ARTICLE IN PRESS

Int. J. Production Economics 122 (2009) 161–175

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

E-Procurement adoption in the Southcoast SMEs

Angappa Gunasekaran a,, Ronald E. McGaughey b, Eric W.T. Ngai c, Bharatendra K. Rai a
a
Department of Decision and Information Sciences, Charlton College of Business, University of Massachusetts – Dartmouth, 285 Old Westport Road,
North Dartmouth, MA 02747-2300, USA
b
Department of Management Information Systems, University of Central Arkansas, Conway, AR 72035-0001, USA
c
Department of Management and Marketing, The Hong Kong Polytechnic University, Hong Hum, Kowloon, Hong Kong, China

a r t i c l e in fo abstract

Available online 31 May 2009 E-Commerce is expected to play a major role in the 21st century global market. Of the
Keywords: various E-commerce models (B2B, B2C, B2E and B2G), B2B has been particularly
E-Procurement adoption successful, due to adoption of standardized processes for document exchange (like EDI),
E-Commerce shipping, tracking, delivery and payment among supply chain partners. One element of
Purchasing B2B is E-procurement. E-procurement focuses on acquisition of resources, especially
Benefits and barriers MRO items, and increasingly materials and components. Some analysts believe that
Empirical analysis enormous cost savings and increased effectiveness can be achieved through the
Framework utilization of E-procurement. E-procurement utilizes electronic purchase procedures
implemented through Internet communication and Web based buying tools. Studies in
the literature report on the adoption of E-procurement in different countries and
industries. This study focuses on the current status of E-procurement in small and
medium sized enterprises (SMEs) located in the Southcoast of Massachusetts. The main
objective of this research is to understand the current state of E-procurement in SMEs
and to examine those things that influence E-procurement adoption. A questionnaire-
based survey was employed for data collection. A conceptual model was developed to
describe/explain the adoption of E-procurement and a framework is proposed for the
successful adoption of E-procurement on the Southcoast of Massachusetts.
& 2009 Elsevier B.V. All rights reserved.

1. Introduction vendors; however, the technology is beginning to catch on

Global market opportunities have encouraged compa-
nies to go global. In a global enterprise environment,
companies have to utilize the various B2B information
technologies/systems such as EDI, Internet, WWW, ERP
and E-procurement to standardize and automate business
processes. E-procurement has become an indispensable
tool for automating procurement in a physically distrib-
uted enterprise environment. E-procurement is important
not only for global operations, but also for domestic
operations. E-procurement in small and medium enter-
prises has not received much attention by researchers or
 Corresponding author. Tel.: +1 508 999 9187; fax: +1 508 999 8646.
E-mail address: agunasekaran@umassd.edu (A. Gunasekaran).
with some SMEs, largely because of the emphasis on
supply chain management in domestic and international
operations. This study focuses on the current state of
E-procurement in SMEs in order to identify opportunities
and challenges.
According to Albrecht et al. (2005), companies have
adopted E-procurement systems to purchase indirect
materials for operations, sales, maintenance and admin-
istration, including things like office supplies, computer
equipment, cleaning solvents, and office furniture.
E-procurement systems facilitate direct links with suppli-
ers of goods, thereby reducing the paperwork and over-
head associated with the buying process and shortening
the purchasing cycle. One of the major limitations of
proprietary E-procurement systems (a particular vendor’s
system) is that they are closed systems and cannot

