E-procurement, or electronic procurement, is a process involving using electronic means of acquiring resources like materials, supplies, and equipment. This process is similar to retail shopping online, but often deals with different types of sellers than typical online shopping. Usually, businesses engage in this practice, but consumers can also use e-procurement methods, especially for products or services they use on a regular basis. A consumer or business can perform electronic procurement manually by visiting websites and ordering products or services, or they can let a program perform these functions automatically.
Software used for this purpose comes in a few types. Some software can be designed specifically for e-procurement functions. Multifunction software programs, such as an enterprise resource planning (ERP) program, might include e-procurement features. Generally, large companies using e-procurement opt for multifunction ERP software. Small business owners more frequently use dedicated programs for recurring orders of supplies and services, mainly because they are low-cost and have limited features that apply more directly to small business needs.
E-procurement systems generally can automatically order supplies when the system indicates that more are needed. While this function can be helpful for large companies with deep pockets, especially those that move a large number of orders, it can cause huge problems for smaller companies that do not have the resources available to justify automatic ordering. A company with limited liquid capital can face massive problems if an e-procurement program makes an ill-timed order. Essentially, it is only a good idea to use automatic ordering if the company has enough pocket cash to easily absorb an unexpectedly triggered order. One option for a company dealing with limited capital is to have an e-procurement program alert management when an order needs to be made, without actually making the order to a supplier.
Suppose a large company makes a lot of chairs out of a certain kind of wood. Before the company can manufacture the chairs, it needs to have the wood on hand. A company that moves a significantly large volume of chairs might use an automatic ordering system to ensure that the wood material is always around when the company needs to manufacture an order. Some software programs might make the order for more supplies when the supplies run low, while others might make an order for supplies when the company receives an order for its product.