Level 4

Diploma in Procurement and

Supply
L4M1 Core
Scope and Influence of
Procurement and Supply
2.3 e-sourcing
By/ Almahi Suliman
Supply Chain Management Consultant
Msc in Procurement Management
Electronic systems used in sourcing

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Electronic Procurement

• Electronic systems can be used at different stages

of the sourcing process.
• The ‘e’ at the start of a term, just means the
process is carried out electronically.
• E-requisitioning
• e-catalogues
• e-ordering
• e-sourcing
• e-payment technologies

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E-requisitioning

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 E-requisitioning

Advantages Disadvantages
Quicker than manual process Large investment to install e-system
Traceability Less personal
Consistent style Individuals may resist change
More control Reliant on technology
Reduces risk Individuals need training (downtime from
roles)
Saves cost in long term Affected by power failure

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e-catalogues
• up-to-date display of a supplier’s product ranges
available on a website or intranet.
• Buyers may refer to e-catalogues to help source the
need.
• Can save procurement professionals time because the
information is readily available rather than having to
wait for a paper copy to be delivered.
• Can be easily searched using technology, rather than
having to manually locate items.
• Reduce the impact on the environment since there is no
need to produce a paper catalogue.

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e-catalogues
Advantages Disadvantages

Information is always available If technology fails access is denied

Information is always up to date lack of relationship building

In depth details are readily available May be difficult for buyer to navigate

E-catalogues can be viewed all time

Environmentally friendly

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e-ordering
• the use of an electronic system to place orders in response to
e-requisitions.
• Two methods:
• • Manual input system – the buyer inputs the order
requirement.
• • Automated systems – commonly used in organisations that
use materials requirement planning (MRP). Reports can be
automatically transposed into an e-order that can be sent.
This saves time and can reduce human error as the system
creates exactly what is needed.

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E-ordering
Advantages Disadvantages

Save time Impersonal

Information is always up to date If technology fail the process stops

In depth details are readily available Requires expensive investment

E-catalogues can be viewed all time

Environmentally friendly

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e-sourcing
• includes:
• Developing the e-specification.
• Sending e-RFQ/e-ITTs to selected suppliers.
• e-negotiation, which is negotiation via e-
mail, or using reverse and e-auctions where
suppliers reduce their bid until nobody will
go any lower.
• Preparing and sending an e-contract.
• Supplier evaluation.
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 Price,
quality &
Delivery

E-
Financial
commerce
capability stability
Supplier
evaluation
criteria

Total quality Long-term

performance
and relationshi
philosophy p potential

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 Reverse and e-auction

• Other forms of e-negotiation include reverse and e-auctions.

• In reverse auctions the supplier reduce their bid until nobody will
go any lower – at that point the contract is made.
• Reverse auctions are ideal for procurement when?
• Specifications are simple and goods/service can clearly described
• There is a large and competitive supplier base
• Lead times are relatively long to enable the process to run fairly
• Prices and market forces are stable, so all suppliers can bid fairly
• Buyers are looking for short-term contracts and not collaborative
relationship
• There are low costs associated with changing suppliers
• The delivery schedule is regular and simple
• The value of the purchase is high, because revers auctions take time to
prepare
• E-auctions are most typically used only to evaluate price.

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Reverse and e-auction
Advantages Disadvantages
Quick and easy to compare bids Suppliers could make lower profit than
through other negotiation methods
Software allows open Without samples being seen suppliers
communication between buyer could be bidding to supply something
and supplier that is not suitable
No geographical constraints

No organisational size constraints

Lower overheads for suppliers –
no need to visit buyers with
offers

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e-payment technologies

• allow the transfer of funds from one

place to another.
• Bank transfers are often used to pay e-
invoices directly into a supplier’s bank
account.
• Debit or credit cards can be used to
pay for goods or services over the
Internet.
• e-payments are quick, traceable and
low risk, and there is a high level of
control. However, they do carry the risk
of online hackers.
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e-payment technologies

Advantages Disadvantages
Quick process Possibility of online hackers
Traceable If technology fails, the
system stops
Low risk of money going No personal relationship
missing
High level of control

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The impact of procure to
pay (P2P) systems on the
sourcing process.
• The P2P cycle includes all the stages from the initial identification
of requirements, to the procurement/purchasing of the item,
through the receipt of the goods .. To the payment of the supplier
once the goods are received.
• This electronic process enabled by technology was designed to
speed up the process.
• The impact of procure to pay systems on the sourcing process
includes the following:
• Reduced errors
• Reduced waste (motion, inventory, overproduction, waiting, defects, overs-processing and transportation.
• Reduced costs
• Faster payment
• Continuous improvement
• Enhanced relationships

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 IDENTIFY
Opportunities
Continuous improvement in e-Procurement:

in the process
workflow

REVIEW The PLAN

How are continuous How can the
changes current
working for the improveme process be
team? nt cycle improved

EXCUTE
Implement
changes
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Electronic Data Interchange (EDI)

• EDI is the electronic exchange of documents in an

agreed format between organisations. This form of
exchange removes the need for paper and people.
• EDI is essentially one computer system
communicating with another. Organisations that
use EDI have no requirement for post or e-mail.
• Common documents that are exchanged using EDI
include the following:
• Purchase orders
• Delivery notes
• invoices

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EDI vs Manual System

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 Electronic Data
Interchange (EDI)
Advantages Disadvantages
Transactions are much quicker Large investment
Improve accuracy Not all the organisations use the same
system
Less waste, individuals can focus on core Staff training required which could be
activities timely
Improves cash flow Not all organisations will want to use EDI
Real time visibility Employees could lose jobs due to
technology taking over
Reduces lead times No human contact in some areas
Environmentally friendly
Promote good CSR policy
Fewer staff required
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Finally: the
impact of
P2P
• Electronic procurement to pay systems have a
large impact on the sourcing process. There
are many positive aspects to implementing
such a system, but suppliers relationship
development and management should not be
ignored as technology replaces manual
processes.
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