0925-5273/$ - see front matter & 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2009.05.013
 ARTICLE IN PRESS
162 A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175
support automated searches and comparisons across all
vendors. Other systems, such as vertical and horizontal
industry portals, do support those capabilities.
Muffatto and Payaro (2004) define E-business
as a system wherein Internet technology is employed
to streamline the business processes of a company to
improve productivity and efficiency. This communication
system is for better integration of suppliers, buyers and
customers. Peleg et al. (2002) see the emergence of
E-procurement as a powerful vehicle for achieving cost
reduction and productivity improvement. According to
Rajkumar (2001), E-procurement is capable of integrating
multiple supplier catalogs into a single buyer-managed
view of the catalog. This system will enable purchasing
personnel to review product purchase profiles and in turn
facilitate supplier negotiations. Also, it will automate most
purchasing processes (Kheng and Al-Hawamdeh, 2002).
Moon (2005) and Bendoly and Schoenherr (2005)
discussed some of the major benefits of E-procurement.
Those benefits include: (1) reduced transaction costs,
(2) faster ordering, (3) wider range of vendor choices,
(4) streamlined procurement processes, (5) better control
over procurement spending and employee compliance, (6)
access to more alternative buyers, (7) less paperwork and
duplication of tasks, and (8) reengineered procurement
workflows.
Gunasekaran and Ngai (2008) studied the adoption of
E-procurement in Hong Kong, and developed a model for
the adoption of E-procurement. They set forth a frame-
work for E-procurement adoption/implementation. Hardy
and Williams (2008) discuss the implications of social and
technical actors on how E-procurement constitutes and is
constrained by a homogeneous network of human and
technical actors in E-procurement policy implementa-
tions. They also explain how actions are constrained and
enabled through the use of E-procurement in diverse
institutional contexts and how they evolve and change
over time and in different locations. The impact of
resource perceptions, electronic systems and enterprise
size on the involvement of small and medium sized
enterprises in public procurement is studied by Karjalainen
and Kemppainen (2008). They found that perceived lack of
resources, especially in legal expertise and administration,
and the lack of electronic systems in order processing
and invoicing, are associated with low involvement
of SMEs. Nurmilaakso (2008) explores how organiza-
tional and technological factors explain the adoption of
E-business functions in 4570 European companies and the
migration from EDI-based to XML-based E-business
frameworks in 329 European companies.
Traditional procurement systems have long suffered
from inefficient processes, lack of prompt information,
and excessive complexity resulting in wasted time and
money. E-procurement can possibly solve these problems
by streamlining processes, providing timely information,
and improving coordination and collaboration, thus
leading to cost savings and reduced procurement cycle
times (Tatsis et al., 2006). For SMEs’ the potential benefits
of E-procurement should be an important motivator in the
adoption of E-procurement, but setting up an E-procure-
ment system can require capital expenditures and skill.
Moreover, it requires the understanding—costs and
benefits in particular—and support of all, particularly
top management and owners. Reunis et al. (2004) focus
on the inter-organizational spread of EP adoption from
one actor to another. Based on an exploratory study with
large Dutch purchasing organizations, they have identified
nine types of influences on actor-to-actor dissemination:
perceived advantage, communication, demonstration, en-
forcement, training, involvement, risk reduction, reward,
and disposition.
Recently a number of empirical studies on E-procure-
ment adoption have been published. For example, Baten-
burg (2007) explores country differences in adoption
of E-procurement. Based on an empirical study of
E-procurement adoption among European firms, this
author observes that firms from countries with low
uncertainty avoidance such as Germany and the UK are
the early adopters of E-procurement, while countries
more reluctant to change, such as Spain and France, have
lower adoption rates. Garrido et al. (2008) analyze how
the intensity of Internet use in the procurement process
impacts firms from organizational and economical points
of view. The organizational perspectives include firm size,
participation, number of hierarchical levels and functional
areas, and the economic consequences include efficiency
and effectiveness in the purchasing function. Vaidya-
nathan and Devaraj (2008) studied the impact of order
procedures of buyers and information flow between
suppliers and buyers on the quality of supplier logistics
fulfillment process. These studies are not focused on
E-procurement adoption in SMEs.
The current state of E-procurement in SMEs has been
studied very little, yet SMEs play an important role in the
global economy and in supply chains. We have examined
the status of E-procurement in SMEs operating on the
Southcoast of Massachusetts, and report our findings in
this manuscript. The organization of this manuscript is as
follows: section one provided an introduction. Section 2
presents various definitions of E-procurement. E-procure-
ment readiness, adoption, and use issues of are discussed
in Section 3. Section 4 discusses the research objectives
and methodology. The data analysis and empirical find-
ings are reported in Section 5. Section 6 synthesizes
findings and presents a framework for the adoption of
E-commerce in SMEs. Finally, Section 7 concludes the
paper.
2. What is E-procurement<
E-procurement refers to the use of integrated informa-
tion technology systems for procurement functions,
including sourcing, negotiation, ordering, receipt and
post-purchase review (Croom and Brandon-Jones, 2007).
Increasingly firms are keen on using online E-auctions for
their purchases. The major reasons for this are: (i) cost
cutting, (ii) real-time bidding and response, (iii) transpar-
ency of the process, (iv) reduced cycle time, and
(v) increased geographical outreach (Yu et al., 2008).
E-procurement provides opportunities to access purchas-
ing networks for suppliers and buyers, expands the
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A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175 163

selection of products, and makes information more easily ling costs, and enhancing information exchange within
obtainable. E-procurement links a vast network of and across organization boundaries’’.
businesses, and makes searching and contacting much
more convenient. Companies use E-procurement to
3. A theoretical framework for the adoption of E-
reduce original procurement cost through relatively
procurement in SMEs
recent developments like the reverse auction. E-procure-
ment can help firms increase efficiency, improve contract
E-procurement adoption poses a great many challenges
compliance, reduce cycle time, minimize human error,
for small to medium sized companies. One serious
and achieve better supply chain management (Yu et al.,
impediment to adoption is the lack of awareness of
2008). Lo et al. (2008) integrated a typical management
E-procurement and its implications for organizational
information system development procedure with that of
performance. A theoretical framework for E-procurement
an E-fashion multi-agent system. The proposed system
adoption suggested by Gunasekaran and Ngai (2008) was
integrates different information technologies to make its
based on an empirical study conducted in Hong Kong.
behavior more intelligent and to catch more useful
That framework has been modified herein to fit SMEs
information from customers. Ganeshan et al. (2009)
(see Fig. 1), based on the literature, and on this study of a
provide an exploratory model that helps a procurement
regional sample of SMEs. The original framework high-
manager determine the right combination of options and
lighted the importance of E-procurement, E-procurement
spot markets that will minimize the total expected cost of
adoption issues, and critical success factors for E-procure-
procurement over two time periods.
ment adoption, including: financial support, system
Almost all of the E-procurement definitions in the
interoperability, communication system standards, top
literature suggest that it is an automated purchasing
management support and commitment, understanding
process, employing information technologies such as EDI,
company priorities, and suitable security systems.
the Internet and WWW. More definitions follow. Tatsis
The model proposed herein highlights what are believed
et al. (2006) define E-procurement as, ‘‘the integration,
to be major influences (based on the literature and
management, automation, optimization and enablement
data collected) on E-procurement adoption, and serves
of an organization’s procurement process, using electronic
as a basis for identifying areas for future research
tools and technologies, and web-based applications’’.
as well as areas that should be of interest to SME
According to Alaniz and Roberts (1999), ‘‘E-procurement
managers and owners considering, implementing, or
refers to Internet solutions that facilitate corporate
using E-procurement.
purchasing’’. According to Morris et al. (2000),
‘‘E-procurement is a series of steps—from the formula-
tion of the corporate purchasing strategy to the actual 3.1. Current status and readiness of companies for E-
implementation of an Internet-based purchasing system’’. procurement
The Aberdeen Group (2001) defines E-procurement as,
‘‘the creation of private web-based procurement markets The success of E-procurement adoption depends upon
that automate communications, transactions, and colla- technological, behavioral and organizational factors.
boration between supply chain partners. It is about Moon (2005) argues that organizations that are large,
enhancing collaboration, streamlining processes, control- managerially innovative, and have strong centralized

Current Status and

Readiness of Perceived Benefits of
Company for E- E-Procurement
Procurement

Perceived Barriers to Adoption of E- Critical Success

E-Procurement Procurement in Factors in E-
Implementation SMEs Procurement

Perceived Future
Organizational
Performance with E-
Procurement

Fig. 1. Theoretical framework for the adoption of E-procurement in SMEs.

