LITERATURE REVIEW OF ADOPTION OF E PROCUREMENT …

AIMA Journal of Management & Research, May 2016, Volume 10 Issue 2/4, ISSN 0974 – 497 Copy right©

2016 AJMR-AIMA

Article No.4

“LITERATURE REVIEW OF ADOPTION OF

E PROCUREMENT PRACTICES BY CON-

STRUCTION INDUSTRIES"

Avinash Shukla Research Scholar in Department of Business Administration, Faculty of Management

studies & Research, of Aligarh Muslim University, Aligarh

Dr Mohd Afaq Khan Assistant Professor in the Department of Business Administration, Faculty of Management

Studies & Research, Aligarh Muslim University, Aligarh

Dr Mrinalini Shah Professor Operations Management,Chairperson Entrepreneurship cell

Institute of Management Technology (IMT),Ghaziabad

Abstract: Advent of information technology (IT) has provided more competitiveness in business opera-

tion. Construction industry is also gearing up towards the more usage of information technology driven plat-

form. Cost is the main factor for construction industry. Construction Industry Development Council of India

(CIDC) has estimated that approx. 40-50% cost belongs to material in total building project. Therefore, it is

imperative to optimize the material purchasing in construction activities. E procurement has emerged as panacea

to address most of the problems- cost saving, time saving and best quality, minimization of malpractices asso-

ciates with purchasing.

We have reviewed 103 research papers from various countries and collated the adoption practices of e procure-

ment. Interestingly TOE and TAM model has used by many of researchers.

Keywords: E-procurement, adoption of E-procurement

E- Procurement –Paradigm shift

Invention and adaption of new technologies and ideas increase the productivity of the

business organization, which will in turn translate to high economic growth. Recent

technology advancements in information and communication technologies (ICT) have made a

paradigm shift in the way business processes are conducted. Electronic procurement (E-

procurement) is one of the technological solutions to facilitate corporate buying. E-

procurement is the electronic (B2B or B2C or B2G) sale and purchase of goods and services.

Procurement supports a delivery relationship between buyers and sellers (Subramaniam &

Shaw 2004, Saeed et al. 2005). Raghavan and Prabhu (2004) defined E-procurement as -


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„„the electronic acquisition of goods and services including all processes from the

identification of a need to purchase of products, to the payment for these purchases,

including post-contract/payment activities such as contract management, supplier

management and development‟‟. Traditionally, procurement processes between various

parties were organized through mail, phone, fax and electronic data interchange (EDI) and

more recently internet. E-procurement has evolved into the use of electronic technologies to

streamline and enable the procurement activities of an organization (Hawking et al., 2004).

The benefit of procurement has contributed great saving in bottom line costs of many

companies worldwide and hence procurement is a significant tactic in most companies‟ E-

business strategies. It is claimed that a company engaging in E- procurement can cut cost by

8 to 15% (Ghazaly, 2005). E- Procurement is driven by automated procurement process,

integrating the functional processes and purchase management. The emergence of Web-

based E-procurement is expected to reduce the order fulfilment cycle time, lower

the inventory levels, reduce the administrative cost of procurement, cost of procurement,

and enhance the order fulfilment and performance of suppliers (Subramaniam and Shaw

2002, Son and Benbasat 2007 ) .

Most of the times, terms „procurement‟ and „purchasing‟ are used interchangeably. However,

both differ significantly in their scope. Overall objectives of purchasing are to buy quality

materials at competitive prices, in bulk quantities, at the required time, and from reliable

sources (Fung, 1999).

Procurement is broadly defined to include a company‟s requisitioning, purchasing,

transportation, warehousing, and in-bound receiving processes, also linking suppliers and

buyers into the purchasing network and rethinking of inter-organizational processes driven by

transaction. Various countries have adopted E- Procurement due to inherent advantages.

As per Chhattisgarh government e procurement portal (http://www.chips.gov.in/projects/e-

procurement 16 Dec-15) e-Procurement is helps to bring transparency and efficiency to the

Government Procurement and adoption of e procurement is being increasingly by the Centre

and many states for their procurement needs.

