E-procurement is the use of electronic means to acquire resources like materials and equipment. It can be done manually or automatically through software, which can be specifically designed for e-procurement or included in all-in-one programs like ERP. Automatic ordering can be useful for large companies but can cause problems for smaller ones with limited working capital.
E-procurement, or electronic procurement, is a process involving the use of electronic means for the acquisition of resources such as materials, supplies and equipment. This process is similar to online shopping, but often deals with different types of sellers than typical online shopping. Usually, companies engage in this practice, but consumers can also use e-procurement methods, especially for products or services they use on a regular basis. A consumer or business can perform e-procurement manually by visiting websites and ordering products or services, or they can allow a program to perform these functions automatically.
The software used for this purpose comes in a few types. Some software may be specifically designed for e-procurement functions. All-in-one software programs, such as an enterprise resource planning (ERP) program, might include e-procurement capabilities. Typically, large companies using e-procurement opt for all-in-one ERP software. Small business owners are more frequently using dedicated programs for recurring orders for supplies and services, primarily because they are low cost and have limited functionality that applies more directly to small business needs.
E-procurement systems can usually automatically order supplies when the system indicates that more is needed. While this feature can be useful for large companies with deep pockets, especially those that move large numbers of orders, it can cause huge problems for smaller companies that don’t have the resources available to justify automatic sorting. A company with limited working capital can face huge problems if an e-procurement program does not place an order in a timely manner. Basically, it’s only a good idea to use automatic sorting if the company has enough cash to easily absorb an unexpected order. One option for a capital-constrained business is to have an e-procurement program that handles alerts when you need to place an order, without actually placing the order from a supplier.
Suppose a large company produces many chairs from a certain type of wood. Before the company can make the chairs, it must have the wood on hand. A company that moves a significantly high volume of chairs could use an automated ordering system to ensure that wood material is always there when the company needs to produce an order. Some software programs might place an order for more supplies when supplies are scarce, while others might place an order for supplies when the business receives an order for its product.
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