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164 A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175
offices are more likely to adopt E-procurement systems.
He also highlights two important areas that influence
successful E-procurement adoption: (1) behavioral issues
and (2) the procurement process. Thus, one can reason-
ably conclude that an organization’s readiness in terms
of its people, its procurement process, and its technology
will influence the E-procurement adoption success (Knudsen,
2003).
3.2. Perceived benefits of E-procurement
The level of understanding of the benefits of
E-procurement in a company will influence adoption.
For example, if no one is aware of the benefits of
E-procurement (not only financial, but also non-financial),
there is little incentive to adopt E-procurement. An
understanding of the benefits of E-procurement indicates
the level of managerial and technological expertise and
awareness of new technologies, including E-procurement.
Roche (2001) suggested that real-time information, a
seamless procurement process, and supply chain integra-
tion are benefits of adopting E-procurement. Some of the
benefits that could be derived from the implementation
of E-procurement include improved relationships with
vendors, effective and timely order fulfillment, improved
purchasing effectiveness, improved service, better prices
from key suppliers, reduced inventory-carrying costs, and
shorter order cycle time (Panayiotou et al., 2004). Many
companies see E-procurement simply as the use of IT for
exchanging information with suppliers, but fail to see
other strategic and tactical benefits. This lack of under-
standing could discourage the adoption of E-procurement.
According to Attaran (2001) the benefits can be grouped
under three categories: (1) strategic, including organiza-
tional changes and market advantage; (2) high leverage
opportunities, such as improved relationships with existing
suppliers and exploring relationships with new suppliers;
and (3) operational advantages, like more efficient purchas-
ing. It should be noted that perceived benefits would likely
influence management expectations regarding future per-
formance attributable to E-procurement. Boyle et al. (2008)
argue that E-intermediation will reduce the supply chain
environmental uncertainty.
3.3. Perceived barriers to E-procurement
Barriers such as the lack of capital, lack of expertise
and technical skills, lack of technologies and tools,
resistance to change, and lack of top management support
will delay adoption of E-procurement, and influence
E-procurement performance post implementation. Hawking
et al. (2004) identified barriers to the adoption of
E-procurement as follows: (a) security of transactions,
(b) lack of supplier E-procurement solutions, (c) high cost
of technology, (d) lack of a legal framework, (e) lack of
technical expertise, (f) lack of E-procurement knowledge,
(g) no real business benefits identified, (h) lack of data
exchange standards, and (i) lack of business relationships
with suppliers. The importance of E-procurement tools
such as E-sourcing, E-tendering, E-informing, E-reverse
auctions, E-MRO, Web-based enterprise resource plan-
ning, and E-collaboration were highlighted in their work.
Liao et al. (2003) highlight behavioral and infrastructure
barriers to the implementation of E-procurement. Besides
lack of top management support, behavioral barriers
include purchasing personnel receiving improper benefits
from favored companies, false floor prices, and informa-
tion leaks, while infrastructure barriers include lack of
expertise and the necessary technology.
3.4. Critical success factors for E-procurement in SMEs
E-procurement critical success factors are those things
that are essential to successful adoption and use of E-
procurement in SMEs. While SMEs tend to be flexible and
innovative, they often have limited capital and limited
expertise with new methods and technologies. Consider-
ing these characteristics, appropriate strategies, tactics
and operational policies need to be developed for the
adoption of E-procurement in SMEs. The business scope of
SMEs in terms of volume of business, product-mix, nature
of the products manufactured/services provided, and
their role in supply chains will influence the need for
E-procurement as well as critical success factors. Fu et al.
(2004) highlighted some of the general critical success
factors for the adoption of E-procurement including:
feasible measures, step-by-step transformation, promo-
tion incentives, government support, commitment of top
management, and system operation and maintenance
mechanisms. Reddick (2004) proposed an E-government
growth model as a way of modeling the development
of E-procurement. He highlighted the importance of good
procurement management and IT capability in successful
E-procurement adoption.
3.5. Perceived organizational performance
and E-procurement
The successful adoption of E-procurement in SMEs
depends upon the understanding and support of the top
management. Attaran (2001) noted that strategic, tactical
and operational advantages can accrue from E-procure-
ment. The extent to which SME owners and managers
actually believe E-procurement can positively impact
future performance will influence their predisposition
toward adoption. It is thus important that they be aware
of the potential impact of E-procurement on their
organizations short- and long-term performance in areas
such as cost of production/services and competitiveness.
They must also recognize the role of E-procurement in
strategic alliances with buyers and suppliers. SMEs tend to
be focused on short-term financial performance measures,
but not long-term strategic performance measures. Such
an orientation is not desirable given the current business
environment characterized by virtual supply chains, out-
sourcing, Internet-enabled supply chain management, and
enterprise resource planning. Non-financial performance
and performance measures are likewise important at all
levels. Wamba et al. (2008) provide some insights into
radio frequency identification (RFID) technology and the
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A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175
electronic product code (EPC) network and investigate
their impacts on B2B E-commerce. RFID has a huge impact
on market share, return on investment, innovation,
inventory turnover, cost and quality.
4. Research methodology
The study employed a cross-sectional field study
survey method, using self-administered questionnaires
mailed to key informants in 250 randomly selected
companies operating on the Southcoast of Massachusetts.
The respondents were promised anonymity and informed
that only aggregate information on participants would
be made public. A self-addressed, stamped envelope
was provided for return of questionnaires directly to the
authors. It was not the authors’ intention in this study to
concentrate on any particular industry. Thirty-nine usable
surveys, 15.6%, were returned. Data analysis was carried
out using Excel.
Basic demographic data was gathered on respondents
who are involved with purchasing activities in their
companies. The following is a summary of that demo-
graphic data. None of the respondents were under
25 years of age, 88% were over 40, and 12% were between
25 and 40. 47.5% of the respondents had bachelor’s
degrees, 22.5% had graduate degrees, and 30% had
a Post-Secondary Certificate/Diploma. Some 77.5% of the
respondents had over 14 years of work experience, 7.5%
had 11–14 years of experience, 10% had 7–10 years
of experience, 5% had 3–6 years of experience, and none
had o3 years of experience. These statistics suggest that
the respondents were generally well-educated, experi-
enced, procurement professionals, and the age data
suggest of a relatively high level of maturity.
5. Survey results
In this section, the survey data and subsequent analysis
are discussed with the objective of examining the
readiness of the targeted SMEs for E-procurement in the
context of the proposed framework. First, some basic
demographics are explored; then, data relating to the
model are examined.
Fig. 2 shows that 23 companies, had o50 employees,
12 companies had between 50 and 199 employees, and
4 companies had between 200 and 499 employees.
Fig. 2. Respondent company’s profile—number of employees.
165
Fig. 3. Respondent company’s profile—location.
The companies certainly would be considered SMEs, by
all accepted definitions of SME.
Fig. 3 shows that 57% of the companies restricted their
business to Massachusetts, 35% had operations in Massa-
chusetts as well as in other states, and only 8% were
international in scope. Most, one could say, were local
businesses, a characteristic common among SMEs.
Fig. 4 describes the sample in terms of industry and
highlights the diversity of the respondents. Most were
manufacturing firms, but many other industries were
represented. It is noteworthy that the service sector is well
represented.
Fig. 5 shows that 95% of the companies currently use
the Internet. This, as other statistics will show, does not
necessarily mean that they are using it for E-procurement.
It does, however, demonstrate a potential for Internet use
in E-procurement.
5.1. Current status and readiness of companies
for E-procurement implementation
In this section, we examine indicants of E-procurement
status and preparedness among the SMEs studied.
Fig. 6 indicates that 72.5% of the total respondents have
their own websites, but provides no details about how
they are used. That is addressed in Fig. 7.
Fig. 7 provides important information about how the
companies use their Websites. Most use their Websites to
provide information about their companies (39.4%) and
their products and services (36.6%). Only 15.5% support
online ordering of their products by customers, and very
few support online payment (1.4%). An examination of the
remaining uses, and their associated percentages, shows
in essence that these companies do very little more with
their Websites than they could do with a hard-copy
catalog. In short, the Websites are used primarily to
disseminate information, but not nearly so much so for
transactions—actually selling online.
Fig. 8 provides information about the number
of employees involved in procurement. Note that 88%
of the companies have a very small staff involved in
procurement (1–5 people). Only 6% have staffs of 6–10
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166 A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175