Through implementation of comprehensive integrated e procurement solution will enhance

the efficiently and transparency in public procurement system. AS per CI

(http://www.c1india.com/are-you-hesitant-of-adopting-e-procurement/ 16 Dec-15)

Now days every business is trying to reap benefit of advent of information technology. The

internet has opened the avenue beyond the boundaries of earth; business can stay connected

with suppliers from around the globe. Organization has benefited in terms of dearth of sup-

pliers, cost competitiveness, better quality due to enhance competitions and advantage of new

technologies. Some the challenges refrain people not to use information technology in pro-

curement or tendering:

a) Unwilling to change

b) Security concern about portal

c) Acquiring digital signature certificate

Ramkumar & Jenamani(2012) Adoption of e procurement can be two way, one optional and

other mandatory from the law like in India as per Central vigilance commission Act mandate

http://www.chips.gov.in/projects/e-procurement%2016%20Dec-15

http://www.chips.gov.in/projects/e-procurement%2016%20Dec-15

http://www.c1india.com/are-you-hesitant-of-adopting-e-procurement/


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e procurement in public sector organization. Since e procurement is not core business for

many organization in that case three option available: a) Develop in house b) service provider

and c) Both a and b. Many of organization opting for service provider option to utilize the

expertise of service provider. Selection of service Provider Company should be based on

main criteria‟s like technology, vendor base, technical competence, performance, flexibility

of service, worthiness and reputation. To remove the biasness Analytical network process

(ANP) approach also being used in selection of e procurement service provider.

Carayannisa & Popescu(2005) european union seen the improvement in its ability to meet the

high expectations from e procurement due to more transparent and efficient manner because

of advent in internet technology. SIMAP is the main platform used in public procurement in

European Union. Information technology created more transparent information made

available to all the stakeholders, standardize the forms and notification.. Major challenge in

adoption for e procurement in public procurement is cost factor.

Stefano Ronchi et al. (2010) adoption of e procurement technology created advantage over

competitors‟ ability to charge high and build the relationship with suppliers. Value assessment

is very important generated through e procurement. Various method is being used to asses

value creation- pragmatic way is cost benefit; theoretical way through decision theory. Two

level of framework develop to assess the value of e procurement: one financial level through

order cost, administrative cost, lead time and opportunity cost of capital; second organization

level measuring the control, transparency, maverick buying, decentralization and supply base

rationalization.

Corina(2011) Discussed about the major impediment in adoption of e procurement. Broadly

four head in barriers:

a) Management barriers- limited resource, resistance in change and information sharing

b) Organization barriers- different culture, different compatible internal and external,

post supplier relationship

c) IT barriers- security, lack of compatibility, no common technology

d) User barriers- fear, change, lack of information skill system

Focusing on training of employees explaining the benefit of e procurement will provide

environment conducive for adoption of e procurement. Collaborative workings with suppliers

are very important in e procurement.

Bof & Previtali(2010) public procurement has three relevant- a) impact on economy b) gov-

ernment public service( provide goods & services) c) affect National‟s competitiveness and

citizen‟s welfare. Researcher has evaluated the Italy public procurement. E procurements

provides acceleration in execution times of procedure, reducing time of purchasing process,

reducing expenses, simplification of processes , direct and constant monitoring of public

spending to compare the benefits, more time for strategic thinking, transparency due to uni-

form success.

Ali & Alrayes (2014) explained the variables that might affect e procurement adoption in

Kingdom of Bahrain. Researcher has studied perceived organization e readiness factors

(POER) and perceived external e readiness factors (PEER). POER factors comprise of


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awareness, commitment, governance, resources (human, business and technology) effect the

institutional adoption. Main PEER factors are market forces, supporting industries and

government. Licker model called perceived e readiness model (PERM) which includes

internal and external factors for IT adoption. Researcher also define the status of adopters of e

procurement- Non adopters (no connection to web, only email), Initial adopters (web with

interaction with email query etc.) and Institutional adopters (transaction web online selling

and purchasing, integration with suppliers, customers and other back office).

Ruey-Lin Hsiao and Thompson S. H. Teo(2005) explained the three stage e procurement

implementation model.– access the applicability of e procurement, determine e procurement

objective, overcome the barriers of e procurement and finally deliver e procurement promise.

CIO9chief information officers) are key role in implementation of e procurement. CIO should

focus broad technology in e procurement can be used to steam lime procurement and improve

the procurement spending. In fact research shows the 10% decrease in procurement cost can

result in 50% increase in profit margin.

Kevin Moindi Omai(2013) data of the study showed that sharing information demonstrated

the development of partner relationship and support the supply chain integration. Partner

relationship has different variant level of importance across different tea factories (capture

through survey) but price and quality emerged very important. Researcher has defined supply

chain performance depend on four factors- information sharing, partnership relationship,

supply chain integration and suppliers appraisal.

Introduction of construction industry

Construction is the Latin word (from com- "together" and struere "to pile up") means the arts

and science to form material, system and organization to build some structures.

Building Construction is the process of sequencing activities start from planning, design and

financing and continues until the structure is ready for occupancy.

From being single activity to large scale construction is the process of human multitasking.

Normally, jobs are managed by project manager, supervisors, site workers, architects and

project engineers.

