E-Procurement at IBM: A case study analysis

Submitted to

Iftehkar Gani Chowdhury

Ex-Director, Institute of Business Administration
University of Dhaka

Submitted by

Asif bin Zaman (Roll: 202-65-009)

Md. Myenuddin Kabir Shakil (Roll: 202-65-012)
Shuvo Islam (Roll: 202-65-018)
S.M. Fahmid Shahriar (Roll: 202-65-049)
Irteza Maroof (Roll: 202-65-054)

Date: 07 November 2023

Table of Contents
Executive Summary ..................................................................................................................... iv
Introduction ................................................................................................................................... 1
Procurement .................................................................................................................................. 1
E-Procurement .............................................................................................................................. 1
Online Supplier Discovery .......................................................................................................... 1
Electronic Catalogs ..................................................................................................................... 1
Electronic Purchase Orders (e-POs) ............................................................................................ 1
Automated Workflows ................................................................................................................ 2
Online Bidding and Auctions ...................................................................................................... 2
Supplier Relationship Management (SRM) ................................................................................ 2
IBM's E-Procurement Initiative: A Case Study ........................................................................ 2
Efficiency Improvements ............................................................................................................ 2
Cost Reduction ............................................................................................................................ 3
Enhanced Supplier Relationships ................................................................................................ 3
Global Deployment ..................................................................................................................... 3
Strategic Positioning ................................................................................................................... 4
Challenges and Lessons Learned ................................................................................................. 4
Change Management ................................................................................................................... 4
Supplier Enablement ................................................................................................................... 4
Data Security ............................................................................................................................... 4
Regulatory Compliance ............................................................................................................... 5
User Training............................................................................................................................... 5
Broader Impacts............................................................................................................................ 5
Global Reach ............................................................................................................................... 5
Data-Driven Decisions ................................................................................................................ 5
Operational Efficiency ................................................................................................................ 5
Supplier Relationships................................................................................................................. 6
Compliance and Security ............................................................................................................ 6
Bangladesh and E-Procurement .................................................................................................. 6
Conclusion ..................................................................................................................................... 7
 Executive Summary

IBM's transition to e-procurement through the "IBM Procurement Desktop" significantly

improved efficiency, reduced costs, and enhanced supplier relationships. This global deployment
not only streamlined operations but also strategically positioned IBM by enabling cost savings,
improving supplier collaboration, and ensuring regulatory compliance. Challenges like change
management, supplier enablement, and data security were effectively addressed. The broader
implications highlight e-procurement's significance in today's business landscape, offering global
reach, data-driven decision-making, and operational efficiency, making it a vital tool for
companies aiming to remain competitive and efficient.

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Introduction
One of the most important parts of running a business is procurement, which is the act of
getting products, services, or labor from outside sources. Electronic procurement, or e-
procurement, has become a disruptive force in the increasingly digital world, changing the way
businesses carry out and maximize their procurement operations.

Procurement
Traditionally, it entailed labor-intensive, paper-based manual procedures for determining
needs, evaluating suppliers, negotiating contracts, issuing purchase orders, receiving items, and
managing supplier relationships. This traditional method frequently resulted in inefficiencies,
higher operating expenses, and opaque procurement procedures. E-procurement aims to improve
and expedite the whole procurement cycle by utilizing digital technologies, especially the internet.

E-Procurement
E-procurement, short for electronic procurement, is the use of digital technology and the
internet to carry out various aspects of the procurement process. It involves the electronic
automation and streamlining of tasks related to sourcing, ordering, purchasing, and managing
goods and services from suppliers. It encompasses a wide range of electronic tools and processes
designed to improve procurement efficiency and effectiveness:

Online Supplier Discovery

Organizations may use digital platforms to locate, analyze, and engage with new
suppliers, increasing their supplier network and encouraging healthy competition.

Electronic Catalogs
E-procurement systems include online catalogs that give specific product or service
information, price, and real-time availability, making procurement experts' decision
process easier.

Electronic Purchase Orders (e-POs)

Purchase orders are created, approved, and transmitted online, which eliminates the
need for paper documentation and improves procurement processes' speed and accuracy.

