Making business sense with e-procurement
WRITTEN BY ELAINE PORTEOUS
Globally, successful implementations of e-procurement are considered as one of the measures of a world-class purchasing organisation.
Evolution and growth
The acceptance of e-procurement, especially in Africa, has been a bit patchy since its inception in the 1990s where it was launched as a method of conducting simple purchasing transactions over the Internet. It has nonetheless evolved into a complex marketplace with many players offering a variety of services from catalogue maintenance and hosting to managing tenders and auctions on behalf of clients.
Externally hosted e-procurement services are clearly a growing trend. Some specialise, like those serving the pharmaceutical and mining industries, which have embraced e-procurement well, and with a good deal of success in creating slicker supply chains.
The majority of transactions are affected through third-party service providers such as Quadrem Africa, a global supply chain solutions company with supplier networks for both the private and public sectors. They have a specialist platform to securely manage the full range of services including sourcing and e-auctions on behalf of clients such as Bhp Billiton and Anglo Base Metals and Anglo American. Quadrem Africa issues more than two million request for quotations (RFQs) and processes more than 500,000 transactions per annum resulting in a $4 billion annual trade.
PetroSA, the Africa-based oil and gas company, recently outsourced its procurement to Intenda. The company says that its new system reduces and eliminates tedious manual work associated with completing and submitting tenders. Its entire system has migrated from a manual to a fully electronic one leading to the purchasing of all equipment, supplies and services to be conducted via the Internet. Without doubt, technology has speeded up its transactional procurement, placement and tracking of orders besides reducing administration time and effort as well as leading to shorter payment cycles.
However, despite worldwide enthusiasm for the Internet, there are additional financial costs from more computers to extra phone lines to the cost of training and skills development. Many companies admit to not being able to measure the return on investment. High volume/low value items are well suited to e-procurement, complex services contracts in facilities management and financial consulting, less so.
E-procurement also has the potential to improve efficiencies in government administration. The World Bank noted last year that there was progress in the adoption of e-procurement in Kenya and Tanzania and that Ghana and Rwanda had plans to implement it under the umbrella of public procurement reform programmes.
However, the World Bank identified key challenges such as how to sell the agenda to government due to a lack of awareness of the benefits that e-procurement can provide. Its research found some reluctance in adopting a system that is fully transparent. It therefore outlined certain basic requirements that needed be fulfilled before an e-procurement system could achieve maximum potential in government. These recommendations included ICT services to be expanded; guaranteeing of secure online environment; development of standards and processes; and most importantly, for purchasers to be trained.
A study was recently completed to establish the extent of the use of e-procurement in the United Nations in the Africa region. Researchers found that e-procurement was being used in the UN for transactions of routine, non-strategic purchases and that UN development agencies were more likely to adopt e-procurement than humanitarian aid agencies due to their operations being more predictable.
E-procurement allows aid-funded buyers to compare quickly, easily and cheaply prices, specifications and delivery dates from suppliers worldwide. Savings of up to 10% have been achieved with there being some evidence available showing savings in processing time, and time is money.
There are many advantages to e-procurement, especially in giving companies from developing countries an equal chance to pitch for global business. Some research recently completed in Hong Kong has some findings that could be useful in the African context. It appears that 79 percent of the companies surveyed have not yet implemented e-procurement. China is helping in the development of web-enabled solutions in the region, particularly in the Republic of Congo, in exchange for some natural resources. Despite the challenges the future for e-procurement looks bright.