e-proc

In today’s competitive world it has become imperative that businesses make strategic plans to survive and succeed in the future. The key areas of concern are - cost reduction and increase in productivity - which have a dramatic impact on the profitability of any organization. Effective and efficient means of functioning and doing business have become the order of the day

Technology today provides the enterprise with the perfect tool to address these requirements. The use of the right technology can help organizations to significantly improve various business processes including the procurement process.

The majority of an organization's costs are made up of purchased products and services. Reduction in these costs would directly impact the profitability of any organization. A 1% decrease in cost of procurement will have the same impact on the profit levels as a 5% increase in sales.

Procurement/Purchase

Procurement/purchasing is basically buying of goods and services, based on internal requirements, which will be used as input for the processing of the end product for a given company.

The input varies from simple stationery or MRO requirement (termed as indirect goods, as they are not directly involved in production processing) to raw materials (termed as direct, as they are used for production processing) and services.

The procurement process is complex involving interaction with users/departments within an enterprise and suppliers.

The trend in the industry, in the past few years, has been moving towards “outsourcing”. This largely involves cutting workflows, which can be distributed to outside agencies. Companies hire outside experts or suppliers to perform work previously done internally.

Supply Chain

As companies have begun concentrating on their core competencies they have increasingly become dependent on their suppliers for the right input for their functioning. It’s performance or strength in the market is largely defined not just by its existence but also by its relationship with its suppliers, as the output finally depends on the input that is given - in terms of quality, speed and cost. Supplier relationship management has become as important as customer relationship management.

Supply chains have started growing as an industrial segment in themselves. The importance of a supply chain has risen out of the logic, that one weak link in this chain can destroy the competitiveness of an entire chain and thus the end product itself. Today not only do companies and products compete with each other but so do supply chains.

Purchasing Function

The purchasing department is involved with the sourcing of various goods and services including maintenance, repair; and operating goods, capital equipment, technology, advertising, office supplies, and travel etc.

This activity involves selecting suppliers, negotiating contracts and establishing close and long-term relationships with them. On the internal side, within the company, they liaise with other departments to process purchase requirements, help on quality-improvement, cost-reduction and new-product development processes.

Procurement is a very labour intensive process. It is cumbersome, involving collating of requirement and information from various other departments and then going through the procuring process based on these requirements.

The procurement process involves requisitioning and order processing.

Requisitioning: This phase basically involves searching for particular goods and services and placing an order.

Order Processing: Tracking the status of the order placed also becomes essential. This involves request for quotation, evaluating quotes, monitoring delivery schedules, goods acceptance, purchase returns, payment options etc.

The purchasing process within most large enterprises still remain paper based. These slow, paper-based processes create major problems as purchasing functions attempt to operate effectively in a fast-changing, constantly evolving landscape of prices, products, and policies. It becomes very difficult to capture all buying activities for increased control, leverage, and analysis of enterprise spending.

Typical problems include the following:

• Time and labour consuming: The traditional system involves tedious repetitive tasks, manual processing of the requisitions. Unnecessary amount of time is spent in processing internal requests and matching them with supplier quotes and finally the purchase. This leaves very little scope for making improvements within the system and any sort of value-added activities.

• Internal requirement process: Usually any purchase requirement has to follow a hierarchy for approval. Sometimes the documents may be lost in this maze leading to delay in procurement.

• Tedious sourcing of products: Depending on the requirement, orders have to be placed with the supplier. This involves going through catalogues, writing for quotations, comparing prices etc making the process tedious and time-consuming. At times these catalogues can be outdated and the prices available may not be current.
  

• Inefficiency of a paper based system: It is difficult, in a paper-based process to keep checking the various options for purchase. Also too many part numbers create confusion in ordering the right products. It also is very difficult to pinpoint expenditures by location, category, vendor, account code or department.

• Difficulty in price comparisons: With quotations coming in for various parts and products it is difficult to keep track of whose price is best vis-à-vis the quality of the product.

