E-Procurement Tools Training Module

Developed By: Benjamin Maughan Operations 361
November 05 © Nov 2005 1

Purpose


 

Define E-Procurement Explain its role as an E-Business Tool Identify E-Procurement in Your Organization Create E-Procurement Flow Chart Summarize Learning Points Identify Next Step
Overview © Nov 2005

November 05

2

Exercises


Process Flow Diagram Process Flow E-Procurement Analysis Streamlined Process Flow using EProcurement Cost Analysis

November 05

Overview © Nov 2005

E-Procurement

Using internet or intranet based information systems software to coordinate the buying, shipping, inventory management, supplier selection, and approval process of vital business acquisitions within the organizations core competency.

November 05

Define E-Procurement © Nov 2005

4

E-Procurement  Purchasing Process .Preliminary Actions     Need/Specification Identification Supplier Selection Terms Negotiation Regulations November 05 Define E-Procurement © Nov 2005 5 .

E-Procurement  Purchasing Process .Buying Process        Purchase Order Delivery Process Purchase Order Receipt Process Order Fill Timing Order Accuracy Order Receipt Order Inspection Order Payment Process Define E-Procurement © Nov 2005 November 05 6 .

Concluding Actions     Order Record Storage & Organization Order Reviews Benchmarking Comparative Analysis November 05 Define E-Procurement © Nov 2005 7 .E-Procurement  Purchasing Process .

E-Procurement  Purchasing Process Purchase Order Prep Follow-up Receipt/Inspection Payment Records Management Specifications Needs Identification Supplier Evaluation Supplier Selection November 05 Define E-Procurement © Nov 2005 8 .

 Creates List of Needed Items (Inputs)  Archives that List  E-Procurement’s Role © Nov 2005 November 05 9 .E-Procurement   Software Tool Encompasses:  Preliminary Actions Coordinates inventory management systems with purchasing systems.  Coordinates new business ventures with purchasing systems.

E-Procurement  Encompasses:  Preliminary Actions Maintains Record of Suppliers  Maintains Record of Supplier Profiles  Maintains Record of Supplier Capabilities  Maintains Record of Negotiated Prices  Maintains Record of Negotiated Terms  Maintains Record of Contracted Limitations  November 05 E-Procurement’s Role © Nov 2005 10 .

E-Procurement  Encompasses:  Buying Actions Sends Purchase Order Delivery directly to Supplier  Maintains Real-time Order Status  Records Order Delivery timing  Records Order Accuracy  Records Order Inspection Data  Submits Payment Request  Coordinates Payment Approval Process  E-Procurement’s Role © Nov 2005 November 05 11 .

E-Procurement  Encompasses:  Concluding Actions: Sends Electronic Receipts to suppliers. archives. managers  Maintains on-demand records for order reviews  Allows reports and analyses for benchmarking  Facilitates comparative and costs analyses  November 05 E-Procurement’s Role © Nov 2005 12 .

E-Procurement  Benefits      Streamlines procurement process Increases communication Increases procurement speed Eliminates non-value added personnel Reduces DEAD time November 05 E-Procurement’s Role © Nov 2005 13 .

E-Procurement  Benefits    Provides records Produces reports Facilitates improvements November 05 E-Procurement’s Role © Nov 2005 14 .

E-Procurement  Detriments   Limits flexibility for extensive notations Poor performance for exception items November 05 E-Procurement’s Role © Nov 2005 15 .

E-Procurement  In your organization:  Understanding Process Flow Beginning Points  End Points  Inputs/Outputs  Gray Boxes  Black Holes  Miracles  Transformation Activities  E-Procurement in Your Organization © Nov 2005 November 05 16 .

E-Procurement  In your organization:  Mapping Symbols  Start Point/Finish Point Symbol  Process Activity/Step Symbol Decision Point Symbol Input/Output Symbol   November 05 E-Procurement in Your Organization © Nov 2005 17 .

E-Procurement  In your organization:  More Mapping Symbols  Document Created Symbol  Delay Symbol Inspection Symbol Move Activity Symbol   November 05 E-Procurement in Your Organization © Nov 2005 18 .

E-Procurement  Identify Buying Steps as Flow Symbols  Engineer requests four computers using ERP. (A procurement software program) What symbol is this request? November 05 E-Procurement in Your Organization © Nov 2005 19 .

E-Procurement  Identifying Buying Steps as Flow Symbols  Manager approves request for four computers. What two symbols would result for this action? November 05 E-Procurement in Your Organization © Nov 2005 20 .

E-Procurement  Identifying Buying Steps as Flow Symbols  With manager approval Procurement sends purchase order to Computer Provider Inc. What symbol would result from this action? November 05 E-Procurement in Your Organization © Nov 2005 21 .

