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Topic Eight – E-Procurement
Introduction
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cost of non-production related purchases is an enormous burden on
business
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eats away profits, efficiency, etc
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technology and online services helps alleviate this problem
Defining E-Procurement
E-Procurement: electronic acquisition of goods and services necessary to run
a business items such as:
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office supplies, furniture, machines, etc
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computer equipment and software
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travel and entertainment
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maintenance and repair goods and services
Aim is to reduce cost of mundane repetition and increase efficiency and
effectiveness!
Here are some advantages the occur when E-Procurement is introduced:
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maximizes leverage for indirect product and services expenditure
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provides cost reductions
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increases organizational control
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enforces higher contract compliance
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increases process accuracy
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improves the sharing of knowledge
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allows more accurate measurement metrics
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facilitates timely reporting processes
Operational resource procurement = items not directly used in production
Production-related procurement = goods acquired that are necessary for
production, manufacture and assembly.
Integration Issues
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a stand-alone procurement system is useless
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the procurement system must be integrated to existing network of systems
for success
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ERP systems have flattened out, however now CRM and E-procurement
systems are in high demand
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Systems from SAP and BAAN offer E-procurement systems that simplify
many mundane purchasing tasks
Buy-Side Versus Sell-Side
Buy-Side: purchases happen smoothly and are tracked from when the order is
placed until goods arrive and receipt is given, fully automated.
Sell-Side: Becoming a commodity and the way they price they service is
controversial. B2B value must be created and this can be done by:
a)
expanding market reach
b)
generating lower prices for buyers
c)
cutting the cost of buyers operations
d)
identifying industry best practice
Price is by subscription or transactional basis. However this model is
controversial since it is becoming a commodity.
Strategy for an Effective E-Procurement System
Three things that must be done:
1.
Speed: must provide immediate access
2.
Reach: globally
3.
Scale: provide depth and liquidity
Four step approach:
1.
Build a solid business case
2.
Conduct a business process analysis
3.
Analyze your spending habits
4.
Consult your suppliers
Risk Management
Risks associated with implementing a e-procurement strategy:
1.
Effective management of the transition from existing systems is
required.
2.
Integrating terminology’s that exist amongst difference industries
3.
Different taxes must be addressed in the e-procurement system
itself to handle transaction from various countries.
SUMMARY
E-procurement is about:
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Market-side capabilities: how your organization transacts business with
its suppliers
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buy-side capabilities: the efficiency with which individuals place orders
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work flow rules: the optimal model for approving and receiving orders
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supply chain integration: how your organizations own ERP system
communicates with suppliers
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content management: the detail provided in suppliers catalogues
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technology vision: how data is moved or shared both within and outside
the organization
Future of E-Procurement
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E-procurement will become mainstream.
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All systems will be integrated and this will be standard purchasing practice
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Doing this will reduce costs, errors and improve business profitability
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