• Delay in order delivery: The manual process of order processing /planning/ monitoring leads to a delay order delivery, which affects the procurement process.

• Inefficient inventory management: The delay in processing of order, delay in delivery etc leads to either over-stocking or shortage

• Inability to negotiate: As the time of the procurement personnel is spent on processing, getting approval and tracking of order they have very little time to negotiate or discuss with the suppliers regarding service and pricing.
  

• Maverick buying: The inefficiency of the earlier system, especially the lack of control leads to maverick/rogue buying which is basically off-contract buying. This translates to increase in cost to the company. One of the major goal of any purchasing manager it to put a stop this process of off-contract buying in order to cut costs.

Any enterprise’s ideal procurement function would reflect speed, lower inventories, quick and easy tracking, reduction of repetitive steps, and enterprise-wide supply chain technology linking its internal activities with their customers and suppliers.

Internet provides the perfect platform to cater to these needs of the procurement function of any organization.

Internet: The New Business Platform

Internet has lead to a new economy where companies of any size can communicate and collaborate with their trading partners. The advent of internet - providing low cost and ubiquitous connection - has lead to a lot of businesses moving online. The major reasons for this move are:

(a) the speed at which the entire business process moves;

(b) cutting-down on cumbersome processes and creating efficiencies; and

(c) cost saving potential.

The electronic connection of business operations to customers, suppliers, and partners via the internet is rapidly transforming business processes. Companies are using the internet to enter new markets, shrink supply chains, create new value chains, significantly improve operating efficiency, and meet the challenges of increased competition and global markets.

Procurement or purchasing is ideally suited to automation. Internet with all its advantages provides the perfect platform for addressing the difficulties faced in corporate purchasing. Internet-based procurement lets organizations eliminate or at least massively reduce the administrative paper chase while enhancing communication with suppliers and internal customers.

It allows achieving substantive supply chain efficiencies, creating a win-win situation for all.

In a typical company where external spending represents between 40% and 70% of revenues, and profit accounts for 5% of revenue, a 5% reduction in purchase costs can result in a 50% increase in profit margin.

Achieving the same impact on profits would require a:

• 50% increase in sales;
• 20% reduction in overhead;
• Significant reduction of staff numbers.

The efficiency increases include:

• Simplifying the choices of products through standardized catalogues;
• Condensing the number of suppliers and negotiating with the relevant ones;
• Improving the purchasing cycle time - involving the movement from the original request through the delivery and payment
• Placing goods and services purchased repetitively into an electronic catalogue form; this makes the ordering process easier;
• In cost:
  - 5 to 15% drop in product costs;
  - 70% decrease in process costs;
  - 50 to 70% reduction in time required to complete a purchase requisition cycle;
• Decrease in marketing and distribution costs, leads to lowering of the selling price and increase in the volume of customers;
• Curbing of off-contract or maverick buying;
• Increased efficiency in inventory and supply chain management.
  

eonour’s e-Procurement Solution: e-Proc

eonour’s e-Proc is a web-based, e-procurement solution, which automates and streamlines the entire purchasing process of any enterprise. It supports and augments the purchase life cycle giving enterprises a strategic advantage.

This solution allows real time access to pertinent information, which allows the organization to have complete control over its procurement process. The whole cycle right from product selection to requisition to approval to PO delivery to receiving is simplified leading to a drastic reduction in the time consumed.

The features of this application are:

Security

e-Proc provides for a secure and stable system. Control can be exercised at the document as well as the module levels. Login and passwords are used to authenticate and validate users to provide them access to the resources.

Workflow

The workflow engine can be used to create rules for routing all the documentation including the indents/requisitions raised, purchase orders etc. The approval rules, the level of approvals etc can be defined so that a complete control of the entire purchasing process can be maintained.

