1. White Paper
E-Procurement - The Future of Supply Chain, March ’09
e - Procurement
The Future of Supply Chain
Raju Sheth
Head -Technology & Research Group
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2. E-Procurement - The Future of Supply Chain, March ’09
What is e-Procurement?
With the advent of the Internet in India in the late 1990s, individuals and organizations started
identifying ways and means of automating their key processes. E-Procurement (Electronic
procurement) is one such area, where the Internet was instrumental in automating the purchase
process, thereby significantly reducing cost and time.
The broad spectrum of e-Procurement is much more than just a plain vanilla system for making
purchases online. It is a comprehensive platform - using the Internet to make it easier, faster and
cost effective for businesses to source their requirements on a timely basis, and in a way that is
aligned with organizational goals and objectives. In the current scenario, characterized by focus
on key strategic initiatives, lesser time-to-market and increased global competition, e-
Procurement aids organizations in streamlining their entire purchasing process, so that they can
focus on core business activities and increase profitability.
Simply stated, e-Procurement is the electronic B2B (or B2C or B2G) sale and purchase of goods
and services. The medium used might be the Internet or any other media like EDI (Electronic
Data Interchange) and Enterprise Integrations (formerly known as EAI).
The scope
E-Procurement makes it possible to automate buying and selling over the internet. Typically an e-
Procurement-enabled website will have product comparisons across vendors and various
processes like tendering, auctioning, vendor management, catalogue and contract management.
High-end e-procurement solutions allow organizations to define their own processes in the form
of workflows - thus utilizing concepts of business process modeling.
Who needs this solution?
Many businesses turn to e-Procurement systems to control, simplify and automate the purchase
of goods and services from multiple suppliers. Companies deploying e-procurement are able to
control inventories more effectively, reduce purchasing overheads, reduce or remove brokerage
costs as well as improve manufacturing cycles.
The key is to find the right products from the right supplier, at the right time and at the most
competitive price, as well as to ensure the appropriate responsiveness and service levels for your
business purchasing needs.
Often a company might find itself a niche with a proven set of customers and encourage others in
a similar field to join them on-line as the business case is proven. Concurrently they may find their
client base grows with more customers keen to capitalize on the benefits as savings and
efficiencies become obvious. Medium to large sized organizations and government departments
that regularly purchase the same products from a limited number of companies are ideal
candidates for e-Procurement.
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3. E-Procurement - The Future of Supply Chain, March ’09
Types of products and services
There are several approaches to e-Procurement taken by different vendors to manage supplier
relationships. Some of these are catalogue and transaction-based e-Procurement products and
those that support supplier-relationship management strategies, which require strategic
partnerships and integration with third-party products.
The service can also be approached from an asset-management angle geared for maintenance
and repair operations. This establishes proper schedules and creates in-house availability of
products and assets that can be tracked. Over a period of time, this helps the enterprise’s e-
Procurement capabilities to evolve.
In an environment where e-Procurement becomes an integral part of the supply chain a lot more
commitment from the involved partners is required. This is due to the more complex nature of
B2B relationships that need to be managed along with additional technology and capabilities.
Best of breed e-Procurement systems should have the ability to locate suppliers, evaluate their
offerings, and make comparisons. They also need to ensure that the proper contractual terms are
applied to each order.
Quinnox’s Services Procurement Solution
Using the e-Procurement platform, we have developed an award-winning software product for a
leading Services Procurement Solutions Company headquartered in the US. This software is the
first ever technology platform that allows hiring managers, human resources personnel and
staffing companies to use a single integrated resource for the entire acquisition of all human
capital including contingent workers, service providers and direct hires.
This innovative product has helped several companies across the globe reduce their procurement
cycle time by up to 70% along with a 20% reduction in service spends.
It has also been recognized by industry experts as having attained the broadest international
footprint and is highly rated for its functionality along with the following key in-built features:
 Workflow and authorization
 Superior reporting capabilities
 Automated invoicing and payment
 Seamless data-sharing integration with back-end ERP, financial and other e-procurement
systems
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4. E-Procurement - The Future of Supply Chain, March ’09
e-Procurement in the Indian context
The purpose of e-Procurement is to reduce costs as well as improve operational efficiency in the
procurement process. While this has happened to a large extent in the US and in European
markets, e-Procurement still has a long way to go in developing nations like India. Some of the
challenges faced here are:
 The lack of IT infrastructure
 Sourcing goods through online (internet/website) channels is relatively unheard of
 Despite relatively high levels of computerization, many organizations find it easier to do
business over the telephone
 Limited Internet and broadband penetration especially in rural areas, where companies
need to ensure an uninterrupted connection.
