Chapter 7 E-Procurement Revised Date: 2/7/2012

Learning outcomes  Define e-procurement process  Identify the benefits and risks of e-procurement  Identify procurement methods to evaluate cost savings

A Scenario.. Example of procurement process

Another Scenario.. Example of procurement process

Another scenario… e-procurement Example of e-procurement process

What is e-procurement?  The electronic integration and management of all procurement activities including purchase request, authorization, ordering, delivery and payment between a purchaser and a supplier  Read ‘e-procurement at Schlumberger in Paris’- page 311- to understand how e-procurement occurs within an organization.

What is e-procurement?  The 5 rights of e-procurement  at the right price  delivered at the right time  are of the right quality  of the right quantity  from the right source.

Figure 7.1 Key procurement activities within an organization What is e-procurement?

Figure 7.2 Electronic procurement system Source: Tranmit plc What is e-procurement?

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?

Types of procurement  Production-related procurement  Non-production related procurement How items are bought:  Systematic sourcing  Spot sourcing

Drives of e-procurement  Cost reduction  Enhanced budgetary control  Elimination of administrative errors  Increasing buyer’s productivity  Improving information management  Improving the payment process

Risks and impact of e-procurement  Organizational risks  Need to redeploy staff  Technology risks  Integration with existing financial systems

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

Figure 7.3 Use of different information systems for different aspects of the fulfilment cycle Implementing e-procurement

Figure 7.4 notification of requisition approval Source: Tranmit plc Implementing e-procurement

Figure 7.5 Document management software for reconciling supplier invoice with purchase order data Source: Tranmit plc Implementing e-procurement

Figure 7.6 The three main e-procurement model alternatives for buyers Integrating company systems with suppliers systems

Table 7.6 Assessment of the procurement model alternatives for buyers Integrating company systems with suppliers systems

Figure 7.7 Integration between e-procurement systems and catalogue data Integrating company systems with suppliers systems

Figure 7.8 An online catalogue of items for purchase Source: Tranmit plc Integrating company systems with suppliers systems

Government marketplace exchanges

Figure 7.10 Supplier Route to Government Portal ( Government marketplace exchanges

Table 7.7 Types of B2B marketplaces identified by Kaplan and Sawhney (2000) 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 Copyright © 2000 by the Harvard Business School Publishing Corporation, all rights reserved Types of marketplace

Summary  E-procurement – the electronic integration of all procurement activities  To reduce purchasing cycle time and cost savings- time spent in procurement and lower inventory

Tutorial 7 1. Define e-procurement 2. Outline the main reasons for e-procurement 3. What are the organizational implications of introducing e-procurement?

References  Google Image, accessed on 13 April  Chaffey, D., (2007, 2009), E-Business and e-Commerce Management, 3 rd and 4 th Edition, Prentice Hall.