Revisions are needed on the paper I submitted for school. I have uploaded a file titled default.pdf which explains. Any section that scored less than a 3 needs to be revised. Please read teachers comments. Aspects B3, B5, C2 - C2f, D1 and D2 require addre
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INTE1208-Lecture4AA.pptE-PROCUREMENT & SUPPLY CHAIN TECHNOLOGIES
INTE 1208
Dr Alka Nand
Sem 1, 2016
B2B Procurement Processes
Objectives
Importance of procurement
What is e-procurement and what are the potential savings
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?
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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)
From Chaffey (2007), p. 309.
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What is E-Procurement?
- The electronic acquisition of goods and services for organizations
- By automating and streamlining the laborious routines of the purchasing function, purchasing professionals can focus on more strategic purchases
Basware Solutions:
CIPS - Chartered Institute of Purchasing and Supply
- is the premier global organisation serving the procurement and supply profession. Dedicated to promoting best practice, CIPS provides a wide range of services for the benefit of members and the wider business community. http://www.cips.org/en-au/homepage/
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According to CIPs
- From a conceptual perspective, eProcurement is very similar to the classical tendering process: it helps companies source input products and services at the lowest possible cost while ensuring that those inputs meet technical and other specifications (Ong, 2002).
- The process of eProcurement incorporates two processes: e-Requisition and e-Sourcing. The former refers to the purchase of goods and services by the end user, while the latter emphasises the negotiations between the company and its suppliers
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Figure 7.1 Key procurement activities within an organisation
which include searching and specification of product by the end‐user, purchasing by the buyer, payment by an account, and receipt and distribution of goods within a warehouse.
Chaffey, Dave. Digital Business and E-Commerce Management, 6th Edition. Pearson (Intl)
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The 5 rights of e-procurement
E-procurement should be directed at improving performance for each of the 5 rights:
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)
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Table 7.1 Process flow analysis for traditional procurement (typical cycle time,
51⁄2 days)
Note: see Table 7.2 on p.302 for key to symbols.
Insert Table 7.1
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Table 7.2 Process flow analysis for new procurement (typical cycle time, 11⁄2 days)
Insert Table 7.2
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Types of Procurement
Businesses tend to buy by one of two methods:
● Systematic sourcing – negotiated contracts with regular suppliers.
● Spot sourcing – fulfilment of an immediate need, typically of a commoditised item for which it is less important to know the credibility of the supplier.
Class examples?
Chaffey, Dave. Digital Business and E-Commerce Management, 6th Edition. Pearson (Intl)
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Key trends in procurement – CIPS
- Integration of CSR issues & sustainability within procurement’s decision matrix
- Category management – Category Management is a strategic approach which organises procurement resources to focus on specific areas of spends.
- Low cost country sourcing – especially China
- Greater awareness of supply chain disruption & strategies to manage risk and supply vulnerability
- Greater compliance role for procurement professionals generally
- E procurement and investment in supply side systems like ERP and Procure to pay
- Centralisation of procurement efforts [or de-centralisation?]
*CIPS Research https://www.cips.org/en/news/
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Procurement Issues today
- Developing procurement led solutions throughout the business
- Ensuring socially responsible procurement
- Balancing total cost against risk
- Improving the organisational interface with stakeholders
- Professionalising procurement through people, process and technology
Procurement as a strategic activity
Procurement has become more significant in response to governance issues that companies face in terms of having a clear picture of how, why and with whom they spend money and having the management processes and controls in place to ensure that this is done in a way that is consistent with legislation, regulations and the values and objectives that the organisation aspires to.
