Before going any further, it’s important to clarify the difference between purchasing and procurement. These terms are often used interchangeably, but they differ in scope. Purchasing refers to the actual buying of materials and those activities associated with the buying process. Electronic purchasing addresses only part of the problem and represents only the tip of the iceberg.
Procurement, on the other hand, has a broader meaning and includes purchasing, transportation, warehousing, and inbound receiving. Procurement is a closed-loop process that begins with the requisition and ends with payment. Integrated procurement remains one of the truly significant business strategies to be developed in this century. But it’s been hampered by technological limitations.
The initial goal of integrating the procurement supply chain was to take apart some traditional, hierarchically structured purchasing organizations. Many had layer upon layer of approval procedures that slowed the process down. What’s emerging is an emphasis on order-to-delivery processes rather than tasks. The focus is moving quickly toward integrated procurement chain management.
At the same time, procurement is migrating from traditional paper-based processes to e-procurement. The benefits of a e-procurement fall into two major categories: efficiency and effectiveness. Efficiency includes lower procurement costs, faster cycle times, reduced maverick or unauthorized buying, more highly organized information, and tighter integration of the procurement function with key back-office systems. Effectiveness includes increased control over the supply chain, proactive management of key procurement data, and higher-quality purchasing decisions within organizations.