These are some of the areas of opportunities for e-Procurement facilitator companies to offer
their solutions over channels other than the Internet – perhaps using telecom or as technology
evolve, over television networks.
Several companies in India have stepped in to make e-Procurement easier, an example being
NIIT Technologies. Their product Procure Easy™ is, in their words - “a unique end-to-end web-
based solution that enables enterprises to streamline their procurement processes through the
entire value chain of the sourcing process.”
Procure Easy™ can be availed on a subscription basis as opposed to the traditional license-
based model. Supported by C-DAC (Centre for Development on Advanced Computing, India),
this PKI-enabled application is hosted in a secure, multi-tenancy environment and supports
several modes of procurement transactions.
e-Procurement for the Indian Government
Over the last few years, several State Governments and Public Sector Undertakings in India have
begun to aggressively campaign for e-Procurement. Some state governments like those of
Andhra Pradesh and Gujarat have already initiated e-Procurement under a larger umbrella
program of e-Governance.
Using e-Procurement these governments have been able to save on procurement of goods and
services. There is also a goodwill factor involved and a definite improvement in the governments’
image and transparency.
Included in these benefits are cost reduction, improved decision making, process efficiency, price
and supplier-behavior forecasting, and supplier-performance monitoring which ultimately leads to
vendor rationalization and standardization.
Certain Public Sector Undertakings (PSUs) like the Oil and Natural Gas Commission (ONGC),
Indian Oil Corporation (IOC), Bharat Heavy Electricals Limited (BHEL) have all taken up e-
Procurement initiatives to rationalize the $30 - $40 billion purchases they make every year.
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5. E-Procurement - The Future of Supply Chain, March ’09
Caselet: State Governments, India
The entire procurement process for the Andhra Pradesh Government is being automated and
streamlined. The focus is to avoid cartel formation, besides reducing inventory costs, and creating
a level playing field for suppliers and buyers. For the AP Government, the value of procurement is
more than $2 billion across more than 150 departments, which will be covered by a single e-
platform. Similarly in Gujarat, a fuel exchange has been set up for GSFMC (a consortium of
various PSUs in Gujarat) wherein the participating members buy and sell fuel online.
Outsourcing and e-Procurement
Outsourcing the e-Procurement process not only complements an organization’s drive towards
cost reduction but also scales down operational executions to a minimum.
Enterprises are increasingly outsourcing all or part of their procurement functions to a growing
number of 3rd party organizations known as Procurement Service Providers or PSPs. Given the
current market condition, the procurement outsourcing industry will continue to grow across
geographies, industries and organization sizes.
When do organizations outsource?
Organizations typically resort to outsourcing their procurement needs, e-Procurement or
otherwise, when they are efficiently catered to by external organizations or Procurement Service
Providers. This involves zero infrastructural costs involved in manufacturing and no operational
and logistical overheads while availing the benefits of consolidated purchases, pricing discounts
and reduced purchasing errors.
An IT-enabled organization would initiate outsourcing of their procurement process when
organizational needs rise to such levels that their current infrastructure is stretched beyond
available bandwidth. This would be true in a scenario where the organization increases the
variety of goods and services being offered based on market demands. An inefficient
procurement process, which results in delays or throws up huge errors, could also fuel an
organization’s need to outsource its procurement.
During e-Procurement outsourcing, the key factors considered by an organization while
finalizing their PSP are:
 Availability of products inventory
 Logistical efficiency
 Discount policies
 Order consolidation options - based on an organization’s inclination to depend more on
their own IT systems and their system’s interactions with that of the PSP's.
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6. E-Procurement - The Future of Supply Chain, March ’09
For IT-enabled organizations, the terms and conditions touched upon while engaging with a
potential PSP would include key service levels such as:
 The provider’s ability to fulfill the demand forecasts
 Willingness to follow standard e-Business processes
 Agreeing to the organization’s terms and conditions for procurement, which would further
include:
o Time taken to accept orders
o Ability to absorb changes to orders
o The rejection process
o Invoicing and payment options
o Delivery time-line adherence
o Tracking abilities
How does Outsourcing in e-Procurement work?
With respect to outsourcing, an e-Procurement system essentially translates into an order or part
of it received into a Purchase Order for the Procurement Service Provider (PSP), associated with
the line of products and services included in the order as well as all the order information. The
end-user is either made aware of the delivery time frame (e.g. 2-3 weeks) or given an open time
range until the order is confirmed and payment transactions are initiated, if not completed.