E-Procurement  Identifying Buying Steps as Flow Symbols  Purchase Order sits in suppliers bottleneck instead of going straight to suppliers pack and ship department. What symbol would result from this action? November 05 E-Procurement in Your Organization © Nov 2005 22 .

Customer Request Five Servers  What are some of the possible process components? Be Creative! November 05 E-Procurement in Your Organization © Nov 2005 23 .E-Procurement  Example .

Activity: Assembly delivers 10A to supervisor for approval E-Procurement in Your Organization © Nov 2005 November 05 24 . Document: Assembly creates order form 10A for ‘out of stock’ items. Activity: Assembly manually collects the inventory items.E-Procurement  Example .Customer Requests Five Servers       Input: Salesperson fills out specification form 10W Delay: 10W sits in ‘new order’ pile Activity: 10W is faxed to assembly.

Activity: Supervisor approves request.E-Procurement  Example .Customer Requests Five Servers       Delay: 10A sits in supervisor ‘to do’ pile. Activity: Supervisor gives 10A to secretary Activity: Secretary gives 10A to assembly Activity: Assembly faxes 10A to approved supplier Activity: Supplier has E-Procurement Software and ships items in 4 hours. November 05 E-Procurement in Your Organization © Nov 2005 25 .

E-Procurement  Example .Customer Requests Five Servers        Inspection: Assembly inspects shipment Activity: Assembly puts items in the five servers Inspection: Quality Assurance inspects servers Document: Quality Assurance creates 10C .Inspection Activity: Assembly moves servers to shipping Activity: Shipping sends servers to Customer Document: Shipping records shipment items and date  Even simple requests require many components E-Procurement in Your Organization © Nov 2005 November 05 26 .

E-Procurement in Your Organization © Nov 2005 November 05 27 .Take 15 minutes.E-Procurement  Creating a List of Flow Chart Components in your Procurement Process  Remember to include: Approvals  Documents created and archived  Delays  Inspections  Any other item that is part of the process   This can be extensive .

E-Procurement  Procurement Process Streamlining  Non-Value Added Actions Inspections  Records  Benchmarking   Delays Dead Time  Wait Time  Ship Time  November 05 E-Procurement Flow Chart © Nov 2005 28 .

E-Procurement  Procurement Process Streamlining  Unnecessary approvals Direct Supervisors  Accounting Process impediments   Unnecessary steps Secretary Handling  Shifting products around Factory  November 05 E-Procurement Flow Chart © Nov 2005 29 .

 Activity: Assembly delivers 10A to supervisor for approval  November 05 E-Procurement Flow Chart © Nov 2005 30 .E-Procurement  Procurement Process Streamlining  Identify unnecessary steps: Input: Salesperson fills out specification form 10W  Delay: 10W sits in ‘new order’ pile  Activity: 10W is faxed to assembly.  Activity: Assembly manually collects the inventory items.  Document: Assembly creates order form 10A for ‘out of stock’ items.

E-Procurement  Procurement Process Streamlining  Identify unnecessary steps: Delay: 10A sits in supervisor ‘to do’ pile.  Activity: Supervisor gives 10A to secretary  Activity: Secretary gives 10A to assembly  Activity: Assembly faxes 10A to approved supplier  Activity: Supplier has E-Procurement Software and ships items in 4 hours.  Activity: Supervisor approves request.  November 05 E-Procurement Flow Chart © Nov 2005 31 .

E-Procurement  Procurement Process Streamlining  Identify unnecessary steps: Inspection: Assembly inspects shipment  Activity: Assembly puts items in the five servers  Inspection: Quality Assurance inspects servers  Document: Quality Assurance creates 10C Inspection  Activity: Assembly moves servers to shipping  Activity: Shipping sends servers to Customer  Document: Shipping records shipment items and date  November 05 E-Procurement Flow Chart © Nov 2005 32 .

November 05 E-Procurement Flow Chart © Nov 2005 33 .E-Procurement  Identify your procurement process unnecessary steps:   Be Creative! Try to take out ALL steps that a computer can do.

6 with E-Procurement       Input: Salesperson assists customer to customize servers using an online POS Delay: Fax delay time eliminated Activity: Online POS system sends the order specifications directly to assembly.E-Procurement  Steps 1 . Activity: Identifying ‘out of stock’ eliminated Document: Order form for ‘out of stock’ items eliminated Activity: Supervisor approval for ‘out of stock’ order form eliminated E-Procurement Flow Chart © Nov 2005 November 05 34 .

