Electronic procurement or e-procurement is where an Amazon FBA seller uses the internet to procure products for sale. It is a form of procurement that replaces paper-based processes with an electronic workflow. Amazon sellers should be aware of the many e-procurement advantages in order to make the right decisions about managing this vital aspect of the supply chain.
Procurement is the process of finding and acquiring goods, services or works from an external party, often through a bidding process. The goal is to receive goods, services or works at the best possible price, taking aspects such as quality, quantity, time and location into consideration.
Procurement can be tactical or strategic. Tactical procurement takes a short-term, transactional approach to the acquisition of goods, services and works. The purpose is to ensure that the organization or seller has the goods it needs according to its requirements. Strategic procurement involves a long-term plan to acquire goods, services or works from a list of vendors or suppliers.
Organizations have a procurement manager to handle the complete process. The manager’s responsibilities include: approving orders, finding reliable suppliers to provide goods at a reasonable price, negotiating price and contract, reviewing technical specifications and full details, forecasting upcoming demand and supervising other procurement staff.
As an Amazon seller, you handle procurement by yourself. Managing all aspects of the function can be overwhelming, and more so when you intend to work with suppliers in China. How do you get procurement right without burning out? The answer is e-procurement.
E-procurement uses the internet as a primary medium to facilitate the purchase and sale of goods. The use of the internet to procure the goods, services and works needed offers many advantages. It eliminates paper-based work, and follows a workflow that streamlines all aspects of the purchasing process.
E-procurement technology creates a direct link between the company and supplier and facilitates bids, purchase orders and email. Unlike ecommerce, e-procurement creates a closed system of communication between the company and supplier.
E-procurement technology centralises and automates interactions to improve the speed and efficiency of procurement. It also creates the potential for cost savings in procurement. Here’s a detailed look at the advantages of e-procurement.
In the 1980s, electronic data interchange (EDI) emerged to make document and information exchange between businesses easy and convenient. It created an alternative to the manual exchange of files. Customers began sending purchase orders to suppliers electronically and received invoices back from them, also electronically.
Technology advancements in the 90s led to procurement tools, such as online catalogs for vendors. Procurement technology kept maturing, and new capabilities were added to make e-procurement simpler and more efficient.
Today, there are different types of e-procurement technologies that ensure the effective functioning of procurement at various levels. For example, a company may have an e-procurement portal where interested bidders can register and submit bids. This is followed by bid evaluation, e-auction, vendor finalization and contract management.
Moving from manual procurement to e-procurement has pretty much become the norm. Thanks to the emergence of ecommerce and rapid rise of supplier directories like Alibaba, procurement exists predominantly online.
No doubt, your search for a Chinese supplier will begin with an internet search. After you make a long list of suppliers, you’ll send them an email or get on a call. The sourcing process begins and you’ll move from one step to another until you’re ready to draft a contract with the supplier and place your first order.
Between finding a supplier and receiving your shipment or its delivery at an Amazon warehouse, there are many activities to manage. They can all be handled online so long as you have proper e-procurement practices in place. For example, how can you stay updated with your order and enjoy peace of mind knowing that everything is on schedule? Is there a way to know whether a major event in China or globally is affecting production times and consequently, delivery timelines?
E-procurement solutions make various aspects of sourcing products from China more efficient and cost-effective. See the full list of e-procurement advantages below:
Identifying the right supplier for your needs is effort- and time-consuming. In an ideal scenario, you want to be able to quickly identify a manufacturing partner who has the capability to make your product. After you find the right supplier, you can set about placing your order and making payments.
E-procurement simplifies the procurement process by maintaining buyer-supplier records in a database and eliminating any unnecessary activities from the time you contact the supplier till you place your order.
With a China sourcing agent, you can magnify e-procurement advantages. This is because the agent will serve as an intermediary and handle the order processing for you. An experienced China sourcing agent will have the systems and sourcing managers to look after your account dedicatedly and provide all the assistance needed to speed up the procurement cycle.
Online procurement saves you money in different ways. You can eliminate paperwork, and the costs of stamps to mail documents. Online order purchase records prevent duplicate spending. Through online communication, you can make your requirements known rapidly and convey your interest to buy in large volumes for price discounts.
As you know, when you buy more, you can save more. One of the key advantages of e-procurement is how quickly you can move back and forth with suppliers to negotiate price and leverage opportunities for bulk buying in a timely manner.
When you go through a China sourcing agent, you have a local agent to help with price negotiations. The agent’s e-procurement system may be more efficient than your set-up and boost procurement times.