Class Activity
- You will be given a case study in class to work in groups
- Your task:
Read and prepare discussion points on the following:
Company and background
Type of industry
What was the challenge or problem faced
How was this challenge overcome
What were some of the benefits of the new eProcurement solution
What were the cost savings identified
One or two members to then present the findings:
(20 mins to complete the activity)
5 min each for presentation of key findings
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Alternative classification: using Type, Use and the Value of goods purchased
- Procurement of raw materials and production goods (High frequencies and unique specifications)
- Procurement of maintenance, repair and operating (MRO) supplies (Low unit cost, low volumes, relatively high frequencies; e.g. Office Supplies)
- Procurement of capital goods and maverick procurements (High Value and low frequencies; eg. a new factory)
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Different Types of Purchases
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Lists and describes many of the items that a purchasing department is responsible for buying
The actors or typical participants involved in purchasing
- The Seller, Vendor or Service Provider
Person or organisation who sells the goods or provides the service
May also be the manufacturer of the goods
- The Requisitioner
Person who is going to consume the goods or service
Typically an employee of the organisation that will pay for the goods or service
In a traditional environment, the requisitioner lodges a purchase requisition with a purchasing officer who will undertake the purchasing process
In the world of eCommerce, the requisitioner may deal directly with the seller, vendor or service provider
The Actors
- The Purchasing or Procurement Officer
Professional who is an expert in the process of procurement and the establishment of trading relationships
Trading Relationships – involves negotiation of contracts
Immediate and long term requirements
Must cover legal conditions of trade, exchange rate conditions, etc…
Objective – The Purchasing Officer ensures that the buyer always receives
Best quality
At best price
In the appropriate timeframe
- The Buyer
The organisation that is purchasing the goods or service
Has responsibility for payment
- Financial Service Providers
The value passed from the seller to the buyer is the goods or service
The buyer must provide equal value to the seller
Can be by transfer of goods or services – trade barter
More commonly through exchange of monetary value through a bank
May involve the use of credit facilities
The Actors
- Transport and Logistic Service Providers
Acquisition of physical goods requires their movement from seller to buyer
Transport/Logistic Services Providers
Secure, safe, timely delivery to the place of consumption
- Chambers of Commerce
Facilitate the establishment of new trading relationships and assist trading organisations to determine common trading procedures
Can provide reduction in costs
Can provide validation services that provide confidence in a trade relationship
Trade Documents
- The purchasing of goods and services relies on a series of transactions which are usually evidenced by paper-based documents.
Some examples:
- Purchase Order Requisition or simply Requisition
- Request for Quotation, Request for Tender (RFT) Registration of Interest (RoI)
- Quotation, Tender, Registration of Interest Response
- Material Safety Data Sheets (MSDS)
- Purchase Order or simply Order
- Order Acknowledgement
- Despatch Advice, Delivery Advice, Advance Shipment Note
- Invoice
- Debit Note
- Credit Note
- Remittance Advice
Knudsen (2003) and Smart (2010) classification on types of applications of e-procurement:
- E-sourcing. Finding potential new suppliers using the Internet during the information‐ gathering step of the procurement process.
- E-tendering. The process of screening suppliers and sending suppliers requests for information (RFI) or requests for price (RFP).
- E-informing. Qualification of suppliers for suitability. It doesn’t involve transactions but instead handles information about the supplier’s quality, financial status or delivery capabilities.
- E-reverse auctions. Enable the purchasing company to buy goods and services that have the lowest price or combination of lowest price and other conditions via Internet technology.
- E-MRO and web-based ERP. These involve the purchase and supply of products which are the core of most e‐procurement applications. The software used manages the process of creating and approving purchasing requisitions, placing orders and receiving the goods or service ordered.
RMIT University©March 2011
International & Development Portfolio
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International & Development Portfolio
Drivers and barriers of e-procurement
- Drivers
Cost reduction
Process efficiency (non value adding activities)
large portion of buyers time is spent on non-value adding activities
Reduced cycle times
More competition
More choice
More control (reduce maverick purchasing)
Improving payment system
Improving information management
- Barriers
Competition issues
Procurement benefits shared with competitors
Organizational culture
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Risks
- Organisational risks
Redundancy/redeployment
- Technology risks
Integration with existing financial/ERP systems
Choice of procurement model
Choice of market place
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Ethical sourcing
- The range of ethical issues to consider is increasing as consumers become more aware of certain practices that they do not consider to be ethical. Issues can include:
Green products
Carbon emissions
Transport
Environmental performance
Health and safety
Diversity and equality
Standards at work including suppliers
Role of the business as an employer, customer or corporate citizen
Sustainability
Future of eProcurement
- B2B Market Places/exchanges/Hubs
typically these are intermediaries that are independent of buyers and suppliers.
Alibaba and how its transforming business http://www.alibaba.com/
- Software Agents
Some demos of AI http://www.cs.wisc.edu/~dyer/cs540/demos.html
Software programs that assist humans by automatically gathering information from the Internet or exchanging data with other agents based on parameters supplied by the user