Fig. 4. Respondent company’s profile—industry sector.

Fig. 5. Use of the Internet.

Fig. 7. Information on website.

Fig. 6. Company’s website.

Fig. 8. Employees in Procurement and Purchasing Department.

people, and similarly 6% of the companies between 10 and

15 people working in the procurement. None had more
than 15 employees involved in procurement. In hindsight,
it would have been helpful to know the dollar volume
of their annual purchases, in order to ascribe some level of
importance to purchasing/procurement. Staff size pro-
vides only a partial view of the significance of procure-
ment in these companies.
Fig. 9 highlights the perceived importance of the
Internet in procurement. Only 33% of respondents per-
ceive it to be important (extremely important or im-
portant). Most regard it as unimportant or simply do not
know if it is important or not. These statistics would seem
to suggest that many of these companies, or at least the
respondents who filled out the surveys, may not be aware
of the potential value of the Internet in procurement, or
current trends among larger companies—it is hot!
Fig. 10 shows a solid understanding of the importance
of procurement and the extent to which procurement
practices and policies are formalized, but that most of the
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A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175 167

responding SMEs did not have a purchasing/procurement
department. The person, or persons, who handle procure-
ment, likely have other duties also. It is not unusual in
smaller companies for employees to ‘‘wear many hats’’
(fill more than one organizational role).
Fig. 9. Importance of the Internet in procurement.
5.2. Perceived benefits of E-procurement
This section reports on the perceived benefits of
implementing E-procurement. Survey respondents were
asked to rate the extent to which the various E-procure-
ment benefits reported in the literature have been realized
in their companies.
Other data presented shows that E-procurement is not
particularly prevalent among survey participants, and
Table 1 shows that the companies, by and large, are not
reaping the benefits of E-procurement. It may be that
they simply have not recognized the potential benefits
and moved to take full advantage of E-procurement. It is
noteworthy that benefits have been realized to the
greatest extent in relationships with partners and suppli-
ers, in customer service levels and satisfaction, and in
utilization of staff. Given the growing importance of

Fig. 10. Procurement/Purchasing Department.

Table 1
Implementing E-procurement system—benefits realized.

