It is estimated that supply chain invisibility leads to 20 to 40% more inventories. The invisibility comes from time delays and lack of communication. Advanced technologies enable real time communication through exchange of documents and they enable many communications.
Ecommerce platforms started with business-to-consumer sales. The characteristics of business-to-business transactions such as multiple decision making process has hindered the progress of B2B ecommerce platforms. The need to save costs has forced firms to look at opportunities provided by the Internet. Many large corporations have started to formulate e-procurement strategies, just like corporations evolved strategies for Internet presence.
E-procurement strategies include category selection for procuring online vendor access to the portal and vendor selection. Category selection decides which items to be procured online. Vendor selection decides the infrastructure access and the nature of access to the vendors and the platform on which the technology has to be hosted. E-procurement software is a web-based interface that is open source or proprietary and integrates email, ERP and legacy systems of the firm and suppliers.
E-procurement software has features to receive proposals, evaluate them, raise purchase orders and track them, and process invoices. In addition to these features, the menu has eMarketplace, where vendors can auction for the items. This is called reverse auction, in which ones bids for the lowest price. The advantage of reverse auction is that many vendors can participate in it; lowest price can be obtained when compared to conventional purchasing prices. E-procurement allows vendors to manage customers’ inventory by having access to inventory data.
An E-procurement package comes along with a Supplier Relationship Management suite, in which suppliers and firm communicate using e-mail and other technologies. Suppliers can access the web based software using their own log-in passwords. Connectivity to legacy systems would require long term commitment from vendors and the firm. Many small and medium enterprises, who are the suppliers to large enterprises, lack web savvy, which explains the lack of penetration of B2B commerce when compared to B2C commerce.