple and quick to use, your engineers can spend more time focusing on maintenance and less on purchases.
 
The growth in eProcurement technology is opening up the market to businesses of all sizes. This makes it essential that any organisation that isn’t already looking at eProcurement should be very soon. The five points I listed earlier are clear benefits that companies will gain by using eProcurement, and in a competitive environment, these efficiencies and savings could make all the difference.
 
 

[2] Best Practices in E-Procurement Aberdeen Group 2005
[3] Aberdeen Group 2006: The Maintenance, Repair and Operating Supplies Benchmark Report