Components of an E-Procurement System

Though still in its nascent stage, e-procurement has been able to develop its own body of language and as such regardless of its model, each has similar components that must be properly considered and managed to ensure a successful system. These components include Catalog content, Processes, User maintenance, Establishing buyer/seller relationships, Billing management, Price establishment, Data transmission, and System maintenance.

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Catalogue content

At the heart of every e-procurement process lies an electronic catalog. Similar to a traditional mail-order catalog, electronic catalogs contain detailed information on products or services available for sale. Suppliers customize the content to address the specific needs of targeted buyers. This content is manipulated and imported into a database that the e-procurement application integrates into web pages

The management of catalog data can be handled using import and aggregation tools or by outsourcing the task to companies specializing in content management. Content providers generally offer the following services:

  •  Convert catalog data into a uniform language and format
  •  Gather and aggregate data from multiple suppliers into one catalog
  •  Publish and maintain the product catalog

Once a catalog is created, various cataloging strategies are used to provide access to the content. Strategies include using a centralized catalog model where the aggregated data is hosted at a central location, a distributed model where data resides at multiple sites, or a content-retrieval method where suppliers present catalog data directly to buyers.

There are three types of catalogues that address various buyer needs :
 Product catalogs:
Contain data on tangible items such as office products, medical supplies, rolls of steel, etc.
 Service catalogs: Offer professional service “intangibles” such as office maintenance


services, temporary personnel services, etc.
 Commodity-specific catalogs: Offer specific product families or groups such as chemicals, paper, or other raw materials
E-procurement Processes
In addition to creating an electronic catalog, existing procurement processes need to be “electrified” end-to-end to support the entire e-procurement process. This includes requisition and order management, real-time tracking and receiving, online order fulfillment, automatic billing, invoicing and payment, as well as workflow management, commerce transactions, and reporting and analysis tools.

Note that an effective e-procurement platform must support both the buyer’s and the supplier’s business processes. It should also offer functionality that can easily be customized and configured to meet specific e-procurement requirements. In general, a successful e-procurement solution will be founded on an open, component-based model that offers easy configurability and scalability.

User Maintenance
Closely related to the two preceding process management components, user maintenance includes defining the individuals authorized to use the e-procurement system, how these users will be enrolled, and how to provide them access to the trading community. This component serves as the foundation for managing the complex buyer-supplier relationships that will occur within the marketplace.

E-procurement user maintenance must address two primary tasks:

 Establish user profiles, access rules, catalog filters, and workflow
 Allow for unique pricing and contractual relationships between a buyer and supplier

The following steps are vital to successful user management:

Creating the buyer organization:
Identifying and defining the individual buyers, how they will form buying groups, and how they will access the e-procurement process
Creating the supplier organization: Identifying sellers, maintaining company profiles, and creating shipping options and other high-level parameters for supplier activities
E-procurement organization: Aggregating the entire marketplace, including buyer and supplier, to include such things as hours of operation, billing rates, etc.


Additionally, user maintenance requires establishing authorization levels and associated procedures to precisely govern buyer and supplier capabilities.

Three authorization levels that must be addressed are:

Access to the electronic catalog: Defines who may access catalogs and how to do so
Creating and editing requisitions: Defines who can create requisitions, who can edit requisitions, and who can edit accounting codes
Managing orders: Defines who has access to POs and who has authorization to override shipping or billing information

Establishing Buyer/Seller Relationships
This component has two phases: managing supplier relationships and managing pricing.
Buyers and sellers may be linked based on their previous buying relationship or based on the buyer’s unique needs. Buyers may make purchases based on negotiated contracts or choose the specific commodities they need from customized catalogs. Price lists too may be customized for a buyer or buying group. For example, prices may be established by adding filters that dynamically calculate a price as a markup or discount of the list price. Or groups of buyers may be categorized into classes with filters applied for each group.

Billing Management
E-procurement revenues are generally based on transaction fees. A billing management system will calculate usage charges and generate and distribute statements or invoices to buyer-seller members of the e-procurement network. Suppliers may also use the billing system to calculate ordering charges or to distribute operating costs for specific orders. These functions must directly interface with back office invoicing systems to automatically generate bills.

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Price Establishment

Effective pricing enables buyers to negotiate the best possible deals and sellers to liquidate excess inventory. Two major pricing options are used: Dynamic Pricing and Fixed Pricing.

Dynamic pricing: Allows buyers and sellers in an Internet market to trade goods and services at prices determined by market forces instead of by a predetermined price list or catalog.
An example of dynamic pricing includes business services such as auctions, reverse auctions, and exchanges.

Fixed pricing:
Based on a predetermined price list or catalog prices negotiated between a buyer and seller

Data Transmission
Transmitting data over the Internet involves two facets: messaging agents and security. Data and messaging tools enable the Internet-based exchange of transactional data between different buyers and


suppliers in the e-procurement marketplace. To do this, transactions are sent via the Internet as “messages” and then integrated into a supplier’s or buyer’s back-office system, enabling financial postings that coincide with the receipt, payment, and invoicing processes. Data messaging tools are also used to cancel transactions and log failures when messages can’t be delivered within a predefined time period or following a specified number of attempts. The most important aspect of the messaging tool is that it enables real-time communication between buyers and sellers.

Coincidentally, security is an important aspect of any Internet transaction. Protecting a buyer’s confidential financial information and ensuring

that only designated buyers have access to supplier product information is critical to ensuring confidence in any e-procurement system.

System Management
Maintaining an e-procurement system involves configuring and monitoring performance usage, average response time, transaction sources, and traffic patterns. To maximize the benefits and strategic opportunities e-procurement systems offer, this information should be used to analyze growth patterns, session times, and ultimately to fine-tune the system’s performance to fit specific market communities or technical environments.

Once an e-procurement system is up and running, it’s important to monitor traffic and system security on a day-to-day basis.

Inadequately designed transaction engines can result in poor marketplace performance, lack of scalability, breakdowns in security, and, ultimately, frustrated users.