Slide 7.

CHAPTER 7 E-PROCUREMENT

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.2

Learning outcomes

Identify the benefits and risks of e-procurement Analyze procurement methods to evaluate cost savings Assess different options for integration of organizations information systems with e-procurement suppliers.

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.3

Management issues

What benefits and risks are associated with e-procurement? Which method(s) of e-procurement should we adopt? What organizational and technical issues are involved in introducing e-procurement?

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.4

How important is procurement?

We estimate that for every dollar a company earns in revenue, 50 cents to 55 cents is spent on indirect goods and services things like office supplies and computer equipment. That half dollar represents an opportunity: By driving costs out of the purchasing process, companies can increase profits without having to sell more goods. Hildebrand (2002)

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.5

What is e-procurement?

Procurement refers to all activities involved with obtaning items from a supplier The electronic integration and management of all procurement activities including purchase request, authorization, ordering, delivery and payment between a purchaser and a supplier

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.6

The 5 rights of E-procurement

Sourcing items: at the right price delivered at the right time are of the right quality of the right quantity from the right source. Baily et al., 1994

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Figure 7.1

Key procurement activities within an organization

Figure 7.2

Electronic procurement system

Source: Tranmit plc

Slide 7.9

Types of procurement

Production-related procurement
Relate

to manufacturing of products
operation of whole business

Non-production related procurement

Supports

How items are bought: Systematic sourcing

Negotiated

contracts with regular suppliers

Spot sourcing
Fulfillment

of an immediate need
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.10

Drivers of e-procurement

Reduced purchasing cycle and cost Enhanced budgetary control Elimination of administrative errors Increasing buyers productivity Improving information management Improving the payment process

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.11

Risks and impact of eprocurement

Organizational risks
Need

to redeploy staff: purchasing team of 5 people was reduced to 4 Maverisk/off-contract purchasing: unnecessary items are ordered

Technology risks
Integration

with existing financial systems

Failure to achieve real cost reduction ROI (return of investment) may be lower than forecast
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Slide 7.12

Implementing e-procurement

Stock control system CD/web-based catalogue E-mail/workflow system Order-entry on web site Accounting systems ERP systems

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Use of different information systems for different aspects of the fulfilment cycle
Figure 7.3

Figure 7.4

E-mail notification of requisition approval

Source: Tranmit plc

Document management software for reconciling supplier invoice with purchase order data
Figure 7.5
Source: Tranmit plc

Figure 7.6

The three main e-procurement model alternatives for buyers

Table 7.6

Assessment of the procurement model alternatives for buyers

Figure 7.7

Integration between e-procurement systems and catalogue data

Figure 7.8

An online catalogue of items for purchase

Source: Tranmit plc

Figure 7.9

Ford supplier portal provided by Covisint

Source: Covisint.com

Figure 7.10

Supplier Route to Government Portal (www.supply2.gov.uk)

Slide 7.22

Government marketplace exchanges

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007

Types of marketplace

Types of B2B marketplaces identified by Kaplan and Sawhney (2000) with examples
Table 7.7
Source: Adapted and reprinted by permission of Harvard Business Review from table on p. 99 from E-hubs: the new B2B marketplaces, by Kaplan, S. and Sawhney, M., in Harvard Business Review, MayJune 2000. Copyright 2000 by the Harvard Business School Publishing Corporation, all rights reserved

Slide 7.24

Questions:
Q1) Describe the different elements of an e procurement systems Q2) Outline the main benefits and risk of eprocurement Q3) Explain how cost saving may arise from eprocurement

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition Marketing Insights Ltd 2007