Benefits from implementing E- Have not been Some what Just begun to be Realized 4 Fully 5 Average
procurement system realized 1 realized 2 realized 3 rating

Better utilization of staff 9 7 5 5 3 2.5

Efficiencies increment 10 6 6 5 1 2.3
Help to achieve SCM 10 4 8 4 2 2.4
Improved existing markets 10 4 10 3 0 2.2
Improved relationships with 6 6 9 4 3 2.7
partners and suppliers
Increased customer service 7 4 9 3 3 2.7
levels
Increased customer satisfaction 7 8 6 3 3 2.5
Increases market share 10 7 5 2 2 2.2
Reduction in inventory levels 14 4 3 3 3 2.1
Reduction in non-contractual 12 6 6 3 1 2.1
buying
Reduction in operational tasks 11 7 7 2 1 2.1
Reduction in processing time 9 7 9 1 2 2.3
Reduction in transactional 9 5 9 4 1 2.4
costs
Support environmental issues 13 5 8 1 0 1.9
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supply chain management, this is encouraging, and may
actually provide further incentive to implement and use
E-procurement.
5.3. Barriers to E-procurement implementation
This section examines perceived barriers E-procure-
ment implementation. Respondents were asked to in-
dicate the extent to which they agreed or disagreed (on a
5 point scale—from strongly agree to strongly disagree)
that the items were barriers to E-procurement implemen-
tation. Table 2 summarizes responses.
The most important barrier to E-procurement imple-
mentation was that E-procurement ‘‘was not the top
initiative or priority of the company’’. Fear of change, and
immature technology, tied for second, and security
concerns and insufficient financial support were tied for
third. All of these five items rated higher than 3, but the
highest was only 3.3. No other item had a ranking as high
as uncertain (3.0), suggesting that they are not perceived
to be particularly important barriers by most respondents.
Since in the aggregate, none of the barriers were rated
very highly, it leads one to wonder if maybe the reason
why many of the companies chose not to implement
E-procurement was more the lack of understanding of
what it can do for them—one must remember that the
benefits have yet to be realized to a great extent in most
of these companies (see Table 1)—rather than barriers
preventing them from utilizing E-procurement.
Responses to a question regarding the desirability
of implementing E-procurement indicated that 83% of
the respondents did not believe it was desirable. Fig. 11
shows the reasons respondents were not very keen on
E-procurement, and the items contained therein reinforce
the barriers in Table 2. In essence, a reason for not
implementing E-procurement is a barrier. One is tempted
to call these ‘‘excuses’’ for not implementing E-procure-
ment, and some were quite popular, like customers are
satisfied with the current practices (23%), no perceived
advantages (21%), and inadequate knowledge (19%).
There were other reasons, but they were popular to
a lesser extent. The data obtained from responses to
another survey question indicated that only 29% of the

Table 2
Implementing E-procurement system—barriers.

Barriers Strongly disagree Disagree Uncertain Agree Strongly agree Average

1 2 3 4 5 rating

Fear to change into a new system 4 2 9 6 5 3.2

Immaturity of technology 4 4 7 9 4 3.2
Incompatibility with ERP systems 5 6 9 3 5 2.9
Insufficient financial support 2 3 14 7 1 3.1
Lack of interoperability and standards with traditional 5 5 8 6 3 2.9
communication
Lack of skill and knowledge in E-procurement 5 4 4 8 6 3.2
Lack of top management support and commitment 7 8 6 6 0 2.4
Not the top initiative or priority of the company 3 6 6 5 8 3.3
Security concerns 5 2 9 7 4 3.1

Fig. 11. Reasons for not implementing E-procurement system.

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A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175 169

respondents were planning to setup an E-procurement
system whereas 71% were not. Given the growing number
of Websites (horizontal and vertical portals in particular)
that have evolved to support B2B E-commerce, there
appears to be some need for better educating SME owners
and managers about E-procurement and what it can do for
them.
the organizational structure was fourth (3.3), and four
were tied for a rating of fifth, including: centralized
control and management of E-procurement initiative,
communication between participants, content manage-
ment, and information system specialists with Internet
skills. No other item had a rating above the threshold
rating of 3.0 (uncertain).

5.4. Critical success factors for implementing E-procurement 5.5. Perceived future organizational performance with
system E-procurement implementation

Survey respondents were asked to rate the extent to
which they perceived numerous items to be critical
success factors for the implementation of E-procurement.
Table 3 summarizes the responses.
The ratings suggests that the most important factor in
E-procurement implementation is top management in-
volvement and support (rating of 3.7), which is not
surprising because many studies have arrived at the same
conclusion—technology initiatives must have top man-
agement involvement and support. Second in importance
was streamlined approvals and workflow (3.5). Third was
close collaboration with suppliers (3.4), which certainly
makes sense since they are on the other end of the
procurement process. Clear accountability for buying in
Respondents were asked to provide their perspective
on what the impact of E-procurement would be on an
organization if implemented—anticipated results. Their
responses were recorded, again using a 5-point scale.
Those responses and are summarized in Table 4.
Many respondents seem to believe that E-procurement
could have a positive impact on their organizations. The
two impacts they thought most likely were improvements
in long-term organizational performance and costs (both
had ratings of 3.6). Next, they expected organizational
competitiveness to be improved (3.5) and last, they
expected benefits to accrue in short-term organizational
performance, and in strategic alliances and networking
(each with a rating of 3.3). Taken together, ratings of these

Table 3
Implementing E-procurement system—success factors.

Success factors Strongly disagree 1 Disagree 2 Uncertain 3 Agree 4 Strongly agree 5 Average rating

Centralized control and management of E-procurement initiatives 3 1 11 5 3 3.2

Communication between participants 4 1 7 10 2 3.2
Clear and achievable implementation phase 6 1 9 7 1 2.8
Clear accountability for buying in organizational structure 3 2 6 10 3 3.3
Close collaboration with suppliers 3 1 8 7 5 3.4
Content management 4 0 10 6 3 3.2
Information systems specialists with internet skills 4 1 9 5 4 3.2
Involvement of stakeholders 5 4 6 6 2 2.8
Streamlined approvals and workflow 2 4 3 13 4 3.5
The use of prototype 3 5 12 3 0 2.7
Top management involvement and support 2 0 8 9 6 3.7

Table 4
Performance with successful E-procurement implementation.

