E-Commerce: E-Procurement

Anil Cheerla, Allen Kenney, Robyn King

MBAD 251

April 8, 2009

Definitions

• In general, e-procurement refers to the electronic acquisition of goods and services for organizations.

• “E-procurement is using the Internet to operate the transactional aspects of requisitioning, authorizing, ordering, receipting and payment processes for the required services or products.”(Source: The Chartered Institute of Purchasing & Supply)

B2B evolution

The Supply Chain

• The supply chain process consists of a number of interrelated sub-processes and roles• Acquisition of materials from suppliers

• Processing of a product or service

• Packaging it and moving it to distributors and retailers

• The eventual purchase of a product by the end consumer

Procurement Process

Concept to Check

Receipt ofGoods/Services

Supplier Communications

Product &Process

Development

RequisitionCreation

ApprovalCycle

P.O.Generation

Invoice

eProcurement

INVOICE

Payment

INVOICEAdvance

Ship Notice

Web-based Procurement System

Communication & Coordination Order

management

Shipping & Logistics

Receiving & Accounting

CFQ & CFP Bidding, Negotiation, & Contracting

Enterprise Information

Systems Gateway

Authorization & Security

management

Demand side

Supply side

Inter-organizational

Forming Auction, Reverse auction,

Or Exchanges

Search & Ordering

Order Fulfillment

Decision support Web-based collaboration

Product catalogs

management

Procurement Support

Procurement Transaction Support

Market Making

Web-based Procurement System

Supplier Information

Systems Gateway

Buyer

Supplier

Buyer

Buyer

Buyer

Supplier

Supplier

Supplier

Buyers Sellers

Main Types of E-Procurement

• e-sourcing– The process and tools that electronically enable any activity in the sourcing process,

such as quotation/tender submission and response, e-auctions, online negotiations, and spending analyses

• e-tendering– The “invitation” to participate in a tendering (bidding) system

• e-informing– Gathering and distributing purchasing information both from and to internal

and external parties using Internet technology.

• Web-based ERP– Creating and approving purchasing requisitions, placing purchase orders and receiving

goods and services by using a software system based on Internet technology

• e-MRO–Indirect materials used in activities that support production

• e-reverse auctioning - tendering or bidding model

E-Procurement Benefits

• Minimizing the purchases made from non-contract vendors

• Expedited payment process and savings due to expedited payments

• Improved invoice reconciliation and dispute resolution

E-Procurement Benefits

• Cost savings via streamlining

• Control over maverick spending

• Better information flow between buyers and suppliers• Increased buying power and better purchase price through

aggregation

Companies Engaged in E-Procurement

• Honeywell• GlaxoSmithKline• Royal Dutch Shell• Sun Microsystems• Aeroxchange

• Provides Internet-based infrastructure for aviation industry

E-Procurement in action

E-Procurement Providers

Concerns

• Are you introducing security and control risks by instituting new systems?

• What are the transition costs of implementing an e-procurement system for purchasing?

• Do new e-procurement systems work with suppliers’ technologies?

• Do employees and managers have necessary skills and willingness to work with new e-commerce technology?