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Capitalize on the World's Fastest Growing E-commerce market through E-Procurement

By

Louie Pitlo

|

March 9, 2017

When the Internet began, consumers and businesses have realised that there will be changes in the process of buying and selling products in the global environment and set the prices in these online transactions. The growth of the Internet as one of the innovations of information technology has required companies and governments to adopt new strategies in the area of purchasing and procurement of goods and services as they have recognised the potential positive impacts of the Internet as a new wave of making transactions. Businesses, therefore, adapt to this trend by re-engineering their way of doing business in the global marketplace. In particular, business organisations tapped the services of extranets, intranets and business websites and solutions to survive in the competitive environment. As a result, information technology and knowledge management have moved their way into the mainstream of business processes with the facilitation of communication efforts. Sophisticated software development has somehow enabled the companies and organisations to buy and sell on the Internet with the presence of secure conditions leading to new strategies suited to the medium used by the companies that gave birth to new business models.

Come the growth of a business model being utilised by businesses for their daily transactions, Web auction through the Internet is an innovative approach in the purchase and sale of products and services surpassing expectations in running intermediate transactions in markets with B2B markets or business-to-business. Specifically, online auctions served as the connection or bridge among buyers and sellers on the Internet that could expand on a global scale significantly cutting time and transaction costs in the process. In addition, web auction provided long-term relationships with suppliers who were previously inaccessible due to the lack of online platform. Market competition is being promoted resulting in major cuts on costs associated with a business transaction on the Web.

Moreover, firms are practising nowadays the incorporation of the specifications of products and services within their electronic procurement systems limiting an employee’s capability to buy a laptop computer on a certain brand with specific features, capacity, memory and software.

E-Procurement: A Centralised Procurement Scheme

Electronic procurement or known as e-procurement is a process of using the Internet in the easy, fast, and less expensive purchasing of goods and services that a business organisation, an individual or a government may be requiring for their continued operations. As such, electronic procurement is a product of the growth and development of Information technology aiming to help organisations make rational decisions in the area of purchasing or procurement of goods and services including machinery and equipment for smooth and efficient operations. In short, the improvements in Information Technology brought about the process of electronic procurement that is now applied and used by major business organisations and governments. E-procurement process covers a wide range of methods like reverse auctions with the overall goal of streamlining the process of procurement and purchasing enabling businesses to focus their attention on the management by serving more customers and earning the needed revenues for the firms.

The Identified Electronic Procurement Advantages

The capability of electronic procurement in saving time is also one of its major benefits. Employees of a firm or a government institution need not make phone calls to suppliers in order to buy goods or place orders as they could simply search the Internet for a supplier offering the goods and services they need for their operations. And since suppliers receive the orders instantaneously, they have the capability to ship and deliver orders faster than the rate of the traditional methods of procurement. However, despite the plenty benefits of electronic procurement, its major pitfalls or shortcomings are also evident. In particular, obstacles exist in the implementation of this kind of electronic process. The biggest shortcoming of e-procurement would be the treatment of all products as identical or the same and all areas of procurement unchanged. This pitfall refers to the reality that not all the goods of e-procurement would be delivered in the different settings or operations of a firm. Illustrating this pitfall could be best achieved by the comparison of products. Urgent items are products supplied by few companies or individuals having a high demand. As such, companies maintain a desirable level of stock of urgent items so that they do not run out of them and face a difficult scenario in the long term. Meanwhile, non-critical items are products needed by the company that are significant for its operations such as coffee filters and papers for printing. In general, non-critical items accounted for about 80% of all of the purchases of a company. Since both types of items or products are needed by a firm, the requirement of crafting procurement techniques provided a crucial role in controlling their costs. As such, since an urgent item is having a high demand, a company or a buyer would never pursue a reverse auction because the supplier or the seller might be able to drive the price of the commodities upward since the supplier has all the power in the relationship. On the other hand, reverse auctions work well in the purchase of non-critical items and buyers have the capability of lowering their price by 35% with the use of this electronic procurement technique.

Hence, the knowledge, as well as the skill in implementing various techniques in electronic procurement, is significant if a firm or a government institution is targeting for the implementation of the system. Recent studies have shown that companies are engaged to some extent on electronic procurement processes although dealing with small amount of the purchases they make on a regular basis. Finally, once companies were able to have knowledge of the potential benefits of the electronic procurement system, they will act swiftly to implement them at the operations level.

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