ELECTRONIC PROCUREMENT
Electronic Procurement
Introduction to E -Procurement
Definitions Used In E-Procurement
E-procurement
According to CIPS, e-procurement is the combined use of electronic information and
communications technology (ICT) in order to enhance the links between customer and supplier,
and with other value chain partners, and thereby to improve external and internal processes. E-
Procurement is a key component of e-business and e-commerce.” E-procurement is the term
used to describe the use of electronic methods, typically over the Internet to conduct transactions
between awarding authorities and suppliers.
The process of e-procurement covers every stage of purchasing, from the initial identification of
a requirement, through the tendering process, to the payment and potentially the contract
management
eSourcing: Preparatory activities conducted by the contracting authority/entity to collect and
reuse information for the preparation of a call; potential bidders may be contacted, if admitted by
the legal rules, by electronic means to provide quotations or manifest interest.
eNoticing: Advertisement of calls for tenders through the publication of appropriate contract
notices in electronic format in the relevant Official Journal (national/EU); electronic access to
tender documents and specifications as well as additional related documents are provided in a
non-discriminatory way.
eAccess: Electronic access to tender documents and specifications as well support to economic
operators for the preparation of an offer, e.g. clarifications, questions and answers.
eSubmission: Submission of offers in electronic format to the contracting authority/entity, which
is able to receive, accept and process it in compliance with the legal requirements.
, ELECTRONIC PROCUREMENT
eAwarding: Opening and evaluation of the electronic tenders received, and award of the contract
to the best offer in terms of the lowest price or economically most advantageous bid.
eContract: Conclusion, enactment and monitoring of a contract / agreement through electronic
means between the contracting authority/entity and the winning tenderer.
eOrders: Preparation and issuing of an electronic order by the contracting authority/entity and
its acceptance by the contractor.
eInvoicing: Preparation and delivery of an invoice in electronic format.
ePayment: Electronic payment of the ordered goods, services or works.
Evolution of E-Procurement
The origins of e-procurement begin in the 1980s, with the development of electronic data
interchange (EDI). This development, while ancient by today’s standards, was groundbreaking
for the time. EDI allowed customers and suppliers to send and receive orders (and invoices as
well) using call-forward networks.
In the 1990s, technology, as it tends to do, improved and software companies began to develop
electronic catalogues specifically for use by vendors.
Since, e-procurement software has become an amalgam of the two: a platform for sending and
receiving orders (as well as myriad other expenses such as travel) and various catalogues.
Marketplaces have also proven to be a popular addition to e-procurement software.
Marketplaces, to borrow CIPS’ definition, are: virtual marketplaces for suppliers, distributors,
agents and customers.”
Electronic Data Interchange May be defined as;
, ELECTRONIC PROCUREMENT
The technique based on agreed standards, which facilitates business transactions in standardized
electronic form in an automated manner directly from a computer application from one
organization to another.
How EDI works
Company A creates a purchase order using its internal business software
EDI software translates the order
Company A sends the Ksh. 850 purchase order to Company over a third party value added
network (VAN) or encrypted in EDIFACT(EDI for Administration, Commerce and Transport
developed by the UN for the purpose of providing EDI standards that would support world
trade).
Company B receives the 850 purchase order document and will translate it from EDI to its
propriety format and, typically, company B will send an acknowledgement to company A.
EDI at the supermarket
One of the best examples of EDI is EPOS (electronic point of sale) at the supermarket. When a
product is purchased the checkout operator scans a barcode on its label, which automatically
registers the price on the cash till.
The same signal also triggers a computer process that reorders the item from the manufacturer,
sets off a production cycle, and arranges invoicing, payment and transportation of the new order.
EDI effectively puts the product back on the shelf with a minimum of human involvement.
Advantages of EDI
- Quick processing of information.
- Better customer service.
- Increased productivity.
- Cost efficiency.
- Improved billing.
- Distortion and exaggeration of supply and demand information is eliminated through real
time strategy
, ELECTRONIC PROCUREMENT
- It speeds transactions, reduce costs and error rates.
Limitations of EDI
- The setup and maintenance of EDI system is expensive.
- Business processes depended on EDI standard format and when the format changed then
the business process has to be changed accordingly.
- EDI systems are vulnerable to attack form viruses, malware and other frauds
- Business incur staff training cost for them to run EDI enabled software.
- Some organizations stops doing business with those that don’t use EDI.
Drivers of the Use of E-Procurement
Reduced Transaction Time: Individual business activities (transactions) can be completed
much more quickly; they are not restricted by office hours and may not even need human
intervention, thus increasing the capacity to complete transactions on a real time basis. This
means that downstream processes are not constrained by waiting for transactions to be
completed.
Electronic catalogues: the development of e-catalogues has enabled organizations to market
their product offer electronically, this has been a fantastic marketing tool for sellers and for
buyers, there is price transparency (you can easily see how much items cost) and buyers can
compare offers from various e-catalogue vendors.
Increased Standardization: With the electronic catalogues mentioned, there has been a move
by some suppliers to offer a more standardized offer, thus allowing buyers to easily compare the
offers from e-catalogues, however care must be exercised in these comparisons as it is difficult
to assess the quality of products without samples. If in doubt request samples and take time to
make your own assessment.
