E-procurement is purchasing implemented through the Internet. It has an important role in achieving efficiency and effectiveness in business today. This results in a reduction in the intermediate costs and labor that are associated with conventional systems.
The e-procurement initiatives involve many issues such as security, the products to be procured and also the investment needed. Despite the various complications, an increasing number of companies are joining the trend owing to the enormous cost savings e-procurement can bring in.
One of the major issues concerning e-procurement initiatives is security. Companies usually desist from sending sensitive information over the Internet for security reasons. The growing number of cyber crimes has added doubts regarding the reliability of the Internet. Security measures such as authentication and encryption are therefore employed while passing sensitive information between companies. Another major issue concerning e-procurement is the type of goods that are procured through the online medium. Companies usually prefer to source smaller, inexpensive goods such as office stationery. Larger complex orders that usually take weeks or months for negotiation are done in the traditional manner. However, the rapid improvement in software technologies has encouraged some companies to employ e-procurement for expensive products also.
Companies launch e-procurement initiative with a view to improve the overall performance of its business machinery. Although the initial investment required in hardware and software may be high, the return is even higher. Some studies indicate that a company can enjoy returns as much as 300% of the initial investment, within three years.