Last March, 24th, one of the MADI students, Sergey Gurchak took part within one of the 2016/2017 MADI Talks, and he talked about the eprocurement. Sergey has been working for more than 10 years in this field, in companies like Nestlé.

The eprocurement manages internal and external processes related to online shopping, supply and payment.

But, why is the e-procurement important for companies? First of all, the correct price including the TCO (Total Cost of ownership) should be determined. The latter includes the acquisition cost and the product costs, that is, the direct and the indirect costs (rates, taxes, etc.). Another role of the e-procurement is to ensure the material quality, the quantity and the delay in terms of supplier’s delivery. In addition, it is responsible for the innovation, sustainability and development of the relationships with the suppliers. Also, one of its main roles is to develop a better financial control, since this one includes the working capital.

Eprocurement phases

From an eProcurement process perspective, there are two main actions. At first, the strategic sourcing, which entails the contracts with international suppliers. In this first stage, you negotiate with the suppliers, you sign the contract, etc. Also, this first stage includes the seven next steps to follow:

  1. Identifying needs
  2. Defining the contract terms
  3. Analyzing and choosing suppliers
  4. Public or private tenders
  5. Evaluation of the proposals
  6. Contract awarding
  7. Contract management

The second phase, called operational procurement, starts when the signed contract is executed.

operational procurement flow

 

 

Difficulties that the procurement faces

  1. Ethical difficulties: it is not all about the price. The purchasing and procurement should be responsibly carried out, with companies that look after their employees, without any misconduct. One the main roles of the eProcurement is to make sure that their suppliers meet the company’s ethical commitments.  

This is the same case when the companies do not comply with the external audits nor the honesty and transparency laws in their accounts, or any authority is investigating them because of some tax irregularities.

  1. Strategic difficulties: like the strategic purchasing, its volume and the price fixing. The eprocurement leaders also face other difficulties such as the contract centralization and awarding and the clients satisfaction.
  2. Operational difficulties: the eProcurement leaders should thoroughly plan the supply chain as well as the expenditures and budgets. Also, they must observe the saving opportunities or the tail spend.

Eprocurement Challenges

cloudSergey also talked about the challenges the eprocurement is going to face. One of the main ones is a decreased visibility about the current and future needs.

Another challenge this job is facing is the applicants may buy or purchase without the need for any notification to the procurement.

The third challenge will be the solution for the communications problems such as those that arise via phone, fax or email and that may lead to misunderstandings. In addition, changes in already processed orders produce a lot of confusion and usually turn into source of problems and misunderstandings.

Finally, Sergey told us about the challenge his job faces when problems from the internal suppliers approval or sign requirement arise, steps that slow the process. Another serious problem is the need for manual prices contribution, which generates big delays in the process due to the required time and commitment needs.

Eprocurement advantages with Cloud applications

 

In order to solve these challenges and problems Sergey’s job faces daily, he explained that the solution lies in the Cloud applications.

We found two types of hosting.

On premise, this one hosts on the company’s server and is in charge of managing the required maintenance and software management. The advantage of these services is that the companies are free to do whatever they want to. The disadvantage is the need for a bigger economic investment in qualified personnel able to develop the product.

Cloud Computing this is when we shift the responsibility to another company. Google is an example. We do not know where its servers are or the person in charge of its maintenance, but we know it works and it is safe. The biggest advantage of these services lies in the required infrastructure and the costs reduction in consequence. The Cloud Computing is cheaper and it entails less infrastructures than the “on premise” server does. We would just need to pay for the company’s submit to manage the cloud.

New technologies contribute to the improvement and development of this emerging job. The technological and social advantages the cities are facing (smart cities), communications (smartphones, cloud storing, big data, etc.) are contributing to the automatization of this job.

En this video you can watch a summary about the MaDI Talk that Sergey shared with us! And if you want to know more about our  MaDI Talks go to our blog and social networks where we publish a calendar with the talks about different topics: Networking, Digital tools,  Jobs and career  y Doing Business .