What is e-procurement and how does it differ from traditional procurement management software?
The procurement software market, broadly speaking, has several segments:
Sourcing: This supports the creation of a sourcing strategy as well as selecting suppliers. Often, this may include the automation of RFx, reverse auctions and so on.
Contract management: This is used for automating the negotiation and creation of agreements and maintaining the data base of contracts as referential data for use by other systems.
Procure to pay (P2P): P2P is for creating purchase orders through inbound receiving and payment.
Supplier performance management (SPM): SPM is crucial for monitoring and measuring suppliers based on specific areas, such as quality, price and on-time performance.
Supplier information management (SIM) or supplier discovery: This relates to a database of potential suppliers.
Supplier risk management (SRM): This can include compliance assurance, audit and monitoring of supplier health.
Social supply chains: These are closed networks that support the relationships and collaboration between customers and suppliers. Social supply chains are not open social networks.
Procurement, generally refers to just the execution components such as P2P and managing contracts. Most of these functionalities are offered on the Web -- thus, e-procurement. The major benefit of using the Web for procurement is the ability to leverage common content, such as general supplier information, standard agreement templates, as well as connections -- electronic data interchange (EDI) maps -- to other companies. Procurement software is often sold as best-of-breed.
ERP systems typically have P2P modules built in. These should have the benefit of integrating to accounts payable, but sometimes they don't. In our research, we often hear the need to integrate procurement with the financial processes, so if you are looking for procurement software from your ERP provider, make sure they can do this or consider a best-of-breed package that makes integration their business.
There are cloud-related nuances in e-procurement software, such as pre-existing connections to suppliers; whereas with on-premises software, you have to build your own connections. Without e-procurement, the user is often on their own to build the rich connections that may be required for sourcing and procurement, as well as supplier collaboration on an ongoing basis.
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