Purchase Requisitions

The purchase requisitions or indents can be raised by any end user. The items can be viewed online, which makes it easy for indenters to specify the items they want. They just have to add items to the checkout list to generate a requisition. Requisitions for new items can also be generated.

Approval

e-proc provides for automated approval routing based on the pre-defined routing rules. The approver gets instant message that he has documents, which have to be approved. The list of documents pending for approval can be viewed online and approval can be given.

Tracking

The indenter and approver and the purchase department can track the status of orders, requisitions etc within their area of authority. This enables them to have an up-to-date knowledge of the status of approvals, orders, etc.

Vendor Selection

Purchase department controls the process of vendor selection, through vendor registration, vendor profile and approval. Comparative pricing of different suppliers for a particular item can be easily ascertained. e-proc allows the vendor for a particular item to be assigned by the purchase department.

Request for Quotation

In some cases there is a necessity to obtain and evaluate quotations from various suppliers. This is especially useful when an order for a new item has to be placed or when looking for a new supplier. e-proc enables the purchase department send request for quotations (RFQ) to various suppliers. This solution allows for easy comparison of received quotes. The purchase department selects the appropriate supplier based on various criteria and sends the PO to the selected supplier.

Purchase Order (PO)

Once approval has been received for the purchase requisition or the quotation a purchase order is raised against a supplier and sent to him. The details will include: requirements, delivery schedules etc. This facility also allows for any sort of amendment of purchase order.

Shipment

On receipt of the PO, the supplier sends a confirmation. The supplier then sends the supplier shipment details including the item details, quantity, shipment date, expected arrival date, LR number, invoice details, transportation details etc. that keeps the buyer updated on the status of his materials at any time.

Inventory

A Goods Received Note (GRN) is raised after the materials arrive in. There is an option which allows for raising the GRN either batch-wiser or serial number wise. The goods are then sent for inspection after which the stock is updated. The rejected materials are sent back to the supplier and a delivery challan (DC) is generated including details on the reason for rejection. Items can also be transferred from one location t o another and a dc can be created for this purpose.

Reverse Auction

Reverse auction is used to order for items, which are required in large volumes for which the supplier offering the lowest rates is selected. An auction is announced and the suppliers are asked to place their bids for the items. This auction can be for selected vendors or can be open for all. The supplier is allowed to view only the lowest bid amount. After the deadline for the auction is over, the purchase department confirms the bid and sends the PO to the selected supplier after approval.

Materials Requirement Planning

This is an add-on feature provided to help in strategic planning and scheduling of critical items. A material requirements planning report is produced to calculate the planned PO and planned receipts, which act as input for purchase planning.

Others

There are also other features, which assist the purchasing function

• Forward Auction: This is basically used to sell scrap, old stock etc to the highest bidder.

• Budget Tracker: It gives information on the budgeted amount for purchasing, how much has already been purchased, the balance etc.

• Vendor Rating: Suppliers can be rated on the basis of their pricing, quality, and service etc using this function.

• Variance Analysis: Variance analysis between actual cost and standard cost can be obtained.

• Integration: This solution can be easily integrated with existing ERP’s and legacy systems.

Benefits

eonour’s e-Proc helps in significantly reducing expenditure on procurement and order processing cost. This solution also provides purchasing with the information necessary to negotiate better rates from suppliers.

Some benefits of e-Proc include:

• Administrative and operational costs are significantly cut down, achieved through reduced requisition cycle time and administrative bureaucracy, reduced transactions costs and the efficiency of paperless transactions;

• Increased leverage and a stronger negotiating position with supplier through improved control over and communications with preferred supplier;

• Accurate reporting via automated routing and approval processes;

• ?Streamlined business processes, which increase their efficiency;

• Improves internal controls by eliminating maverick buying, and enforcing approval guidelines before the purchase;

• Designed to achieve efficiency and cost-reduction goals;

• Will integrate seamlessly with the other elements of the company’s IT environment, including ERP, financials, and other related applications.