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E-PROCUREMENT: THE FUTURE OF PURCHASING

MANAGEMENT

CORINA POP SITAR


Fellow of Romanian Academy, Iasi Subsidiary

Abstract
Nowadays, IT has a major influence on commercial activities, accelerating the adoption of
e-procurement and e-marketplace participation in many industries.
E-procurement is becoming popular in business practice and its benefits encourage its
adoption. This article aims to outline the important role of the E-procurement for the future
of purchasing management. In the first part of the paper we made a literature review about
the impact of the new discoveries on purchasing. Next, we present the main benefits that
E-procurement can provide to organizations structured in a matrix according to their
recipients. The paper ends with conclusions and recommendations for managers.

Keywords: E-procurement, purchasing management, benefits

Introduction

Many studies show that IT industry has become lately a fundamental part of modern
economies (Arbin, 2002; Croom, 2005). Electronic business has changed the way
organizations communicate and interact with each other.
Lederer et. al (2001) suggested that an organization can use E-procurement to create
strategic advantage through improved customer relationships resulting from greater
business efficiency and better information access and flexibility.
As the information society evolves, the need to understand E-procurement practices
becomes more important. This article aims to present the important role of the
E-procurement for the future of purchasing management.
The paper starts with a literature review about the impact of the new discoveries on
purchasing. Next, we define E-procurement. Furthermore we present the main benefits that
E-procurement can provide to organizations. We structure the benefits of E-procurement in
a matrix according to the recipient of the benefits. At the end of the paper we draw
conclusions and we elaborate guidelines for managers.

Literature review

The new discoveries from the international business environment have a strong impact on
the purchasing. Globalization of trade, changing consumer requirements and the advent of
information technologies are some of the most important changes that affect purchasing.
Globalization of trade and increased international competition are considered to be
consequences of the following factors: cross-cultural mixing, improving transport,

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revolutionary discoveries in the field of IT. An important consequence of these findings is
not only increasing the number of potential customers, but also increase the number of
potential suppliers.
Because of increasing diversity of products, consumers become more sophisticated and
their needs are changing. This translates into a continuous pressure for organizations to
create competitive products. As a result, organizations will transfer the pressure faced by
consumers to their suppliers. Therefore, choosing the best supplier is becoming
increasingly important, but also more difficult because many factors have to be taken into
account.
Nowadays, the advent of information technologies has a major influence on commercial
activities, accelerating the adoption of E-procurement and E-marketplace participation in
many industries.
Croom (2005) considers that E-business development in the supply chain management
follows five stages of evolution:

1. In the first stage firms use emails and website to gain improved access to customers and
markets
2. In the second phase, the emphasis is on the management of customer relationship
3. Next stage represents the utilization of e-business systems to support operations process
management
4. The fourth stage includes a move to integrated e-supply chain management and greater
management of total costs of purchasing
5. The last stage emphasis integrated e-supply chain management such as global

Cousins and Lamming (1997) consider that the evolution of purchasing to a strategic
function of the organization has been driven by improvements in information technology,
globalization of businesses and the need for organizations to become truly lean in order to
remain competitive.

E-procurement: the future of purchasing management

E-procurement is defined in many ways by researchers and practitioners. For example,


Croom and Brandon-Jones (2007) define E-procurement as: the use of integrated
(commonly web-based) communication systems for the conduct of part or all of the
purchasing process; a process that may incorporate stages from the initial need
identification by users, through search, sourcing, negotiation, ordering, receipt and
post-purchase review. Morris et al. (2000) considers that e-procurement is a series of
steps from the formulation of the purchasing corporate strategy to the actual
implementation of an Internet-based purchasing system.
No matter how is defined, E-procurement can offer many potential benefits to
organizations. The main benefit of E-procurement reported by several researchers (Croom
and Brandon-Jones, 2007; Arbin, 2002) is reduced costs through various ways, including
the followings: improved internal efficiency, cut supplier costs, reduce order error rate,
minimized maverick buying, etc.
Based on a literature review we tried to summarize the main benefits offered by
E-procurement (see figure 1).

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Management benefits Suppliers benefits

- improved management - improved relationships


information across all with the buyers
areas of purchasing - cost savings
- greater management - time savings
influence and control over - reduction in paperwork
the purchasing process and duplicated records
- better control of - bills are paid on time and
maverick spend and more quickly
better use of corporate
contracts

Operational purchasing Strategic purchasing


benefits benefits

- cost savings - increased purchasing


- time savings power
- reduced inventory level and - increased profit margin
inventory costs - improved efficiency of the
- reduction in paperwork purchasing process
and duplicated records - gaining competitive
advantage

Figure 1: The matrix of E-procurement benefits

We classified the benefits of E-procurement according to their recipients and we obtained


four main categories of benefits:

Management benefits
Suppliers benefits
Operational purchasing benefits
Strategic purchasing benefits

The most important benefits for management offered by E-procurement are: greater
management influence and control over the purchasing process and improved management
information across all areas of purchasing.
From the suppliers benefits we mentioned: improved relationships with the buyers, cost
and time savings, reduction in paperwork and duplicated records.
We included the following benefits in the category of operational purchasing benefits:
costs and time savings, reduced inventory level, reduction in paperwork and duplicated
records.
From the strategic purchasing benefits we mentioned: increased purchasing power and
profit margin, improved efficiency and gaining competitive advantage.

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Conclusions

This article wants to draw the attention of researchers and managers on the tremendous
potential of E-procurement to provide benefits to the organizations. Based on a literature
review we summarized the main benefits provided by E-procurement.
The use of traditional procurement systems is recognized for their lack of prompt
information and their excessive complexity, all of these factors leading to waste of time
and money.
E-procurement is promising to solve these problems by streamlining processes, providing
timely information and improving coordination and collaboration, all these leading to cost
savings and economies of time.
Nowadays, managers should not ask themselves if they should adopt E-procurement,
instead they should think how to implement it in order to obtain the maximum benefits.
In spite of the many benefits of E-procurement mentioned, the extent of E-procurement
adoption in European Union is below expectations. This low rate of adoption is due to the
comprehensive list of barriers for E-procurement implementation. The list comprise: risk,
uncertainty from suppliers, cultural differences, staff resistance to change, catalogue
content readiness, etc.
The identification of the main barriers of implementing E-procurement is fundamental for
managers in order for them to be able to facilitate the implementation process.

ACKNOWLEDGEMENT: This paper was made within The Knowledge Based Society
Project supported by the Sectoral Operational Programme Human Resources
Development (SOP HRD), financed from the European Social Fund and by the Romanian
Government under the contract number POSDRU ID 56815."

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