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Rainer Alt
Introduction
Evolution of e-procurement
As a major part of supply chain management (Leenders and
Fearon, 1997; Monczka et al., 1997), supply chains in
procurement are traditionally supported by information
technology. With the implementation of enterprise resource
planning (ERP) or manufacturing resource planning (MRP)
systems in the 1980s electronic data interchange (EDI)
connections with suppliers were established. For example,
close partnerships have been forged with direct material
suppliers through the automation of delivery schedules by
linking a companys materials management system with
supplier systems. Since the mid-1990s companies have also
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122
Benefits of e-procurement
The potentials of e-procurement have already been proven in
a number of studies (Aberdeen Group, 2001; Eyholzer and
Hunziker, 2000; Arthur Andersen Business Consulting,
2001). According to these studies, e-procurement enables
companies to decentralize operational procurement processes
and centralize strategic procurement processes as a result of
the higher supply chain transparency provided by eprocurement systems.
Typically, a companys procurement function is subdivided
into strategic and operational processes since activities and
priorities in these two areas are entirely different (Kaufmann,
1999; Lamming, 1995). Supplier management, the pooling of
purchase requisitions and procurement-oriented product
development are tasks that are typically assigned to strategic
procurement. Prior to e-procurement, strategic procurement
often had to deal with administrative routine work as well,
such as individual transactions, converting purchase requests
into purchase orders or ensuring the correct allocation of
invoices received. Strategic aspects are frequently neglected in
the process, with the buyer having little influence over the
choice of suppliers and the purchased products. The use of
Internet technologies in procurement is aimed at realizing
faster and more efficient operational procurement processes
which bypass the purchasing department and enable those
people to concentrate on more strategic tasks (Giunipero and
Sawchuk, 2000; see Figure 1). In e-procurement, requesters
directly search for and select products in electronic catalogs
which are authorized and negotiated by strategic procurement
in advance.
Successful use of e-procurement
Despite the potentials promised by the vendors of such
systems, e-procurement got off to a slow start. A study by
(Eyholzer and Hunziker, 2000) shows that only 18 percent of
the Swiss companies analyzed used electronic product
catalogs, auctions or requests for quotations in procurement
in the year 2000. According to this study, however, many
123
Research method
Benchmarking method
Benchmarking can be defined as the systematic comparison
and learning from other companies with the goal of achieving
sustainable improvements for a companys own position
(Camp, 1989). Depending on focus, two benchmarking
approaches can be distinguished which are not mutually
exclusive (Pieske, 1995):
1 Goal of comparison. Quantitative benchmarking is aimed at
comparing efficiency on the basis of key performance
indicators in order to define a companys position by
applying objective criteria. The goal of qualitative
benchmarking, on the other hand, is to deduce reference
concepts, methods and models for the design and the
transfer of successful practices to ones own company.
2 Horizon of comparison. Four main types of benchmarking
can be differentiated depending on organizational focus.
Internal benchmarking studies allow companies to
compare best practices on a quantitative, key
performance indicator-based approach. External
methods such as competitive benchmarking support
individual positioning very well but are lacking when it
comes to discovering detailed key performance indicators
from other industries (Boutellier et al., 1999).
Defined criteria
Introduction project
Organization
Operational efficiency
3
4
5
Intranet catalog
High
Low
High
Low
High
Low
Punchout
Medium
Low
Medium
Low
Medium
Low
Auction
Low
High
Low
High
High
High
Company
E-procurement
system
ERP system
Babcock Borsig AG
Bayer AG
Cisco Systems, Inc.
SAP AG
Xerox (Europe) Ltd
Lotus Notes
SAP B2B 2.0
Ariba Buyer 6.1
SAP B2B 2.0
SAP B2B 2.0
SAP R/3
SAP R/3
Oracle, Peoplesoft HR
SAP R/3
SAP R/3
Architecture component
Product
Catalog
classification
standard
standard
BME-Cat
Harbinger
Ariba
Requisite
Requisite
BME-Cat
eCl@ss
UN/SPSC
UN/SPSC
UN/SPSC
Communication
standard
E-market
ASCII
XML
XML
XML
XML
EC4EC
chemplorer
emaro
Operational efficiency
According to a study from Intersearch Corp. (1998),
approximately 80 percent of all purchasing transactions are
spent on indirect products and services. Most Fortune 100
companies have in excess of 40,000 suppliers of indirect
goods but purchase less than US$10,000 annually from 80
percent of those suppliers. E-procurement provides an
opportunity to consolidate sources and control maverick
buying, which can account for dramatic savings. These cost
savings are one of the most important motivations for eprocurement. Nearly all of the companies analyzed in the
benchmarking study have confirmed operational efficiency.
E-procurement benefits fall into two major categories:
efficiency and effectiveness (Kalakota and Robinson, 2001).
The former includes process, products and inventory savings
(see Figure 9), the latter the proactive management of key
data, and higher-quality purchasing decisions within
organizations. Efficiency improvements are calculated on the
basis of the as-is situation prior to the implementation of eprocurement. The more complicated the old paper-based
procurement processes, the more authorization stages and
exceptions, and therefore the higher the savings will be. To
take advantage of these potentials, the procurement process
Success factor
1. Introduction project
1.1
1.2
1.3
2.1
2.2
2. Organization
3.1
3.2
3.3
4.1
4.2
5. Operational efficiency
4.3
5.1
5.2
131
Babcock
Borsig
Bayer
Cisco
Systems
SAP
Xerox
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
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