Two sides of the same coin: e-commerce platforms and e-procurement systems
- 09 Jun 2021
Over the last few decades, the way people sell has changed dramatically, giving rise to e-commerce. Technology has simplified back-office purchasing processes and, thanks to the prevalence of digital tools, procurement has never been more convenient.
Digitised B2B processes have also introduced new ways of describing business transactions. E-commerce, e-procurement, ERP, PIM, Punchout catalogues - if it's not 'i' something, it's 'e' something else. No wonder it's all so confusing. We are often asked to participate in the "e-procurement versus e-commerce" debate, or, more specifically, to comment on whether OroCommerce is an e-procurement system or is related to Punchout catalogues.
To avoid confusion, we decided to take the opportunity to dot the i's and cross the t's. In today's post, we'll start by defining what e-procurement systems are, and then look at how B2B e-commerce fits into the concept. Also, don't miss our next episode, which will be dedicated to Punchout catalogues.
Confusion between e-commerce and e-procurement systems
Electronic procurement (e-procurement) and electronic commerce (e-commerce) systems are systematically used with B2B trade. SMEs and large companies, but also supply chain actors, use them for sales/marketing and purchasing. However, with B2B, the relationships are not so simple. For every sale made by one party, there is a purchase made by another party, which is often very different from the first. They are two sides (buyer and seller) of the same coin (the buy/sell transaction).
Although they have some similarities, e-procurement and B2B e-commerce systems also have differences. Both have features that make them unique.
All B2B e-commerce platforms can handle online transactions, and some e-procurement systems do as well. Some e-commerce systems (such as OroCommerce) can handle RFQ processes, but all e-procurement systems have this functionality. This is also true for credit limit management.
But that's where the similarities end. In short, the e-commerce platform is designed around the needs of the seller, and the e-procurement platform is developed for the buyer. But let's take a closer look.
How do e-procurement systems work?
In essence, e-procurement includes all the buying and selling activities of a company on the Internet. Where a traditional business would need to fax physical purchase orders or search through paper catalogues and price lists, e-procurement digitises these activities. Companies use e-procurement software to help them make the research and purchasing process more efficient.
E-procurement's benefits are numerous for companies, their suppliers and their purchasing companies. It is a way to simplify the requisition and payment process while reducing the cost per transaction. It allows companies to benefit from the ease of e-commerce for their purchases, and to better manage their expenses.
Most e-procurement solutions offer:
· Pre-purchase approval processes
· Manageable preferred/approved supplier list
· Expense tracking
· Purchase order generation system
· Receipt of goods/services after a purchase order/fulfilment order is issued
· Multiple levels of user access
· Budgeting tools
Unlike a traditional B2B buyer, a buyer who uses e-procurement is slightly different. The seller has to do more to satisfy the second customer - i.e. use an e-procurement system at the buyer's request.
Manufacturers can use e-procurement to facilitate their purchases of direct goods for the production process. Government agencies and public sector entities can use an e-procurement system to simplify the RFQ process and increase their purchasing power.
Since they can direct their purchases to selected suppliers, buyers can negotiate better prices. This provides greater transparency and accountability. Information can be shared with the right people. The risk of fraud is reduced through the separation of roles. Errors during contract management and quoting processes are minimised. Finally, employees have access to a pre-approved catalogue of the goods and services they need, at fixed prices. As a result, purchasing, accounting and all other related functions become more efficient.
As they have many "moving parts", it is essential that e-procurement systems and buyers' purchasing processes work seamlessly together. To save time and costs, these systems need to offer proper authorisation management, and accurate stock, pricing and product information.
This is one of the differences between e-commerce and e-procurement: an e-commerce platform will have this information from the start.
How do e-commerce systems fit in?
How are e-procurement and e-commerce different? E-commerce systems are used by manufacturers, distributors and other B2B companies to market and sell goods and services. Where e-procurement systems are designed around the needs of the buyer, e-commerce systems are based on the needs of the seller. This can be confusing, as sellers have only one goal: to offer buyers what they want.
However, B2B sellers also have constraints - they operate within the strict confines of their industry, their processes, their partners or their relationships with their customers.
Many B2B e-commerce platforms available on the market are B2C platforms repurposed for B2B applications. However, systems such as OroCommerce have been created from scratch for the specific needs of B2B e-commerce.
