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Chapter 7 Eprocurement

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Identify the benefits and risks of e-procurement ... Manufacturing resources. Operating resources. How businesses buy? What businesses buy? ... – PowerPoint PPT presentation

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Title: Chapter 7 Eprocurement


1
Chapter 7E-procurement
2
Learning objectives
  • Identify the benefits and risks of e-procurement
  • Analyse procurement methods to evaluate cost
    savings
  • Assess different options for integration of
    organisations information systems with
    e-procurement suppliers

3
Issues for managers
  • What benefits and risks are associated with
    e-procurement?
  • Which method(s) of e-procurement should we adopt?
  • What organisational and technical issues are
    involved in introducing e-procurement?

4
How important is e-procurement?
  • In Q1 2001, polling similar organizations showed
    that two thirds of companies had started to
    implement e-procurement systems.
  • However, complete solutions were rare only
    about one in six actually has a live system in
    place. Of the rest, nearly half (47) have some
    form of interim solution or are part way through
    implementation programmes

5
Key procurement activities within an
organization
Figure 7.1  Key procurement activities within an
organization
6
Requirements for procurement systems
  • Baily et al., 1994 says 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.

7
Electronic procurement system
Figure 7.2 Electronic procurement system Source
Tranmit plc
8
Turban et al. (2000) summarize 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 buyers
    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
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
10
E-mail notification of requisition approval
Figure 7.4  E-mail notification of requisition
approval Source Tranmit plc
11
Document management software for reconciling
supplier invoice with purchase order data
Figure 7.5  Document management software for
reconciling supplier invoice with purchase order
data Source Tranmit plc
12
The three main e-procurement model alternatives
for buyers
Figure 7.6  The three main e-procurement model
alternatives for buyers
13
Integration between e-procurement systems and
catalogue data
Figure 7.7  Integration between e-procurement
systems and catalogue data
14
An online catalogue of items for purchase
Figure 7.8  An online catalogue of items for
purchase Source Tranmit plc
15
Implementation risks
  • Authentication fraud
  • Maverick purchasing
  • Lock-in to suppliers
  • Cost-savings not realized
  • Cost and difficulty of implementing systems

16
B2B Marketplaces
  • International benchmarking study
  • 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.

17
Types of B2B marketplace
18
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.

19
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 associations
  • 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?
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