Performance with successful E-procurement implementation Strongly disagree 1 Disagree 2 Uncertain 3 Agree 4 Strongly agree 5 Average rating

Short-term organizational performance 5 2 6 14 3 3.3

Long-term organizational performance 4 0 5 14 6 3.6
Improve cost performance in organization 3 2 5 14 5 3.6
Organizational competitiveness 3 0 8 13 4 3.5
Strategic alliance and networking 5 0 11 7 5 3.3

Table 5
Opinion after E-procurement implementation.

Opinion after E-procurement implementation Strongly disagree 1 Disagree 2 Uncertain 3 Agree 4 Strongly agree 5 Average rating

Organization achieved process efficiency 3 2 8 10 2 3.2

Organization achieved process effectiveness 3 2 9 9 2 3.2
Organization’s revenue increases after E-proc. adoption 2 4 12 4 2 3.0
 ARTICLE IN PRESS
170 A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175

performance improvements suggest that most respon-
dents recognize that E-procurement has strategic value
(long term, cost, and competitiveness benefits), but not by
a wide margin (note that the average rating on each was
less than 4 which represents ‘‘agreement’’ that the item is
important). In sum, one can hardly assert that respon-
dents see a strong link between E-procurement and
success in the areas of interest.
When asked about the improvements or benefits
experienced in their own companies from E-procurement
implementation, survey respondents provided these re-
sponses (see Table 5). Ratings suggest that efficiency and
effectiveness were improved (tied with rating of 3.2), and
that revenue increased (ranked only a 3.0). None of these
ratings are very high, and it stands to reason, given
the level of E-procurement use indicated by the survey
(see Tables 1 and 2). These low ratings may simply be a
reflection on the extent to which the companies are using
E-procurement. Note the high number of uncertain
responses on all three items. Note also the fairly high
number of Agree responses for the efficiency and effec-
tiveness items. The affirmative responses may be from
companies using it to a greater extent. The uncertain
responses, and the few disagrees and strongly disagrees
likely come from respondents representing companies
that were using E-procurement very little.
5.6. E-procurement use
This section reports user responses to questions
regarding E-procurement use in their respective compa-
nies. The responses paint a reasonable picture of the
extent to which the companies were involved in
E-procurement at the time of the study.
Table 6 reveals much about the use of computer related
technology for E-procurement. While we did not ask
about the extent to which the telephone (or cell phone)
was used, the authors own experience suggests that it is
probably used more than other electronic means. That
said, we can glean from Table 7 that FAX and E-mail are
most often-used electronic procurement technology (even
for them, not that much—4 denotes ‘‘to a great extent,’’
and both were rated o4), with the Internet/E-commerce
playing a less significant role, and the remaining items
used infrequently. E-mail and FAX have been around for
quite some time, though not as long as the telephone
and they are simple to use—familiarity and convenience
are likely the reasons why they are more often used than
the others vehicles for procurement. None of the respon-
dents were under 25 and most, 88% of them, were over 40.
That could help explain the tendency to FAX, and why
more used FAX to a great extent or used it always. FAX is
the oldest, cheapest (in terms of initial investment as
it requires no computer), and most easily accessible of the
E-procurement technologies mentioned.
Table 7 shows that the same seven E-procurement
tools did not support sales to customers to a very great
extent. The same two, FAX and E-mail were most used,
with all others used even less to interact with customers
than with suppliers. In short, these SMEs are not utilizing
21st century electronic commerce technologies nearly as
much as their larger competitors.
Survey questions were asked to quantify respondents
E-procurement practices more precisely than the scales
denoting frequency of use of E-procurement technology.
Fig. 12 shows the relative importance of various models
for E-commerce. The B2B procurement portal was most
popular with 41% of respondents using it, while 25% used
EDI. Nearly two-thirds of respondents used these two,
while the other 5 were used to a much lesser extent.
When describing their E-procurement system (see
Fig. 13) almost half the companies say that they developed

Table 6
Technologies to support E-procurement (supplier).

Technologies Never 1 To a little extent 2 To some extent 3 To a great extent 4 Always 5 Average rating

E-Commerce 8 8 11 7 3 2.7
E-mail 7 4 10 10 8 3.2
EDI 16 5 3 3 2 2.0
ERP 13 5 3 6 0 2.1
FAX 8 4 4 14 6 3.2
Internet 10 5 8 6 5 2.7
Intranet 18 5 6 4 1 2.0

Table 7
Technologies to support E-procurement (customer).

Technologies Never 1 To a little extent 2 To some extent 3 To a great extent 4 Always 5 Average rating

