1. ECT 589 E-Procurement

2. Agenda Market News B2B E-Hubs E-Procurement Case: Newark in One Eastman Chemical Next Week: GHX

3. Classifying B2B Hubs How business buy systematic sourcing spot sourcing What business buy operating inputmanufacturing inputs MRO Hubs Aggregation Catalog Hubs aggregation Yield Managers Matching Exchanges Aggregation Matching Source: E-Hubs 2000

4. How Companies Conduct Purchases Strategic sourcing Long-term contracts based on negotiation between the sellers and buyers Can be supported more effectively and efficiently through a streamlined supply chain Spot buying Purchasing of goods and services at market prices, as determined by supply and demand in a dynamic manner. Buyers and sellers do not know each other. Eg. Stock exchanges, or commodity exchanges (oil, sugar, corn) Can be more economically supported by the 3 rd party exchange

5. E-Procurement Purchasing electronically, usually via an electronic procurement application Value propositions: Increase efficiency in the buying process and reduce the internal cost per transaction. Streamline and automate a company’s purchasing process Provide purchasing and finance with the information and time to better control spending and negotiate more advantageous supplier pricing. Eliminate maverick buying. Reduce the cost of products Reduce the number of suppliers

6. Streamline the Procurement Process Finding approved vendors and products Creating requisitions Getting necessary approvals Placing orders with suppliers Confirming the receipt of goods Getting them to the requisitioner Settling accounts.

7. Benefits Industry average cost per MRO transaction is $107, MRO e- procurement systems is $35 (72% savings) 25% of MRO purchases are maverick buys resulting in purchase costs 20% over contracted price. E-Procurement adoption results in a 51% average reduction of maverick spending. An industry average of 5-10% reduction in prices paid for goods, through increased contract compliance. The industry average MRO requisition cycle time reduction is 70- 80%. A one time 25-50% reduction in inventory is possible by matching stocking requirements to actual and forecast demand. Average inventory carrying costs are 20-45% of inventory value.

8. MRO and Direct Materials Purchase MRO e-procurement: reducing the cost of the transaction (20% of corporate purchase) Direct Materials : reducing the cost of materials for production AMR Research: Trim purchased goods costs by 15- 20%; saving ranges from 5% (purchased energy), 15-20% (chemical), 19% (metal and machinery components), 36% (for temporary labor), 40% (MRO items.)

9. Changing Relations Negotiation: 3 months  90 minutes Who benefits? Quality and service?