Automated e-procurements and automated data transfer systems require maximum standardization of the company's operations, and should only be implemented after evaluating risks and benefits.

 

Benefits:

• Creates efficiencies since information is entered only once to trigger the automatic supply chain operation between buyer and supplier.
• Offers better customer service to buyers by offering a faster production and delivery cycle, and potential reduction in price.
• Allows for integrated planning among participants.
• Increases production efficiency, save time, and cut costs.
• Easier to establish relations with known customers.
• Expanded sales by providing electronic catalogs online.
• Potential to significantly expand their sales volumes.
• Reduction of operating costs: when a supplier's systems can transfer and receive business data directly to and from buyer, the supplier is able to more quickly create orders, minimize time, and reduce the cost of transaction errors so common with paper-based processes.
• Improved performance: directly linking to a customer ensures accurate and on-time delivery, provides better service, lowers overall procurement costs, and results in much more collaborative buyer-seller relationships. 
• Increased predictability: when buyers provide forecasts of requirements to its vendors, suppliers can better predict and prepare for individual buyer requirements well ahead of time.

 

Risks:

• Automated e-procurement systems require significant up-front investment.  In addition to buying and installing the e-procurement application, necessary hardware, and ERP systems, other expenses include catalog and content development, consulting fees, supplier ⁄ buyer negotiations, training, licensing fees, maintenance, system integration, non-production hours spent on the project by in-house resources, etc.).  However, it is possible to avoid some of these costs by purchasing e-procurement services through ASPs. ASPs provide outsourcing of financial database management, and running of software and e-procurement applications.

 

• Lack of standards: Currently a company can automatically exchange data if its supply chain customers use the same electronic data exchange format (e.g., EDI or XML), or if either partner develops interfaces to translate the other partner's data into a compatible format.

 

• Lack of compatible software: Currently a company with incompatible systems to a buyer's systems must hire a programmer to write an interface to the other company's system.  An alternative is to purchase a large and costly e-procurement software system able to interface with other e-procurement systems.  In the future, inter-compatible e-procurement software packages will likely be developed and marketed to a widespread user group similar to how Microsoft's inter-compatible PC software packages took hold among most of the world's PC users.  Also, XML (extensible markup language) standards will make it easier to transfer data without a pre-harmonized data format.