South African companies are testing the e-procurement waters by using the technology to streamline the purchase of maintenance repair operations (MRO) goods such as stationery and computer components. However, the real benefits of e-procurement only start to kick in when it is integrated with processes across the entire supply chain.
That`s according to Chris Greyling, business development executive at Commerce Centre who says that moving MRO purchases onto the `Net` is only the starting point for companies that want to capitalise on all the potential benefits of B2B e-commerce.
"Anyone who has purchased goods for their company knows how time-consuming and expensive that process can be. Because MRO goods tend to be commodities that require little communication or customisation, most companies have used this as the departure point for their B2B e-commerce strategies.
"This makes enormous sense because it allows companies to slash between 30% and 60% off the cost of processing a simple purchase while freeing the procurement department up to focus on more strategic issues," says Greyling.
E-procurement links the buyer to his network of sellers via the Internet, allowing automation of the procurement process from placing an order to settling the payment. It gives users the ability to perform self-service requisitioning through browser-based access to a catalogue of goods and services from approved suppliers.
If a company needs a constant supply of certain parts, the e-procurement package will monitor inventory levels and automatically replenish stock. The software can also automate clerical tasks such as purchase requisitions.
Greyling believes that it is important that companies look at e-procurement as part of their entire supply chains, and close the loop between the "buy" side and the "sell" side of their businesses. Companies can integrate their e-procurement applications with their own systems and those of their suppliers and customers fairly painlessly.
"Once this level of integration is achieved, companies can start to make use of sophisticated techniques such as just-in-time manufacturing and manufacturing-on-demand to keep inventory at its optimum level, increasing efficiency and reducing stock holding costs," says Greyling.
Greyling warns that companies who want to take advantage of e-procurement in this way need to have a solid back-end infrastructure in place, including clearly defined workflows, a solid enterprise resource planning (ERP) backbone and customer relationship management (CRM) applications. These systems also need a high degree of flexibility and openness to ease integration with the systems in use at business partner sites.
This infrastructure will allow companies to match their purchase and manufacturing activities with the demand (or projected demand) from their customers, for example.
Says Greyling: "There are a number of business models and options open to companies in the e-procurement space, and the trick is to match the right one for your business.
"Your choices include purchasing an e-procurement solution and hosting it yourself; hopping onboard one of the many business-to-business hubs that have come to market in the last six months; or turning to a an Internet Information Broker Service."
Such a service enables all parties in a business community to conduct business electronically. The broker, which is built on Internet technology, acts as a bridge between the multitude of systems and technologies in use by various members of the business community.
For most businesses, Greyling recommends the use of a third-party broker because it removes technological complexity from their hands and saves them up-front investment in software and infrastructure. Such a service should ideally be paid for as it is used, with fees based on transactions.
By using a broker service, companies can participate in a number of B2B marketplaces through a single entry point as well as build closed marketplaces that only include their most important customers and suppliers without needing to be concerned about integration or security issues.
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