Online procurement is strategic tool utilized by world class corporation and government organization to streamline purchasing process. Traditionally, when demand is realized, buyer sends inquiry to each vendor to obtain the quotation. Under this technique, manual processing is virtually eliminated.

Benefit of Online Procurement

Implementation offers many benefits such as,

- Leverage of volume discount and reduce purchasing price.
- Reduction of administrative costs
- Shortening ordering and delivery cycle time due to elimination of paper work and communication.
- Lowering inventory level due to better product availability and order visibility.
- Empowering end user to use selected pool of vendor, decentralization of purchasing function provides greater satisfaction to end user.

Type of Online Procurement

Simplest form of this system is just to search product on the internet. More elaborate version of online procurement is,

- Request for Quotation: company puts inquiry on its own website or on electronic market requesting for quotation. Interested vendor simply sends the offer to user directly.

- Intranet Catalog: product catalogue of various vendors will be stored company's intranet for internal user. Orders will be combined and sent to each vendor periodically or in real time.

- Punchout Catalog: product catalogue will be hosted on the website of service provider of individual vendor. This kind of catalogue is more sophisticated, product may require customization or configuration to meet user's requirement.

- Auction: company publishes its requirement and specification on the website. Each vendor needs studying the requirement, send bid price and additional conditions online securely. Then, the company evaluate bid and award the contract or order to selected vendor.

Implementation Issue

One size doesn't fit all. Each organization has unique requirement. In order to decide if you should try this system, you might want to consider below,

- Consider the Benefit and Cost: smaller organization may not be able to leverage the volume discount even though they use online procurement. In contrary, some types of online procurement come with a price tag. Quantifying benefit and cost before buying online procurement technology/software.

- Identify the Product: each type of online procurement is suitable for specific product. If you plan to use auction, thing is going to be more complicated. You have to simplify the specification and identify selection criteria effectively. So you can actually compare the bids from suppliers.

- Payment: online procurement offers less opportunity for buyer/seller to negotiate. You may end up with lowest price available in the market but supplier won't provide credit term to you.

- Supplier Selection: you may find it difficult to actually know the performance of each supplier by electronic means. Make sure that you're not buying very critical product using online procurement.

- Product Quality: make sure that you understand product warranty and return policy.