Estimating the Benefits and Risks of Implementing E-Procurement

In recent years, organizations have invested heavily in e-procurement technology solutions. However, an estimation of the value of the technology-enabled procurement process is often lacking. Our paper presents a rigorous methodological approach to the analysis of e-procurement benefits. Business process simulations are used to analyze the benefits of both technological and organizational changes related to e-procurement. The approach enables an estimation of both the average and variability of procurement costs and benefits, workload, and lead times. In addition, the approach enables optimization of a procurement strategy (e.g., approval levels). Finally, an innovative approach to estimation of value at risk is shown.