Basic Concept of E-Procurement

 E-procurement refers to the electronic integration

and management of all procurement activities
including;
◦ Purchase request
◦ Authorization
◦ Ordering
◦ Delivery and
◦ Payment between a purchaser and a supplier.
 E-procurement should be directed at
improving performance for each of the ‘five
rights of purchasing, which are sourcing
items:
◦ At the right price
◦ Delivered at the right time
◦ Of the right quality
◦ Of the right quantity
◦ From the right source
Traditional Procurement Task Flaw
(Typical cycle time, 5 1⁄2 days)
• Delay in issue of tender schedules to Vendors
• Disadvantage for geographically spread bidders to
participate
• Physical request / threats to bidders
• Risk of Tender Boxes at Multiple locations
• Delays in finalization of tenders
• Human interface at every stage leading to loss of
objectivity
• Lack of Transparency
 What to Procure?
1. Production Related
2. Non production Related (MROs)
 How to Procure?
1. Strategic Sourcing : Long term relationship
2. Spot Sourcing : Fulfillment of Immediate needs
The six common forms:
1. Web-based enterprise resource planning (ERP)
◦ Goods/services ordered are product related
◦ Purchasing department authorized to place order
2. Electronic maintenance, repair and operating (e-MRO):
◦ For non production related items purchase
◦ Used by all employees of an organization.
3. E-sourcing: Used for identifying new suppliers
4. E-tendering: Used for solicited suppliers and includes the analysis and
comparison of suppliers responses.
5. Reverse auctioning:
◦ Used to buy goods/services from many known/unknown suppliers.
◦ It focuses on the price of the goods and service auctioned.
6. E-informing: Gathering and distributing purchasing information to d/t
parties
E- procurement Models Advantage
- Searching
Sell-Side - Responsibility of
e.g. www.rswww.com maintaining data on
supplier
Buy-Side - Simplicity
e.g. www.sap.com. - Wider choice
www. ariba.com - Integration ERP systems
- Good purchase control
- Simplicity-single interface
- Potentially widest choice
Independent Marketplace of suppliers, products and
e.g. www.sciquest.com prices
- Often unifies terms and
conditions and order
forms
Disadvantage
- Different interface
- Restricted choice
- Poor integration with
ERP/procurement system
- Limited purchase control
- Responsibility of maintaining
data is on buyer
- Software license costs
- Retraining cost
- Difficult to know which
marketplace to choose
- Poor purchase controls
- Uncertainty on service levels
from unfamiliar suppliers
- Interfacing with marketplace
data format
- Relatively poor integration
with ERP
The three main e-procurement model
alternatives for buyers
 Reduced purchasing cycle time and cost
 Enhanced budgetary control
 Elimination of administrative errors
 Increasing buyers’ productivity
 Lowering prices through product standardization and
consolidation of buys
 Improving information management
 Improving the payment process
 Security concerns and lack of faith in trading partners
 Change resistance
 Maverick or off-contract purchasing might happen
 Technological risk
 Lack of vendor support for e-commerce
 Require big expenses associated with software license
and training
 IS (information System) manager and procurement
team must work together
 Different Parts of the procurement Cycle;
1. Stock control system
2. CD or web-based catalogue
3. E-mail- or database-based workflow systems
4. Order-entry on web site
5. Accounting systems
6. Integrated e-procurement or ERP systems
 End of the Chapter

Question & Discussion