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 Automated Workflows
E-procurement ensures that purchase requisitions proceed smoothly through the
procurement process, from request to final approval, by streamlining approval procedures.

Online Bidding and Auctions

By using digital platforms, businesses may hold reverse auctions and online bidding
to get the best prices from suppliers.

Supplier Relationship Management (SRM)

Through the provision of an effective platform for collaboration, order
management, and data exchange, e-procurement solutions facilitate the establishment and
maintenance of better connections between organizations and suppliers.

IBM's E-Procurement Initiative: A Case Study

Global provider of services and technology, IBM has always been at the forefront of
innovation. The company set out on an ambitious mission to use e-procurement to transform its
procurement processes in the late 1990s (1999). This initiative's main achievement was the
development of the "IBM Procurement Desktop" (PD).

With a number of advantages, the organization's procurement process was intended to be

streamlined and digitalized through the use of IBM Procurement Desktop.

Efficiency Improvements
Improving efficiency across the procurement process was one of the main goals of
IBM's e-procurement effort. Purchase requisition processing time was greatly shortened
and bottlenecks were lessened with the use of automated approval procedures. Due to the
increased operational speed, procurement is now quicker and more adaptable to the
demands of different IBM teams and departments.

In addition, the PD provided extensive inventory management tools and enabled

real-time order tracking. This simplified procedure decreased the likelihood of stockouts
or overstocking, which in turn improved inventory control efficiency.

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Cost Reduction
The adoption of e-procurement was motivated by more than just increasing
efficiency; it also involved lower operating expenses. This transition led to significant cost
reductions for IBM. Costs were decreased by moving away from paper-based procedures
and automating repetitive procurement chores. There was a major reduction in the
requirement for physical documentation and human labor, which freed up important
resources and reduced operating costs.

A further factor in the total cost reduction was the automation of approval
procedures and the simplification of the buy request process, which decreased
administrative overhead. The procurement team might avoid being mired in repetitive,
time-consuming chores by concentrating on more strategic and value-added initiatives.

Enhanced Supplier Relationships

There were wider ramifications from IBM's e-procurement program, especially in
the area of supplier relationships. The technology gave vendors additional access into the
procurement process, allowing them to monitor the progress of their orders and work with
IBM more efficiently. Improved visibility into IBM's demand estimates, faster payment
cycles, and a more consistent order flow were all advantages for suppliers. Suppliers were
able to more efficiently organize their production and delivery because to the predictability
and visibility, creating a win-win situation. Better supplier ties helped IBM as well since
suppliers were more eager to collaborate closely with the business to meet its demands.

Global Deployment
The worldwide implementation of IBM's e-procurement program was one of its
noteworthy features. This method was put into place all around the world, not just in one
area or trade division. This worldwide reach made sure that the organization's buying
procedures were consistent and standardized. Because of IBM's worldwide e-procurement
strategy, all employees could take use of the system's advantages regardless of where they
worked. This uniform method improved efficiency and cost management by streamlining
procurement procedures across national borders.

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 Strategic Positioning
For IBM, e-procurement was a strategic decision that set up the business for long-
term success rather than just a cost-saving measure. IBM was able to provide its customers
with more affordable prices because to the cost reductions and strengthened supplier
connections. Its reputation and consumer happiness increased as a result of this competitive
edge in the market, which also helped to fuel its expansion and profitability. Furthermore,
by implementing e-procurement, IBM was able to delegate the repetitive procurement
duties to the automated system and concentrate on its strategic ambitions and core
capabilities. As a result, the business was able to invest in sectors that would spur
innovation and value creation and use its resources more wisely.

Challenges and Lessons Learned

IBM's journey into e-procurement was not without its share of challenges and lessons.
Several key factors played a pivotal role in the success of this transformation:

Change Management
For IBM to implement e-procurement, a culture change was necessary. It took
change management initiatives, such as thorough training and continuing assistance, to
make sure that staff members accepted the new technology. The advantages of e-
procurement may be compromised if employees oppose the new system due to improper
change management.

Supplier Enablement
One of the biggest challenges was making sure all vendors could link with the e-
procurement system. At first, several suppliers lacked the necessary tools to engage in e-
procurement. IBM put time and effort into training and working with suppliers to properly
onboard them because it understood the value of supplier enablement. This endeavor
played a pivotal role in expanding the advantages of electronic buying across IBM's supply
chain.