The PSP, based on the terms and conditions decided earlier, might buy some time to consolidate
similar orders based on various factors like items in the order, delivery locations, fulfillment dates
or might immediately start managing it’s inventory to build and deliver the order items with the
required delivery date range.
The packing slip on the items prior to delivery reflects the organization’s details and not that of the
PSP's.
Once the order items are ready for delivery to the customer, the PSP collaborates with its
Logistics Provider to initiate and complete delivery to the end-user.
With B2C models like Amazon, Wal-Mart, rediff.com, etc., the entire procurement is outsourced.
Amazon.com represents the classic B2C commerce firm, which is directly focused on individual
final consumers. In the absence of a brick-and-mortar structure, Amazon’s entire procurement is
based on the e-Procurement model. Secondly, the pay process of Amazon is also directly linked
to Amazon’s internal pay process or that of their PSP's.
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7. E-Procurement - The Future of Supply Chain, March ’09
Challenges of Outsourcing e-Procurement
While the operational and logistical challenges faced by enterprises exercising their outsourcing
option are many, there are some crucial process-related challenges also worth mentioning.
Workflow - Typically a PSP provides services based on the workflow that suits its own business.
However, an enterprise seeking outsourcing may require a different workflow to suit its own
processes. Hence it is imperative that an enterprise be involved with a PSP that provides the
facility to customize the workflow as per individual organizational needs.
Pricing - Enterprises also look towards PSPs for reduced pricing i.e. prices lower than those
prevailing in the market. While some PSPs do not differentiate between the consumer market and
a corporate, some provide a feature of premier customers and catalogs created specifically for
such premier customers based on certain conditions such as minimum purchases in a year. An
enterprise looking towards outsourcing of its e-Procurement would need to evaluate PSPs based
on their catalog pricing mechanisms and premier customer options.
Maverick buying - Another important challenge that enterprises need to be aware of and
address, is an internal problem of its employees consistently procuring goods and services from a
local vendor instead of a PSP with whom the enterprise has already negotiated special prices on
overall volume of purchases. This phenomenon termed as Maverick Buying nullifies the
advantage an enterprise could gain from it’s agreement with the PSP since the volume of
purchases do not reach the sufficient levels required to avail special rates. Add to that, purchases
from a local vendor could be at higher prices thus increasing the enterprise’s expenditure.
Developed versus Developing Nations
Developed nations being the early adopters of technology have already adopted the models best
suited to their requirements. On the other hand, developing nations have had the added
advantage of being able to analyze existing e-Procurement solutions and their outcomes. As a
result, they have innovatively adopted the most hybrid solutions in the space.
Emerging markets
Latin America and Africa have opened up new growth avenues for e-Procurement solutions.
Mexico’s push into the e-Procurement domain has been largely driven by its highly integrated
assembly industry that works in conjunction with the US and Asian suppliers, many of whom do
business online. With the big assemblers already adopting the electronic route, their Mexican
suppliers have jumped on to the bandwagon.
China on the other hand, is helping in the development of African nations like the Republic of
Congo, in exchange for the continents natural resources. With an ever-increasing investment by
Chinese companies, Africa will soon be on the Information Highway thereby leading to the growth
of web-enabled solutions in the region.
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8. E-Procurement - The Future of Supply Chain, March ’09
The Future of e-Procurement
e-Procurement has been in existence for a substantial period. To achieve cost and time
efficiency, several enterprises and governments now consider it a crucial cog in the wheel of their
procurement processes.
With recessionary winds blowing across the globe and a growing need to rationalize spends while
sustaining optimum levels of productivity, enterprises big and small will further leverage the e-
Procurement model to achieve greater savings and deliver enhanced value.
Advances in Internet and media technologies, now require a revisit of the traditional methods of
e-Procurement. As the current market conditions tighten, e-Procurement facilitator companies
need to reinvent themselves and devise newer methods, so as to achieve far greater reach with
greater process simplicity and usability.
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9. E-Procurement - The Future of Supply Chain, March ’09
About Quinnox
Quinnox is an IT services and solutions provider headquartered in the US, with offices in UK, Japan,
Germany and India. We also have four state-of-the-art development centers in India that leverage a
cost-effective delivery mechanism and a wide talent pool catering to a client base consisting of
Fortune 500 companies.
Quinnox offers the full spectrum of IT lifecycle solutions, right from development to support services,
including packaged implementations and product development services. We are a technology-
focused company, with a wide experience in select industries – Banking and Financial Services,
Retail and Manufacturing.
 Headquartered in Naperville, Illinois in US
QUINNOX  Over 1000+ employees globally
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 Preferred IT solutions partner for several Fortune 500 companies
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