eProcurement: Skills, Knowledge, and Strategic contribution
Date:27/11/2019
Prepared by: Majed Abdeen
Introduction
The introduction of eProcurement systems has radically changed the nature of the skills and knowledge required of Supply Management Personnel (SMP) and has also increased the strategic contribution to an organisation. eProcurement systems have specific components in common, such as electronic catalogue management, order/payment/supplier registration/tendering systems, etc. (EBRD, 2016, p.32). Procurement should ideally be based on fundamental principles, including transparency, traceability, security, and inter-operability (EBRD, 2016, p.32). eProcurement thus requires many new skills and knowledge from SMP both during the implementation, and throughout operation, however, eProcurement also provides several benefits to governance, business development, and efficiency (EBRD, 2016, p.37).
eProcurement Skills & Knowledge
In light of the growth of eProcurement, SMP require knowledge and skills across various domains which can be broadly categorised as legal, business and technological (EBRD, 2016, p.23), and should regularly carry out continuing professional development to maintain, improve, and develop these (CIPS, 2013, p.2).
Legal knowledge related to documents and signatures is already required of SMP; however, at least basic understanding of new requirements for e-signatures, electronic records management, protection/privacy, data protection/confidentiality, copyright, and codes of practice is also now required (EBRD, 2016, p.25). This knowledge is especially crucial for staff designated to lead on implementing an eProcurement system.
Business skills such as leadership are also vital, as staff will require capacity-building following implementation to ensure they possess the required knowledge/skills for operation/eProcurement processes (EBRD, 2016, p.38). Leadership is also needed for ensuring creation of an organisational structure with sufficient authority for implementing the rules, laws and policies which will govern the implementation and use of the eProcurement system (EBRD, 2016, p.39). Naturally, the standard leadership soft and personal skills such as listening, diplomacy and Emotional Intelligence are also required (CIPS, 2013, p.2). SMP requires enhanced professional competency in soft skills as with the advent of eProcurement, a significant percentage of communication no longer takes place on a personal level such as via in-person meetings or phone calls, instead taking place through impersonal means such as email. Being more impersonal, eProcurement commands that staff have a stronger ability to create connections through impersonal means (APCC, 2018, p.5). It is becoming clearer that other skills such as creativity, flexibility, and agility/adaptability when faced with change are more desirable for SMP with the advent of eProcurement (APCC, 2018, pp.6-7). eProcurement will also result in the development of new forms of buyer-supplier relationships and contracts, which will, in turn, require SMP to have additional skills and knowledge directly as a result of eProcurement.
Analysis skills and knowledge are also becoming more critical: eProcurement provides for vastly more data than before; thus staff must have both knowledge and skills to identify options, opportunities and problems rapidly (APCC, 2018, pp.6-7). Technological knowledge/understanding is also required, as with an increasing volume of big data eProcurement may require use of AI to make sense of the data. This will require SMP to have sufficient knowledge and skills to ensure they design the digital environment of the eProcurement system to make the most of the value of the data there-in, supporting and enhancing decision-making (APCC, 2018, pp.13-14).
Other business skills required of SMP management teams include a strong economic background and understanding of Economic Value Added (EVA), used to measure value creation, which is critical for ensuring the business case for implementation of an eProcurement system (Presutti, 2003, p.220). eProcurement system implementation and management also requires a good understanding of risk management techniques, as the use of eProcurement and supplier management is of strategic importance (CIPS, 2013, p.2). All-round business understanding empowers SMP to apply their knowledge to reduce potential risks (APCC, 2018, p.5).
Domain knowledge is essential both during implementation and use of an eProcurement system: SMP must have a strong understanding of the organisational structure of the suppliers in their sector, as well as the reputation of all potential suppliers among their other customers (CIPS, 2013, p.2). Strong domain knowledge empowers SMP to make more effective use of the eProcurement system. With the enhanced capability provided by such a system, staff must ensure that their skills are ready to match. This includes aspects such as strong understanding of social and economic factors and outcomes, and improved procurement technical skills (such as category management or sourcing), without which staff will be unable to utilise eProcurement systems effectively or efficiently (APCC, 2018, p.5). Knowledge of global procurement practices and best practices allows SMP to continuously improve procurement approaches through the eProcurement system (APCC, 2018, pp.6-7). Extra-domain knowledge is also needed to enable understanding of how other areas may affect eProcurement, for instance, understanding of finance, logistics, human resources, project management, or legal aspects (APCC, 2018, p.5). The ability to build on traditional procurement skills and knowledge with eProcurement skills and knowledge, as well as with knowledge of external domains allows SMP to understand how all factors work as an inter-related eProcurement system, integrated with other systems within the organisation (APCC, 2018).