Data Security
IBM needed to concentrate on data security measures to safeguard both its own
information and those of its suppliers since sensitive procurement data was now digitalized

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 and available through the e-procurement system. Strong security measures were necessary
because data breaches or security flaws might have serious repercussions.

Regulatory Compliance
E-procurement systems have to go by a number of rules, including laws pertaining
to data privacy and standards particular to the sector. IBM had to make sure the system
complied with all applicable laws and regulations while navigating this complicated
regulatory environment.

User Training
For employees to get the most out of e-procurement, they had to be adept at utilizing
the system. To guarantee that staff members could use the platform, make purchase
requisitions, and navigate it, comprehensive user training was needed. The system's
potential may be underutilized as a result of inadequate training.

Broader Impacts
IBM's pioneering efforts in e-procurement have broader implications for organizations
worldwide. E-procurement is no longer just an option; it's a strategic imperative. Here are the key
takeaways from IBM's journey:

Global Reach
Through e-procurement, businesses may contact a worldwide supplier base. In the end,
this results in cost savings and improved procurement outcomes by fostering more
competition and providing a wider choice of purchasing possibilities.

Data-Driven Decisions
Real-time data is made available to enterprises through e-procurement, allowing for
data-driven decision-making. Organizations may enhance their procurement strategy by
reducing risks, identifying patterns, and making well-informed decisions through the
analysis of procurement data.

Operational Efficiency
E-procurement is a potent instrument for workflow optimization, process reduction,
and operational efficiency. Shorter procurement cycle times, more efficiency, and
considerable cost reductions result from this.

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 Supplier Relationships
Organizations may use e-procurement platforms as a platform to develop and solidify
their connections with their suppliers. Increased supplier cooperation promotes innovation,
lessens supply chain interruptions, and produces win-win situations.

Compliance and Security

E-procurement systems need to adhere to regulatory and data security requirements in
a world that is becoming more and more regulated. Organizations may guarantee business
continuity and resilience by mitigating legal and security risks by adherence to these
standards.

Bangladesh and E-Procurement

Each year, Bangladesh spends around $10 billion of its national budget on public
procurement to build and maintain schools, roads, power plants and others. Public funds can be
used effectively for the people only when the procurement system is transparent and efficient. In
the last few years, the country has shifted away from traditional procurement standards paperwork
and long processing time and rolled e-GP, a new electronic government procurement system.

Launched in 2011, e-GP started implementation in 2012 across four key public sector
agencies, which together spend about half of Bangladesh’s annual development program. As of
August 2015, over 28,000 tenders valued at about $3 billion have been processed through
electronic procurement.

E-GP means that all procurement is conducted from beginning to end through a single web
portal. That is, from advertising through evaluation and contract award to completion and final
payment, all are done online. Bidders submit tender applications and track progress online.
Processing time has decreased substantially. With greater transparency and increased competition
among bidders, the cost of doing business and the risk of collusive practices has gone down
significantly. Moreover, the e-GP system is becoming self-sustainable with the revenues it
generates; its exponential growth is embraced by all stakeholders from the business community to
civil society.

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Conclusion
This case study's presentation of IBM's e-procurement journey offers a powerful
illustration of how technology may revolutionize the procurement process. The transition from
manual, paper-based procedures to a productive, automated, and digital system highlights how
crucial cost-cutting, supplier cooperation, efficiency, and change management are to the success
of e-procurement. Businesses all around the globe need to learn from IBM's experience and modify
their approaches to effectively match the changing environment as they continue to implement e-
procurement procedures. Purchase orders are only one aspect of e-procurement; it's a broad
revolution that may boost productivity and development in all types of businesses, no matter where
they are located. Other businesses thinking about implementing comparable digital changes in
their procurement procedures might benefit greatly from the lessons IBM's journey has taught
them.

To sum up, e-procurement is a strategic step that may position businesses for long-term
success by helping them save costs, forge deeper connections with suppliers, and maintain their
competitiveness in a market that is changing quickly. It is not just a modernizing fad.