E-Commerce 15 6 6 5 3 2.3
E-mail 8 4 8 6 9 3.1
EDI 17 3 4 3 1 1.9
ERP 15 3 5 1 2 1.9
FAX 9 2 5 13 6 3.1
Internet 11 6 6 7 5 2.7
Intranet 21 1 5 2 2 1.8
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A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175
Fig. 12. E-commerce model used for E-procurement.
Fig. 13. Using E-procurement system.
their E-procurement capability in-house, while a third
outsource their E-procurement needs. A few (6%) used
both in-house solutions and outsourcing. Touchnet and
E-procurement solution systems were used by very few of
the companies.
Respondents were asked about their E-business prac-
tices (includes E-commerce and more) (Fig. 14) and a
myriad of E-business practices were noted. Electronic
ordering actually played a relatively small role compared
to other practices that involved electronic information
exchange of some sort.
According to BuyIT Best Practice Network, October
2002 edition ‘Indirect’ goods and services spending
presents a huge opportunity. Benchmarks show that on
average 36% of organizations’ external spending is on
indirect goods and services, including office equipment,
stationery, printing, repair and maintenance supplies, IT
resources, travel, contract staff, consultants and contrac-
tors. Fig. 15 shows the kinds of products survey respon-
dents purchased via the Internet. Office supplies and
maintenance items accounted for nearly 80% of Internet
purchases. Raw materials accounted for 14% of Internet
purchases, and other assorted purchases accounted for the
balance, each accounting for a very small percent of
Internet purchases. These findings seem consistent with
171
the purchasing practices reported by the BuyIT Best
Practice Network.
6. The current state of E-procurement in SMEs studied
In this section, the results of the surveys are used in the
context of the proposed E-procurement implementation
success framework to assess the state of/potential for
successful E-procurement implementation in the SMEs
studied.
6.1. The current status and readiness of companies
for E-procurement adoption
In terms of technology, the majority of the companies
have Internet access, but for the most part, the Internet is
used for acquiring or providing information much more so
than for actual support of transactions. This falls within the
domain of what we call E-business (electronic support of
business processes), but not more narrowly within the
domain of E-commerce. Most respondents indicated that
they understood the purchasing and supply strategy of their
organizations, and that their companies had organizational
conventions, like structured and documented purchasing
and order handling procedures, in place to formalize the
procurement processes. It is noteworthy that few had
purchasing/procurement departments per se, and that the
vast majority of the companies had only 1 to 5 employees
involved in procurement/purchasing. Given their small size,
that seemed reasonable and is probably not a ‘‘readiness’’
concern. Respondents were pretty evenly split on Internet
importance to procurement, with about a third perceiving it
to be important, slightly less than a third perceiving it to be
unimportant, and a slightly more than a third undecided
about its importance. In terms of readiness, it would seem
as though organizations had what they needed to engage
in E-procurement, on a basic level, since not much more
is required than Internet access. A readiness concern is
noteworthy in that, while Internet access was available in
most companies, only about a third of the respondents felt
it was important in procurement.
 ARTICLE IN PRESS
172 A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175

Fig. 14. Use of E-procurement system.

Fig. 15. Products purchase through Internet.

6.2. The perceived benefits of E-procurement
Survey responses showed that the companies were
apparently just starting to realize the benefits of
E-procurement. The average ratings showed that some
benefits were realized to a greater extent than others, and
in particular the greatest benefits had been realized in
improved relations with suppliers, increased customer
service, increased customer satisfaction, better staff
utilization, reduced costs, greater efficiency, and improved
supply chain management. Other benefits were achieved
to a lesser extent. Given that the highest rating of all was
only 2.7, somewhere between ‘‘somewhat realized’’ (2)
and ‘‘just begun to be realized’’ (3), it is safe to say that the
surveyed companies were not reaping significant benefits
from E-procurement, and as other tables and figures in
Section 5.6 show, it is likely because they simply are not
using E-procurement to a great extent. It seems reason-
able to conclude that the respondents do not perceive the
benefits to E-procurement to be great, because of their
reported experience with E-procurement.
cluded the following (listed by importance ranking): not a
top management initiative or priority, fear of change to a
new system, immaturity of the technology, lack of skills
and knowledge in E-procurement, insufficient financial
support, and security concerns. These were the only items
with a rank higher than 3 which represents ‘‘uncertainty’’
regarding the extent to which item is a barrier. While the
benefits were not perceived to be great (section 6.2),
neither do respondents ascribe much importance to
barriers, suggesting that the barriers may not be the most
important reason for not adopting E-procurement. As with
perceived benefits, the lack of certainty about barriers
could be attributable to the lack of experience with
E-procurement. Recall that 83% did not perceive imple-
mentation of E-procurement as necessary, largely because
customers were satisfied with current practices, they did
not see significant advantages in E-procurement, and they
lacked adequate knowledge, resources, and funds for
E-procurement implementation. It would seem then that
perhaps the greatest barrier to implementation is a lack of
enthusiasm!