B2B solutions offer:
· Content management
· Shopping cart for online purchases
· Customised catalogue management
· Multiple levels of customer access
· Multiple price lists
· User-created shopping lists
· Customisation functions for price lists and catalogues
· Online submission of RFQs and RFPs
· Customer relationship management
· Customisable processes
Those who buy an e-commerce platform are the companies that make the sales. While buyers use the website to make purchases and submit RFPs, e-commerce systems were developed to be used by sellers for B2B transactions.
Product distributors such as pet food distributor Animal Supply Company use e-commerce to accept orders, maintain customer relationships, and implement marketing strategies to grow their business. Manufacturers such as ARC use e-commerce platforms to enter new markets, support existing supply chains and reinforce their corporate identity.
To sum up, e-commerce enables companies to be operationally efficient, but also to be effective in terms of marketing and sales.
Buyers participate in an e-commerce system, by filling in a contact form, placing an order online, or submitting an RFQ from their web browser. Shoppers engage with the e-commerce system because it facilitates the purchasing process. The e-commerce platform is designed for the benefit of the seller, to enable them to engage with their customers, grow their business and digitise processes.
A transaction, e-procurement versus e-commerce
In any given business transaction, the buyer and seller may have a common goal - to complete the transaction - but their needs are very different. The more complex the participants in the transaction, the more these needs may diverge.
This is why they use two very different systems to automate and digitise their processes. E-procurement systems are designed with the buyer in mind, while e-commerce systems are designed to meet the needs of sellers. The two systems are not interchangeable and any attempt to do so leads to a real disaster.
Here are some of the differences that exist in terms of managing the e-procurement process between e-procurement and B2B e-commerce software.
|No, with integration
|Quote configuration (CPQ)
|No, with integration
|Request For Quotation (RFQ)
|Supply request management
No, with integration
|Management of purchase orders
|No, with integration
Benefits of integrating e-procurement and B2B e-commerce
In some sectors and with some sales models, it is not enough for salespeople to offer customers the right products. Sellers have to meet unique buying requirements that vary from customer to customer. Buyers using e-procurement systems typically start their research here, by looking through sellers' catalogues (also known as "Punchout catalogues") to move on to the buying process.
So it makes sense for vendors to set up a fast and efficient e-commerce integration with an e-procurement provider used by their customers. It also makes good business sense: buyers spend more and their relationships with vendors who integrate their e-procurement systems last longer.
By integrating their B2B e-commerce and e-procurement systems, B2B buyers and sellers can achieve their goals without affecting the other party. The buyer can use its e-procurement system to purchase on the supplier's e-commerce website. The seller uses his own system, which he knows and knows how to use.
Thus, a seamless exchange of procurement data between B2B e-commerce, e-procurement, ERP and other systems is necessary to maintain consistency and transparency of information on inventory, purchase orders, payments, shipments and invoicing.
The necessity of e-procurement in B2B e-commerce
Although B2C e-commerce tries to make shopping more straightforward and more transparent, the objectives of B2B e-commerce are slightly different. Since B2B buyers are employees who make purchases on behalf of their company, B2B e-commerce companies need to make it easier for them.
But how do e-procurement users view the buying experience? Whether they select a pre-approved supplier or choose from a list, they first evaluate suppliers using their e-procurement solutions. When they choose a supplier, they see their personalised account with their products and prices from the e-commerce site. When they add products to their shopping cart, their shopping list is transferred to the e-procurement system, where the purchase order and necessary authorisations are created. The information is then transferred to the e-commerce system, where the purchases are recorded.
Companies want to automate this process with an e-procurement system to reduce costs and ensure consistency of supply and transparency for key stakeholders. It also reduces manual data entry and the risk of errors and speeds up purchasing cycles.
It is not surprising that many B2B buyers evaluate B2B sellers based on their e-commerce experience and their ability to integrate with their e-procurement system. It is important to realise that many e-procurement users are invested in their systems and that companies that have flexible e-commerce solutions with integration capability have a competitive advantage.
Integration of B2B e-commerce and e-procurement
Is the e-procurement versus e-commerce debate still relevant? As long as the needs of buyers and sellers are different, integration is necessary.
An integrated e-commerce and e-procurement system consists of procurement software for the buyer and an e-commerce platform for the seller, like OroCommerce.
OroCommerce is a flexible B2B e-commerce platform associated with Punchout technology providers such as Vurbis and Greenwing Technology. In addition, Oro's robust open-source architecture and scalable front-end and back-end APIs can be integrated with other third-party e-procurement systems.
Whether you want to develop an e-procurement solution in-house or connect to an existing system, Oro has the technology, expertise and partner ecosystem to turn your goals into reality.