Activity: Transfer time to secretary eliminated Activity: Transfer time to assembly eliminated Activity: Order to Approved Supplier will come directly from the E-Procurement system integrated with the POS system. Activity: The supplier with E-Procurement will continue to have their items shipped in 4 hours.12 with E-Procurement       Delay: Supervisor approval time delay eliminated Activity: Supervisor approval is not required because of JIT inventory based on sales data.E-Procurement  Steps 7 . Emails sent to all pertinent parties. E-Procurement Flow Chart © Nov 2005 November 05 35 .

19 with E-Procurement        Inspection: E-Procurement will log inspection results. Document: An extended E-procurement tool can produce the inspection approval records. Activity: Assembly to Shipping move will not change Activity: Shipping to Customer will not change Document: An extended E-procurement tool can record shipment items and dates.E-Procurement  Steps 13 . Activity: Assembly will not change. Inspection: Q&A will not change. November 05 E-Procurement Flow Chart © Nov 2005 36 .

E-Procurement  Create/Renovate your current procurement process with E-Procurement  Remember  A computer program can do all repetitive. limited thinking tasks. November 05 E-Procurement Flow Chart © Nov 2005 37 .

E-Procurement  Cost Analysis  Cost Savings Excess personnel eliminated  Inventory costs eliminated  Supervisor’s approval time requirements decreased  Customer dissatisfaction decreased.  Competitive advantage  November 05 E-Procurement Flow Chart © Nov 2005 38 .

E-Procurement  Cost Analysis  Costs Custom E-Procurement tools can be expensive  ‘Off-the-shelf’ E-Procurement tools are cheap. but not very robust  November 05 E-Procurement Flow Chart © Nov 2005 39 .

000  Integration costs: $25.000  Requires 10 dedicated servers: $50.000  Training costs: $25.E-Procurement  Cost Analysis Example  E-Procurement rough estimate costs Customized 35 supplier profiles.000  Maintenance costs: $10.000 E-Procurement Flow Chart © Nov 2005 November 05 40 .000   Total Cost: $260. 3500 product EProcurement tool with 125 available reports and expansion capabilities: $150.

000  Eliminates order error costs: $10.000   Total E-Procurement Savings: $410.000  Eliminates inventory costs: $60.000 November 05 E-Procurement Flow Chart © Nov 2005 41 .E-Procurement  Cost Analysis Example  E-Procurement rough estimate savings Eliminates 3 assembly jobs: $120.000  Reduction wait time increases sales by: $100.000  Eliminates related payroll expenses: $120.

$260.E-Procurement  Cost Reduction = Savings .000 .Costs   Cost Reduction = $410.000 November 05 E-Procurement Flow Chart © Nov 2005 42 .000 Cost Reduction = $150.

E-Procurement  Using your new E-Procurement Process:  Identify your: Eliminated personnel  Comparable RPE  Order error costs  Increase in sales   Your company should be willing to pay up to this amount for the E-Procurement Tool E-Procurement Flow Chart © Nov 2005 November 05 43 .

E-Procurement  Learning Points   E-Procurement Tools are internet/intranet based Coordinate buying. inventory. and approval process of a company November 05 Learning Points © Nov 2005 44 . supplier selection.

E-Procurement  Learning Points  Diagnosing the need for E-Procurement Tools Step 1: Identify current procurement process  Step 2: Identify unnecessary components  Step 3: Recreate procurement process with an EProcurement tool in mind.  Step 4: Create a cost analysis of savings  Step 5: Buy or Develop an E-Procurement Tool  November 05 Learning Points © Nov 2005 45 .

E-Procurement  Next Step: Get E-Procurement Software  Some Suggestions        Choose a company that has experience Choose a company with exceptional customer service Choose a company that wants your company to succeed Identify your needs first then listen to their suggestions Ensure that your team lead understands basic software coding principles Ensure that your team lead understands process flow diagrams Ensure that this effort is in parallel to your companies core competency Next Step © Nov 2005 November 05 46 .

edu November 05 Next Step © Nov 2005 47 .E-Procurement Questions?? Contact: Benjamin Maughan BMaughan@byu.

Applications and Technologies. Introduction to E-Supply Chain Management. Wolfgang Polasek. Michael Bohlen. 2001 E-Government: Towards Electronic Democracy. Marcia Robinson . Nick Speare. Next Step © Nov 2005 November 05 48 . Brian Stanford-Smith. March 2005 Successful Global Account Management: Key Strategies and Tools for Managing Global Customers.2002.Readings        E-Procurement: From Strategy to Implementation.2000. Kevin Wilson Business & Economics .Computers .Business & Economics .2000. Johann Gamper. Paul T.2002. Dale Neef Business & Economics. Kidd . David Frederick Ross . E-Business: Key Issues.2001 Cyber Commerce Reframing: The End of Business Process Reengineering? Uwe G Seebacher .Business & Economics .0: Roadmap for Success.Computers . Ravi Kalakota. E-Business 2.

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