E-Procurement - The Next Evolution of E-Commerce for Industrial Sourcing
Most of us have heard about e-commerce for over twenty years, with online retail shopping being a matter of course today. During this same period, commercial and industrial suppliers have quietly evolved their own online procurement ecosystem, with modern footprints that often rival consumer platforms in revenue if not volume. Within this ecosystem, a new paradigm referred to as E-Procurement has recently emerged, going beyond simple industrial web storefronts to entire integrated procurement processes. What is E-Procurement and how does it benefit industrial instrumentation purchasing, especially over long-term contracts? Let's find out below!
Using E-Procurement Workflows for Industrial Buying
In short, e-procurement refers to both a workflow and a software package. The workflow typically consists of discrete steps, each performed digitally (mostly) and with specific objectives at each step that underscore the electronic nature of the process. We say "mostly digital" as e-procurement should never serve to displace human communication - e-procurement should be viewed as a tool that drives accuracy and quickens engagements, but not at the expense of human relationships. The core e-procurement components are:
- Vendor Database - serving as a digital contact library, e-procurement begins with compiling a list of vendors and important information about them such as specialization, annual revenue, competitive advantages, expected quality, and typical terms.
- Vendor Qualification - buyers can create prequalification assessment packages used to determine if a supplier is suitable to become an approved vendor. Assessments typically consist of requesting financial, corporate, safety, and compliance data, and then measuring those responses against a scorecard. All of this can be carried out automatically using a web interface or via email.
- Quote Solicitation - once a new requisition comes along, e-procurement tools can create a Request for Proposal package and automatically submit those RFPs out to qualified, approved vendors pulled from the vendor database. An online bidding portal is used to help buyers and sellers alike track, communicate, clarify, revise, and receive proposals quickly.
- Proposal Selection – next, proposals are subjected to a host of analytical and leveling diagnostics, producing a ranking of the quotes in order of factors important to the buyer such as total price, lead time, payment terms, etc. Buyers can use e-procurement to further engage vendors for revisions or clarification, or can make a final decision to accept the winning proposal (which will automatically notify non-winning vendors of the outcome).
- Ordering - with a successful bidder identified, buyers can next use e-procurement tools to automatically compile and send out the company's purchasing documentation, generating a purchase order or contract, terms and conditions, warranty requirements, specifications, and other addenda. Vendors can digitally accept these documents within the e-procurement system, which will store all data for easy lookup over the life of the engagement.
- Order Management - once an order is cut loose, e-procurement tools can automate and present status updates of the order. Milestones can be set up to keep communication lines open, such as notification of shipment and recording tracking numbers. Once the order is received, e-procurement can close out open threads such as acceptance confirmations and lien releases and provide a performance score for the transaction for later continuous improvement review.
Nurturing Long Term Instrumentation Procurement Relationships
Turns out, instrumentation is a perfect arena for e-procurement workflows! And yes, we're saying this as a supplier. Readers might naturally see the benefits of e-procurement on the buying side - faster RFP cycles, less haggling, more transparency, fewer price games - but there are just as many benefits on the buying side that squarely fit with instrumentation contracts as well. Let's explain:
Instrumentation is a category of products that can be specified for an application once, and then volume-ordered over time against that original specification. Once the upfront qualification, sample testing, price negotiations, volume discount, and order frequency are worked out, a volume contract can be drawn up to lock in these details. Buyers then can place multiple orders against this contract, spaced out over time to align with their sales cycles. While the upfront work takes healthy interaction, the subsequent orders can be almost completely automated. E-procurement tools are perfect for this type of arrangement, facilitating the front-end technical development and documentation, and then managing the contract over time in a highly streamlined, transparent way.
As a supplier, receiving repeat orders against an established procurement contract greatly simplifies pricing structures, paperwork, warranty lookup, inventory forecasts, and production schedules. Further, because these e-procurement tools and contracts are firmly in place, suppliers such as us know to keep application engineering and customer support resources available to service the relationship whenever needed. Lastly, because of all the time saved using e-procurement tools, buyers and sellers can focus their interactions towards growing the relationship, finding new opportunities, and developing emergent projects.
To say again, e-procurement should be viewed as a resource and toolkit that speeds up, centralizes, and facilitates purchasing engagements, but should (hopefully) never replace human communication and relationships. Many software providers of e-procurement platforms tote their products on the basis of completely offsetting human decision making from procurement processes, leaving the entire realm to algorithms and machine learning. While to a degree that is very valuable and expeditious, overall, we suggest that coupling human communication with e-procurement practices will make all the difference in long-term vendor relationships.
As a veteran-owned small business, Whitman Controls is dedicated to supplying premium quality, reliable, technologically advanced instrumentation for use in nearly any application. Our Bristol, CT manufacturing facility embodies over 40 years of engineering, fabrication, and customer service expertise, serving both end-user and manufacturing customers nationwide through direct and distribution channels.
Our values drive us to provide the highest level of servant partnership that you can find. To discuss your applications or to learn more about our capabilities, please contact us at (800) 233-4401, via email at [email protected], or online at www.whitmancontrols.com.