Strategic Contribution
eProcurement can increase the strategic contribution to an organisation in a number of ways. Implementation of an eProcurement system requires the existing procedures and practices for procurement to be re-evaluated and assessed (EBRD, 2016, p.22). This allows procurement strategies and practices to be re-designed so that eProcurement strategies and procedures are closely aligned with the organisation's strategic objectives. This embeds eProcurement firmly within the organisation and ensures that procurement supports and works towards business goals. By implementing an eProcurement system, the business is effectively re-engineering and creating an entirely new business service by overhauling the procurement process itself (EBRD, 2016, p.24). Research indicates that aligning eProcurement strategy with the business strategy has a significant effect through improving the strategic performance of the company (Phillips & Piotrowicz, 2006, p.3).
The challenges with implementing eProcurement are thus less technological and more associated with management of procurement and eProcurement processes, as failure to align eProcurement with the business strategy leads to a failure in creating a coherent business-wide procurement strategy, and thus eProcurement does not increase strategic contribution (EBRD, 2016, p.22). In implementation of eProcurement, companies must be wary to ensure sufficient attention is paid to existing supplier relationships to prevent their dissolution, which would have a negative effect on the strategic contribution of the eProcurement system through loss of flexibility or reliability (Phillips & Piotrowicz, 2006, p.11). However despite these challenges, once in place, a properly designed and implemented eProcurement system will promote value for money through providing increased efficiency and economy, will promote economic development through providing better access to suppliers, increased competitiveness, and development of suppliers, and finally, provides for good governance through allowing for accountability and transparency (Phillips & Piotrowicz, 2006, p.6; EBRD, 2016, p.23). An important method through which eProcurement increases the strategic contribution to the company is through transferring the focus of procurement from being procedure-based to being performance-based.
eProcurement also ensures properly defined roles and responsibilities for each party involved in the procurement process, which prevents misunderstandings, confusion, and enhances efficiency and strategy. Increased efficiency also arises from the freeing-up of human resources, allowing them to focus more on strategic sourcing activities (Phillips & Piotrowicz, 2006, p.6), which are often overlooked due to the volume of work associated with transaction processed in traditional procurement systems. This strongly contributes to the strategic benefits brought by eProcurement, as strategic purchasing has been proved through empirical evidence to have a beneficial effect on organisational financial performance. eProcurement enhances strategic procurement, through which the organisation can ensure sustainability, thus eProcurement is now seen as being a strategic business enabler (APCC, 2018, p.10). Redefinition of goals, policies, roles and rules to take into account electronic practice and e-transactions (EBRD, 2016, p.24) provides for a stronger, more efficient procurement system which improves the organisation's progress towards achieving the business goals.
eProcurement brings an improvement to coordination and interaction between businesses, resulting in savings through reduced transaction costs, and better opportunities for the buyer to source from competitive sources (Phillips & Piotrowicz, 2006, p.4). An added benefit is that eProcurement provides opportunities for development of new forms of relationships and new collaboration and alliances between disparate organisations involved in the procurement process through changes in communication methodologies (Phillips & Piotrowicz, 2006, pp.5-7). These new opportunities and relationships increase the strategic contribution of eProcurement to the business.
Conclusion
In conclusion, it is evident that eProcurement requires staff to have both specific knowledge and specific skills, both to envisage and manage eProcurement system implementation and usage, and to manage the overall procurement lifecycle through the system, as well as to negotiate the new forms of relationships which arise with the advent of eProcurement.
eProcurement delivers improved strategic value to the organisation in several ways, but primarily through integrating all procurement functions into one cohesive system, along with ensuring business-wide integration, and alignment of procurement strategy with the business goals and strategies.
In the research it is becoming increasingly apparent that the value of procurement in general, and of eProcurement in particular, is being more widely recognised (APCC, 2018, p.16). This will allow the contributions of eProcurement to be even more enhanced, however, in doing so, it is clear that staff will require further skills, such as digital technology skills as eProcurement technology is improved over time, allowing it to manage the entire procurement lifecycle in greater depth. SMP and business leaders will need to focus more on the benefits that eProcurement brings, consider the driving forces which impact eProcurement so that negative forces can be mitigated or eliminated, while benefits are maintained or enhanced.
References
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Available at: https://9104f275-f216-4fd2-9506-720eb252b4fc.filesusr.com/ugd/473156_002d1f7cccc24163a12dc17fe28cd17e.pdf
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CIPS, 2013. Supplier Rationalisation - CIPS Positions on Practice. [Online]
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EBRD, 2016. Are you ready for eProcurement? Guide to Electronic Procurement Reform. [Online]
Available at: https://www.ebrd.com/documents/legal-reform/guide-to-eprocurement-reform.pdf
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Phillips, p.& Piotrowicz, W., 2006. E-Procurement: How Does it Enhance Strategic Performance?. [Online]
Available at: https://kar.kent.ac.uk/10316/1/Web_Version.pdf
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Presutti, W. D., 2003. Supply management and e-procurement: creating value added in the supply chain. Industrial Marketing Management, 32(1), pp.219-226.