Originally posted on on the e-Sourcing Forum [WayBackMachine] on Thursday, 15 November 2007

e-Procurement is the counterpart to e-Sourcing, starting where e-Sourcing ends and ending where e-Sourcing begins. It is the “e” implementation of the procurement cycle which is concerned with the requisitioning, receiving, and reconciliation of the received goods as opposed to the analysis, auction, and award that takes place in the sourcing cycle. It is essentially the automation of the non-strategic and transactional activities that consume the majority of a buyer’s time, but one that comes with increased enterprise level visibility of all purchases.

The basic procurement cycle consists of up to nine steps, depending on the complexity of the buy and organizational policies. At a bare minimum, it consists of an order (requisition or purchase order), an invoice (which might be one with the receipt), and payment. For high-dollar purchases, the process will generally also include authorization and reconciliation of the invoice. In addition, if taxes were paid that the organization is capable of reclaiming, then the forms or entries to reclaim such taxes at the proper time will also be filled out or made. Finally, in a leading procurement organization, every step will be completed, although many will be completed automatically for low-dollar or non-strategic purchases by the eProcurement system using defined rules in the workflow engine.

• Requisition
  A buyer recognizes a need and places a request for goods or services.
• Authorization
  Each requisition made by a buyer gets routed to an appropriate approval agent. The approver verifies that the goods or services are needed, that they are either off of an appropriate contract or acceptable as a stand-alone non-contract order, and that the purchase amount is acceptable.
• Purchase Order
  Once a requisition is approved, a purchase order is created and automatically delivered to the supplier(s).
• Receipt of Goods
  Once goods are received, the buyer issues or confirms a receipt of such goods to the supplier.
• Invoice
  After a supplier prepares goods for shipment, an invoice is created that denotes the individual goods ordered by SKU and the amounts being charged.
• Reconciliation
  After the goods are received, the invoice needs to be reconciled to the purchase order and goods receipt before payment is made. Are the charges for the right goods or services? Are the amounts the contracted amounts? Were the quantities correct? Are any other charges, including taxes, valid and correct?
• Payment
  Once the goods have been received and the invoice reconciled with the order and contract, payment is scheduled and made using an appropriate payment method, which could be p-card, electronic funds transfer, or good old fashioned cheque.
• Reclamation of Taxes
  In some situations, the supplier of a good or service will be obligated to charge a tax, but the buyer may be eligible to retain some or all of that tax because of its corporate status. Examples include European Value Added Tax, Canadian Goods and Services Tax, and out-of-state sales taxes.
• Analysis
  After a number of procurement cycles have been completed, it is important to take measurements of the efficiency and accuracy of the procurement process.

For more insights into e-Procurement, check out the “e-Procurement Primer: 9 Steps to Procurement Success” over on the e-Sourcing Wiki [WayBackMachine] which not only dives into the 9 steps to success, but also discusses the core capabilities required in every e-Procurement solution, other important features of good e-Procurement solutions, the benefits an e-Procurement solution brings, best practices for implementation, challenges that may need to be overcome, associated costs, and tips on user adoption as well as a glossary of many e-Procurement terms and a rather extensive bibliography.