Organizations invest in e-procurement systems to save time for other strategic, profit-making activities. Transaction records stored electronically can be retrieved within seconds. Pre-made templates allow paperwork to be filled quickly. Basically, all important communication is stored on file, just electronically.
E-procurement can boost your productivity in another way - by relieving you of the responsibility of maintaining records of transactions and agreements with suppliers. Your sourcing agent can maintain electronic records and provide copies to you or your supplier as required. This saves you time to focus on other areas of your business and enhances your productivity in those key areas.
There are two ways in which e-procurement supports transparency and accountability in the procurement process. One, by facilitating access to many suppliers to submit their bids for your project. You can rest assured that the supplier is acting fairly rather than choosing an existing supplier in their network even though there are better manufacturers to make your product.
Second, e-procurement leaves an electronic trail that allows verifications and cross-checking to take place seamlessly, and is especially helpful in the event of a misunderstanding or dispute.
Also, transaction records help prevent duplicate spending. You don’t have to waste effort in figuring out whether you made a payment or if the balance from any excess payment has been credited to your account. Keeping a tab on transaction details can be difficult and overwhelming when you’re using paper records or basic tools like Excel or Google Sheets.
The success of your Amazon business depends on finding a supplier that has the capability and experience to make your product. Not only that, the supplier should not treat you lesser than other clients that place large orders. In this regard, one of the main advantages of e-procurement is the effectiveness with which it helps you find a quality supplier who can help you build and sustain your business.
How? E-procurement widens the competitive field, bringing a number of suppliers before you, each vying for your business. If you visit a supplier directory, you can see the vast number of options to choose from. You come to know that you have leverage over suppliers, and can negotiate prices with them.
If you use a China sourcing agent, then the agency already has relationships with suppliers. They may invite bids from more suppliers electronically. Greater choice and increased competition improves your chances of getting top quality at a cheap price.
Following from the point above, better transparency minimizes the risk of fraud or dishonesty by the supplier. Although selecting a trusted supplier means not having to worry about whether you’ll be duped, better safe than sorry. If the supplier challenges your claim that they haven’t received payment from you, then you should have proof other than your bank records, ready. An email with the receipt of payment will help you get out of the sticky situation.
Here again, working with a China sourcing agent helps. As an intermediary, your sourcing agent will keep a tab on transactions between you and the supplier. This does its bit to deter the supplier from committing fraud. Agents receive their fee only when the buyer pays the supplier. So, the knowledge that you have paid the supplier will present a truthful picture and make it difficult for any one party to exploit the other.
Effective supplier management requires time and effort. It is difficult to manage on your own when you have other important tasks such as marketing, business development, investor meetings and so on. In this regard, e-procurement is beneficial as it records and administers’ suppliers’ information, interactions, relationships and performance.
As a single point of information, an e-procurement system is a source of truth. By providing accurate information, it makes supplier management easy. You have the facts and interactions on file before you to make informed decisions.
Among the key procurement advantages is that it is a tactical activity that allows you to make the most of rising and falling rates. Unless you plan to stick with one supplier for your needs, you can switch suppliers based on the cost and quality advantage they offer. As e-procurement provides all the supplier information in one place, reviewing performance and costs is simpler, allowing you to move proactively to meet changing business requirements.
There are different ways to maximize cost advantages from procurement. Consider these ideas for cutting unnecessary costs in the purchase process:
Take a look at your inventory to determine whether you’re using everything you have in stock or you’re stocking more than you need. Based on this assessment, you can plan your order quantities and avoid purchasing in excess.
Compromising on quality to reduce costs further almost always results in rework, which suppliers may not do for free. On the other hand, also think about whether you need only the highest quality or whether your customers are fine with an acceptable quality level at a low price.
Novice Amazon sellers that accept suppliers’ quotes without negotiating may find out only later than they could have received a better price. While driving the cost too low is not advised, you should also avoid paying more for a product that can be easily manufactured for less.
Most Chinese suppliers are willing to offer discounted prices on large order volumes or early payments. After you’ve been purchasing from your vendor for a couple of months, reevaluate terms and make the most of the discount offers and other perks to reduce procurement costs.
Procurement risk management prevents you from losing money when unexpected events occur. Fluctuating markets and the large geographical distances between China and your home country make risk management even more crucial.
Experience all e-procurement advantages by working with Maple Sourcing. We have the systems, practices and staff to manage supplier relationships electronically in the most efficient way possible.
We handle all aspects of the procurement process so you can focus on other key business activities. A dedicated account manager updates you on your order and communicates your requirements efficiently to your supplier. Get in touch to learn about how we can make procurement more quality-driven and cost-effective for you.