Wider Spread Supplier Bases: Because the virtual e-procurement portals are web-based, buyers
can search suppliers worldwide, meaning a wider selection of products and services are available
to the organization meaning that when items are not available locally, it is still possible to source
Electronic Procurement
Introduction to E -Procurement
Definitions Used In E-Procurement
E-procurement
According to CIPS, e-procurement is the combined use of electronic information and
communications technology (ICT) in order to enhance the links between customer and supplier,
and with other value chain partners, and thereby to improve external and internal processes. E-
Procurement is a key component of e-business and e-commerce.” E-procurement is the term
used to describe the use of electronic methods, typically over the Internet to conduct transactions
between awarding authorities and suppliers.
The process of e-procurement covers every stage of purchasing, from the initial identification of
a requirement, through the tendering process, to the payment and potentially the contract
management
eSourcing: Preparatory activities conducted by the contracting authority/entity to collect and
reuse information for the preparation of a call; potential bidders may be contacted, if admitted by
the legal rules, by electronic means to provide quotations or manifest interest.
eNoticing: Advertisement of calls for tenders through the publication of appropriate contract
notices in electronic format in the relevant Official Journal (national/EU); electronic access to
tender documents and specifications as well as additional related documents are provided in a
non-discriminatory way.
eAccess: Electronic access to tender documents and specifications as well support to economic
operators for the preparation of an offer, e.g. clarifications, questions and answers.
eSubmission: Submission of offers in electronic format to the contracting authority/entity, which
is able to receive, accept and process it in compliance with the legal requirements.
, ELECTRONIC PROCUREMENT
eAwarding: Opening and evaluation of the electronic tenders received, and award of the contract
to the best offer in terms of the lowest price or economically most advantageous bid.
eContract: Conclusion, enactment and monitoring of a contract / agreement through electronic
means between the contracting authority/entity and the winning tenderer.
eOrders: Preparation and issuing of an electronic order by the contracting authority/entity and
its acceptance by the contractor.
eInvoicing: Preparation and delivery of an invoice in electronic format.
ePayment: Electronic payment of the ordered goods, services or works.
Evolution of E-Procurement
The origins of e-procurement begin in the 1980s, with the development of electronic data
interchange (EDI). This development, while ancient by today’s standards, was groundbreaking
for the time. EDI allowed customers and suppliers to send and receive orders (and invoices as
well) using call-forward networks.
In the 1990s, technology, as it tends to do, improved and software companies began to develop
electronic catalogues specifically for use by vendors.
Since, e-procurement software has become an amalgam of the two: a platform for sending and
receiving orders (as well as myriad other expenses such as travel) and various catalogues.
Marketplaces have also proven to be a popular addition to e-procurement software.
Marketplaces, to borrow CIPS’ definition, are: virtual marketplaces for suppliers, distributors,
agents and customers.”
Electronic Data Interchange May be defined as;
, ELECTRONIC PROCUREMENT
The technique based on agreed standards, which facilitates business transactions in standardized
electronic form in an automated manner directly from a computer application from one
organization to another.
How EDI works
Company A creates a purchase order using its internal business software
EDI software translates the order
Company A sends the Ksh. 850 purchase order to Company over a third party value added
network (VAN) or encrypted in EDIFACT(EDI for Administration, Commerce and Transport
developed by the UN for the purpose of providing EDI standards that would support world
trade).
Company B receives the 850 purchase order document and will translate it from EDI to its
propriety format and, typically, company B will send an acknowledgement to company A.
EDI at the supermarket
One of the best examples of EDI is EPOS (electronic point of sale) at the supermarket. When a
product is purchased the checkout operator scans a barcode on its label, which automatically
registers the price on the cash till.
The same signal also triggers a computer process that reorders the item from the manufacturer,
sets off a production cycle, and arranges invoicing, payment and transportation of the new order.
EDI effectively puts the product back on the shelf with a minimum of human involvement.
Advantages of EDI
- Quick processing of information.
- Better customer service.
- Increased productivity.
- Cost efficiency.
- Improved billing.
- Distortion and exaggeration of supply and demand information is eliminated through real
time strategy
, ELECTRONIC PROCUREMENT
- It speeds transactions, reduce costs and error rates.
Limitations of EDI
- The setup and maintenance of EDI system is expensive.
- Business processes depended on EDI standard format and when the format changed then
the business process has to be changed accordingly.
- EDI systems are vulnerable to attack form viruses, malware and other frauds
- Business incur staff training cost for them to run EDI enabled software.
- Some organizations stops doing business with those that don’t use EDI.
Drivers of the Use of E-Procurement
Reduced Transaction Time: Individual business activities (transactions) can be completed
much more quickly; they are not restricted by office hours and may not even need human
intervention, thus increasing the capacity to complete transactions on a real time basis. This
means that downstream processes are not constrained by waiting for transactions to be
completed.
Electronic catalogues: the development of e-catalogues has enabled organizations to market
their product offer electronically, this has been a fantastic marketing tool for sellers and for
buyers, there is price transparency (you can easily see how much items cost) and buyers can
compare offers from various e-catalogue vendors.
Increased Standardization: With the electronic catalogues mentioned, there has been a move
by some suppliers to offer a more standardized offer, thus allowing buyers to easily compare the
offers from e-catalogues, however care must be exercised in these comparisons as it is difficult
to assess the quality of products without samples. If in doubt request samples and take time to
make your own assessment.
Wider Spread Supplier Bases: Because the virtual e-procurement portals are web-based, buyers
can search suppliers worldwide, meaning a wider selection of products and services are available
to the organization meaning that when items are not available locally, it is still possible to source
