1. Chapter 7 E-procurement

2. e-procurement: The electronic acquisition of goods and services for organizations
The electronic integration and management of all procurement activities including purchase request, authorization, ordering, delivery and payment between a purchaser and a supplier

3. Key procurement activities within an organization
Figure 7.1  Key procurement activities within an organization

4. Requirements for procurement systems
procurement involves sourcing items:
At the right price.
Delivered at the right time.
Of the right quality.
Of the right quantity.
From the right source.

5. Electronic procurement system
Figure 7.2 Electronic procurement system
Source: Tranmit plc

6. Types of procurement Production-related procurement
Non-production related procurement
How items are bought:
Systematic sourcing(negotiated contracts with qualified suppliers)
Spot sourcing(fulfilment of an immediate need at the lowest possible price)

7. 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)

8. The benefits of e-procurement as follows:
Reduced purchasing cycle time and cost
Enhanced budgetary control (achieved through rules to limit spending and improved reporting facilities)
Elimination of administrative errors (correcting errors is traditionally a major part of a buyer’s workload)
Increasing buyers’ productivity (enabling them to concentrate on strategic purchasing issues)
Lowering prices through product standardization and consolidation of buys
Improving information management (better access to prices from alternative suppliers and summaries of spending)
Improving the payment process (this does not often occur currently since payment is not always integrated into e-procurement systems).

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

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

11. Use of different information systems for different aspects of the fulfilment cycle
Figure 7.3  Use of different information systems for different aspects of the fulfilment cycle

12. E-mail notification of requisition approval
Figure 7.4   notification of requisition approval
Source: Tranmit plc

13. The three main e-procurement model alternatives for buyers
Figure 7.6  The three main e-procurement model alternatives for buyers

15. Types of marketplace
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

16. Sell-side e-marketplace: A Web-based marketplace in which one company sells to many business buyers from e- catalogs or auctions, frequently over an extranet
Buy-side e-marketplace: A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e-procurement method

17. Implementation risks Authentication – fraud Maverick purchasing
With traditional procurement processes, paper requisitions are so time-consuming to complete. They find other ways to purchase something, whether it is by placing an order directly with a supplier or by using a credit card or petty cash. This is known as ‘maverick purchasing’ or ‘rogue spending’, though to many end users who are simply trying to buy something to get a job done, it is not ‘maverick’ but in the best interests of the organisation. When they do use the traditional system, they sometimes have to make several phone calls to different authorisers or to the buyer to speed up the transaction
Lock-in to suppliers:
Cost-savings not realized
Cost and difficulty of implementing systems

18. B2B Marketplaces International benchmarking study:معايير
UK, 11% of businesses provide the opportunity for customers to purchase from e-marketplaces, 9% in Sweden and Italy, 8% in Australia and Germany, 7% in France and 6% in Japan.
ComputerWorld (2001a) reported that of an estimated 900 business-to- business Web sites that were functioning worldwide mid-2000, a little more than 400 were left standing by end-2000.

19. Covisint example - DaimlerChrysler AG - 2001
512 online bidding events processed through Covisint in the last twelve months
Purchasing volume of approximately €10 billion. That is a third of the total procurement volume assigned in newly closed deals in 2001.
In May 2001, DaimlerChrysler staged the largest online bidding event ever, with an order volume of €3.5 billion in just four days.
In total, 43 per cent of the total value of the parts for a future Chrysler model series was negotiated online with over 50 online bidding events in the third quarter of 2001 alone.

20. Criteria in selecting marketplaces
Number of suppliers and customers who are actively trading (not just members)
Costs of being a buying member (on each transaction)
Backing from trade associationsمدعوم من الاتحادات التجارية
Funding source
Ease of using exchange through all stages of buying process from order to receipt
Technical changes needed to integrate with system – are industry standards being established through XML?