6.3. Barriers to E-procurement implementation 6.4. CSFs of E-procurement system implementation

Respondents rated numerous barriers to E-procure- The possible critical success factors for E-procurement
ment implementation. Those rated most important in- implementation were synthesized from case studies and
 ARTICLE IN PRESS
A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175
empirical findings from studies of E-procurement adop-
tion in different regions and countries. Respondents
ranked them and the following were the most important
(based on their ranking and above minimum threshold
of 3—means uncertain): top management involvement
and support, streamlined approvals and workflow, close
collaboration with suppliers, clear accountability for
buying in the organizational structure, centralized control
and management of E-procurement initiatives, commu-
nication between participants, content management, and
IS specialists with Internet skills. Note that things that are
managerial in nature, like leadership, organization, and
control, and things that are behavioral like communica-
tions, were rated higher in importance than technology
related concerns. This suggests that good management is
perceived to be more important than technical issues to
successful E-procurement implementation.
6.5. Perceived likely and actual impact on organizational
performance
Performance improvements in process efficiency and
effectiveness are indicants of successful adoption of E-
procurement in SMEs (Chang et al., 2004). Respondents
ranked expected future improvements and improvements
their organizations had realized from E-procurement. In
terms of future performance, long term organization
performance and improved cost were ranked first (tied),
organizational competitiveness ranked second, and stra-
tegic alliance/ networking and short term performance
improvement ranked last. Regarding realized benefits,
respondents rated improved process efficiency and effec-
tiveness first (tied for first), and increased revenues was
rated last. Recognizing that the rating scale used 3 for
uncertain, 4 for agree and 5 for strongly agree, and that
no perceived future benefit ranked 43.6 or o3.3, and no
realized benefit ranked 43.2 or o3.0, it does put the
rankings in perspective. Perhaps, since perceived future
benefits were ranked generally higher than benefits
realized, it demonstrates a guarded optimism among
respondents about E-procurements impact on future
performance.
6.6. E-Procurement use
The most commonly used E-procurement tools are FAX
and E-mail—tools that have been around for quite some
time. This is true not only for transactions with suppliers,
but also in selling to customers. When the surveyed
companies do use more sophisticated network E-procure-
ment models (Internet technology for the most part), they
most often use B2B procurement portals or EDI networks.
These two models were used by approximately 2/3 s of the
respondents. Other Internet based E-procurement models
are used to a much lesser extent. Respondent procure-
ment related electronic interactions tended more often to
be for information exchange/information gathering, than
for electronic ordering (only 20% reported the use of
electronic ordering). Furthermore their purchases tended
to be MRO items, office supplies and such (total to 88%),
173
and to a much lesser extent raw materials (14%). This is
consistent with trends reported in the literature, regard-
ing the nature of purchases. With regard to E-procure-
ment use, findings suggest that the respondents in this
survey are using E-procurement much less than was
expected.
7. Concluding remarks
Given current trends in industry, we expected to
observe a higher level of E-procurement use among the
SMEs studied. Study findings were surprising, in that
SMEs, at least this sample of SMEs on the Southcoast of
Massachusetts, were not embracing E-procurement, even
though a substantial number of them seem to realize its
strategic value and appreciate the potential impact on
organizational performance. Readiness did not seem to be
the primary issue thwarting adoption, as they had the
basic infrastructure and organizational conventions in
place to engage in E-procurement. It is noteworthy that
only about a third of the respondents thought E-procure-
ment was important. Respondents do not perceive the
benefits of E-procurement to be significant, most likely
because of their inexperience with it. Were they using it to
a greater extent, then they might experience greater
benefits from its use, but the question is how do you get
them to use it< Recall that 88% of the respondents did not
perceive E-procurement implementation to be necessary,
and that the most important barrier was that E-procure-
ment was not a top management initiative or priority, and
other barriers like fear of change, lack of financial support,
insufficient skills and knowledge, immature technology
and security concerns were mentioned. Respondents
seemed to understand the factors that would influence
adoption, but they come into play in planning for and
during adoption.
In terms of the model, E-procurement use was low
among study participants. Why were the firms studied not
adopting E-procurement to a greater extent< First, study
participants did not see great promise in the advantages
offered, because they have little experience with
E-procurement, and thus had realized few of its advan-
tages. Barriers did not seem really to be thwarting
E-procurement per se, but instead seemed better to
explain why there was only lukewarm support for
E-procurement. Readiness was not an issue from a
tangible perspective, but was from a behavioral perspec-
tive, in that respondents just did not seem that keen on
adopting E-procurement. While participants did seem to
recognize potential performance improvements that could
result from E-procurement, those improvements seemed
not to be important enough to respondents to make them
really want to adopt E-procurement.
Were top managers or owners to recognize the value of
E-procurement, and make it a priority, it seems likely that
others in their companies would be inclined to make it a
priority. Additional education for organizational personnel
on the advantages of E-procurement, and how to proceed
with E-procurement could strengthen support. Of course
adequate funding of E-procurement initiatives would in
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174 A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175
Table 8
Recommendations to encourage SME E-procurement adoption.
Influences on E- Action agenda
procurement adoption in
SMEs
Current status and readiness Analyze/examine: the nature of the
of organizations business, need for E-procurement, size of
the company, nature of the market,
technology levels and skills available for E-
procurement implementation, nature of
Internet and WWW access, leadership
needed/available, business growth goals,
extent of/need for globalization, logistics
support systems
Perceived benefits Promote understanding of: the strategic
impact of E-procurement on organizational
performance, potential for reduction in
costs and prices, impact on business
growth, global market access, wider pool of
potential suppliers, enhanced collaboration
with suppliers, improved communication
and information flow, better control of
material flow along the supply chain,
increased customer service and satisfaction
and in turn business growth and new
opportunities
Perceived barriers Provide financial support through strategic
alliances and consortiums; increase the
awareness of top management in order to
obtain support and commitment for the
adoption of E-procurement; provide
technological support through
consortiums, supply chain partners and
government; ensure access to the fast
Internet; promote training and education
for E-procurement; streamline
procurement processes; make E-
procurement a top priority of the
company; increase confidence in the
security of the electronic procurement by
demonstrating security effectiveness;
develop suitable reward schemes;
encourage government support for
companies implementing E-procurement
systems
Critical success factors Employ business process reengineering
where appropriate; train and educate IT
personnel and hire skilled IT people;
ensure top management support and
progressive leadership for business
growth; encourage ‘‘greening’’ of
operations; aim to achieve flexibility and
responsiveness; promote strategic
alliances among buyers and suppliers;
centralize management of the
procurement initiative; encourage
communication among participants,
adoption by clients, and close collaboration
with suppliers; streamline work flow and
approval processes; establish/adopt data
exchange and legal standards
Organizational performance Establish/adopt suitable performance
measures (tangible, intangible, financial
and non-financial) and metrics of E-
procurement success for strategic, tactical
and operational levels of
management—the focus should be
balanced to encourage short-term
performance that leads to long term
success; employ metrics that assess
success of interaction with supply chain
partners
essence amount to management demonstrating support
for E-procurement in a tangible way. With greater use of
E-procurement, the advantages might be realized to a
greater extent, building support for expanded use of
E-procurement and positive impacts on organizational
performance. Specific recommendations for increasing
E-procurement adoption can be seen in Table 8.
If the companies on the Southcoast of Massachusetts
are representative of SMEs in the United States, then much
work remains to be done in bringing about greater use of
21st century technology in every-day business practices.
This is a fruitful area for future research, and an area
important to the global competiveness of American SMEs.
The increasingly global economy of the 21st century
demands that companies adopt technology that stream-
lines business processes and secures for them a place in,
not just local, but global supply chains. E-procurement is
not a luxury, but rather a necessity for SME competitive-
ness and survival in the 21st century.
Acknowledgments
The authors are most grateful to two anonymous
reviewers for their constructive and helpful comments
that helped to improve the presentation of the paper
considerably.
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