Slide 7.

CHAPTER 7
E-PROCUREMENT

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.2

Learning outcomes
 Identify the benefits and risks of
e-procurement
 Analyze procurement methods to evaluate cost
savings
 Assess different options for integration of
organizations’ information systems with
e-procurement suppliers.

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.3

Management issues
 What benefits and risks are associated with
e-procurement?
 Which method(s) of e-procurement should we
adopt?
 What organizational and technical issues are
involved in introducing e-procurement?

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.4

How important is procurement?

We estimate that for every dollar a company earns in
revenue, 50 cents to 55 cents is spent on indirect
goods and services – things like office supplies and
computer equipment.
That half dollar represents an opportunity: By
driving costs out of the purchasing process,
companies can increase profits without having to sell
more goods. Hildebrand (2002)

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.5

What is e-procurement?
 Procurement refers to all activities involved with
obtaning items from a supplier

 The electronic integration and management of all

procurement activities including purchase request,
authorization, ordering, delivery and payment
between a purchaser and a supplier

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.6

The 5 rights of E-procurement

Sourcing items:
 at the right price
 delivered at the right time
 are of the right quality
 of the right quantity
 from the right source.

Baily et al., 1994

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 7.1 Key procurement activities within an organization
Figure 7.2 Electronic procurement system
Source: Tranmit plc
Slide 7.9

Types of procurement
 Production-related procurement
 Relate to manufacturing of products
 Non-production related procurement
 Supports operation of whole business
How items are bought:
 Systematic sourcing

 Negotiated contracts with regular suppliers

 Spot sourcing
 Fulfillment of an immediate need

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.10

Drivers of e-procurement
 Reduced purchasing cycle and cost
 Enhanced budgetary control
 Elimination of administrative errors
 Increasing buyer’s productivity
 Improving information management
 Improving the payment process

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.11

Risks and impact of e-procurement

 Organizational risks
 Need to redeploy staff: purchasing team of 5 people
was reduced to 4
 Maverisk/off-contract purchasing: unnecessary items
are ordered
 Technology risks
 Integration with existing financial systems
 Failure to achieve real cost reduction
 ROI (return of investment) may be lower than

forecast
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.12

Implementing e-procurement
 Stock control system
 CD/web-based catalogue
 E-mail/workflow system
 Order-entry on web site
 Accounting systems
 ERP systems

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
 Use of different information systems for different aspects of the
Figure 7.3
fulfilment cycle
Figure 7.4 E-mail notification of requisition approval
Source: Tranmit plc
 Document management software for reconciling supplier invoice with
Figure 7.5
purchase order data
Source: Tranmit plc
Figure 7.6 The three main e-procurement model alternatives for buyers
Table 7.6 Assessment of the procurement model alternatives for buyers
Figure 7.7 Integration between e-procurement systems and catalogue data
Figure 7.8 An online catalogue of items for purchase
Source: Tranmit plc
Figure 7.9 Ford supplier portal provided by Covisint
Source: Covisint.com
Figure 7.10 Supplier Route to Government Portal (www.supply2.gov.uk)
Slide 7.22

Government marketplace
exchanges

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
 Types of marketplace

Types of B2B marketplaces identified by Kaplan and Sawhney (2000)

Table 7.7
with examples
Source: Adapted and reprinted by permission of Harvard Business Review from table on p. 99 from ‘E-hubs: the new B2B marketplaces,’ by Kaplan, S. and Sawhney, M., in Harvard
Business Review, May–June 2000. Copyright © 2000 by the Harvard Business School Publishing Corporation, all rights reserved
Slide 7.24

Questions:

Q1) Describe the different elements of an e

procurement systems

Q2) Outline the main benefits and risk of e-

procurement

Q3) Explain how cost saving may arise from e-

procurement

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007