The Goal Of Procurement

The goal of procurement is to obtain the right product or service, at the right place, at the right time,
at the right price in the most efficient manner possible. This is because, when done right, an
organization will save time, money, and add value to their product or service offerings.
Requisitions can also be assured that each supplier in the system meets any regulatory and
specification requirements. Finally, e-procurement institutes and enforces best practices that
increase spend under management, the ultimate key to procurement savings.
True e-procurement is the enablement of the full procurement cycle from initial requisition to final
payment. It includes support for the location of the required good or service, the necessary
authorizations, generation or acceptance of a goods receipt, invoice processing, multi-way match based
reconciliation, e-payment, payment acknowledgement, and analysis and reporting.
Integrated end-to-end e-procurement is the implementation of e-procurement technologies that
support each step of the various procurement cycles of your organization in a tightly integrated
fashion. It also supports integration with the e-sourcing technologies that share common touch
points. With integrated end-to-end e-procurement, the entire process is best practice workflow
driven, each step flows into the next, no data has to be re-keyed, and no time or productivity is lost.
It’s more than just requisition tracking, catalogue management, EIPP, e-payment, and analysis.
Although these technologies, when combined, arguably cover the basic procurement cycle, it’s not
true end-to-end e-procurement, because these and other components need to be integrated:
If the goods or services being ordered don’t have fixed prices, but instead are priced using a “best price”
or “discount off of standard price” mechanism, as many contracts are priced, how do you know
that the rates you are getting through a catalogue management system are optimal? How often does
the supplier update catalogue prices? How often does the supplier change SKUs? How many versions
of the catalogue does the supplier maintain? Some suppliers maintain a different version of the catalog
for every client, and only update the master regularly. Others shift SKUs every time a component
changes, even if the change is as minor as shifting the 2GB memory chip in the standard desktop PC
configuration from one supplier to another. Others still only provide the promised discounts as
“rebates”, and still use antiquated systems which are not integrated, so there’s no guarantee that all
your orders will be credited unless your system accurately tracks them and automatically provides
an invoice for promised rebates on a monthly basis. Without an integrated end-to-end eprocurement
system, you cannot track, and enforce, preferred pricing and suppliers.
In addition, how do you know that ‘best price’ as reported by the supplier has any relationship
whatsoever to external benchmark prices for the item? How do you know, without a trend analysis,
whether ‘best price’ has obeyed the standard falling price curve associated with certain items (like
PCs)? Without integrated end-to-end e-procurement that allows for integration with external
content and analyses, such as might be conducted with your spend analysis system, you will have no
way of knowing if the ‘best price’ is indeed the ‘best price’.

According to Aberdeen Group1 research, e-procurement reduces the average requisition to order
cycle by two thirds, from 11 days to 4.4 days in a typical organization. However, in addition to just
cycle time reduction, an integrated end-to-end e-procurement system will also allow you to
automatically detect shipping errors, eliminate invoice overpayments, eliminate tax overpayments,
reduce fraud, identify un-deposited checks and spend more time on strategic issues.
Automatic Detection of Shipping Errors
An integrated system can automatically compare goods receipts to purchase orders and
determine if the shipment matches what was ordered, and automatically alert the
purchasing department, the supplier, and even the third party shipping company (if a return
needs to be made) of any errors.
Elimination of Invoice Overpayments
An integrated system can automatically compare invoices to goods receipts to purchase
orders to contracted rates and insure that you only pay for what you received and that you
pay at the rate that was agreed to.