OHT 7.1 © Marketing Insights Limited 2004 Chapter 7 E-procurement.
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Transcript of OHT 7.1 © Marketing Insights Limited 2004 Chapter 7 E-procurement.
OHT 7.1
© Marketing Insights Limited 2004
Chapter 7E-procurement
OHT 7.2
© Marketing Insights Limited 2004
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
OHT 7.3
© Marketing Insights Limited 2004
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?
OHT 7.4
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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
OHT 7.5
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Key procurement activities within an organization
Figure 7.1 Key procurement activities within an organization
OHT 7.6
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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.
OHT 7.7
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Electronic procurement system
Figure 7.2 Electronic procurement system
Source: Tranmit plc
OHT 7.8
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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 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).
OHT 7.9
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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
OHT 7.10
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E-mail notification of requisition approval
Figure 7.4 E-mail notification of requisition approval
Source: Tranmit plc
OHT 7.11
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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
OHT 7.12
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The three main e-procurement model alternatives for buyers
Figure 7.6 The three main e-procurement model alternatives for buyers
OHT 7.13
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Integration between e-procurement systems and catalogue data
Figure 7.7 Integration between e-procurement systems and catalogue data
OHT 7.14
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An online catalogue of items for purchase
Figure 7.8 An online catalogue of items for purchase
Source: Tranmit plc
OHT 7.15
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Implementation risks
• Authentication – fraud
• Maverick purchasing
• Lock-in to suppliers
• Cost-savings not realized
• Cost and difficulty of implementing systems
OHT 7.16
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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.
OHT 7.17
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Types of B2B marketplace
What businesses buy?
How businesses buy?
Operating resources Manufacturing resources
Systematic sourcing MRO Hubswww.barclaysb2b.com
Catalogue Hubswww.sciquest.com
Spot sourcing Yield Managerswww.elance.com
Exchangeswww.e-steel.comwww.plasticsnet.com
OHT 7.18
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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.
OHT 7.19
© Marketing Insights Limited 2004
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?