Since these activities involved the entire eco system of environment as well as human socie-

ty. So it is very important those involved with design and execution must consider the zoom-

ing of requirement, environment impact, successful scheduling, budgeting, construction site

safety and transportation & logistic of building material.

Definition Russell Sturgis distinguished between architecture as being artistic structure, where a

building is unadorned and can be "...poor...commonplace, ugly, insufficient, or otherwise of

small importance; " and the use of the word construction as meaning built using scientific

principles in a highly skillful way.

Type of Construction

Broadly construction sector has divided into two sectors- real estate and infrastructure


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sectors, out of which major share holds by infrastructure and is key driver of the overall

growth in construction sector. Residential building, township, commercial, SEZ/IT parks

come under real estate sector. Heavy projects executed on massive scale like roads, railways,

ports, airports come under the infrastructure segment. As per planning commission D&B

report show the data:

Civil Construction

Infrastructure is back bone for any construction activity, civil construction majorly contribute

to infrastructure. Generally government as well as international government agencies are the

typical the builder of this construction. Civil construction primarily serves the interest of the

public interest.

Building Construction Building constructions are acquired both privately and publicly. Residential, corporate office

and commercial include retail, shopping malls, showroom, hotels are comes under building

construction segment.

Industrial Construction Usually, this type of construction required a highly specialised skill in construction, planning

and design. The industries which fall under this segment are medicine, power generation,

chemical and petroleum manufacturing.

According to National building code of India (SP :7 – 1983) ,classification of the building

based on occupancy. Different types of buildings:

Group A: Residential buildings: Building in which sleeping accommodation is provided, with

or without cooking or dining or both facilities.

Group B: Educational buildings: Building used for school, college or day care purpose.

Group C: Institutional buildings: Building or part of building is used for medical, disease or

infirmity; convalescent etc.

Group D: Assembly buildings: Group of people congregate or gather for amusement, recrea-

tion, social, religious, patriotic, civil and travel purpose.

Group E: Business buildings: Building used for business transaction purpose.

Group F: Mercantile buildings: Building is used for shops, stores, market for display and

merchandise.

Group G: Industrial buildings: Wherein products or material of all kind and properties are

fabricated, assembled, manufactured or processed.

Group H: Storage building: Primarily used for storage or sheltering of goods, wares or mer-

chandise.

Group J: Hazardous buildings: Used for storage, handling, manufacturing or processing of

highly combustible or explosive materials.


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E Procurement adoption in different countries Every country has different challenges in adoption of E- procurement in construction

industry. Research has been conducted for different countries with respect to E- procurement

in construction industry base on country wise challenges but no comprehensive study has

done.

India

The Government of India approved the National e-Governance Plan (NeGP) on 18 May 2006

(http://india.gov.in/govt/national_egov_plan.php). Government of India can achiever E-

governance through NeGP programme. E-Procurement is an integral component of NeGP.

According to a recent estimate, government is buying five lakh crore materials per annum.

Single portal for E-procurement for all the government departments and agencies can elimi-

nation of „aberration and malpractices‟ in existing procurement procedure. (Prabir Panda, GP

Sahu and Pramod Gupta,2010)

Many companies used the E-procurement to achieve greater efficiencies. Some of the

examples are Tata , Wipro , MUL(Maruti), LML, HDFC, Amtrex, Blue Star, Ballarpur

Industries, Grasim, Asian Paints, Marico Industries, Nerolac Paints. Engineering,

Construction & Contracts (ECC) division of Larsen & Turbo Limited also adopted vertically

integrated supply chain management initiatives implemented in Management (SCM)

initiatives. (Sri Devi Bulusu, ITC., Proceedings of the Fifth Asia Pacific Industrial

Engineering and Management Systems Conference 2004)

eProcurement Trends

Financial

Year

No. of

Tenders

Value in

Crores (INR)

2003 - 2004 1549 3623

2004 - 2005 4901 30822

2005 - 2006 9930 11892

2006 - 2007 21985 31487

2007 - 2008 33904 75119

2008 - 2009 44883 130061

2009 - 2010 26062 28208

2010 - 2011 47182 19675

2011 - 2012 49354 24436

2012 - 2013 67593 25191

2013 - 2014 93566 3684

Source: http://www.eprocurement.gov.in/

Austria In Austria E-procurement adoption is low in construction industry compare to automotive

industry. Probable reasons for low adoption rate are customized project which differ from

each other in material ordered etc. On contrary, automotive industry concentrates on mass

production and distribution of nearly similar products. The Austrian construction industry is


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constituted of numerous small and medium sized firms (SMEs) but only few big players

(Zunk et al, 2014) which might be a reason for the low adoption rate. Austrian construction

companies use E- procurement order to enhance their efficiency due to reduce complexity in

procurement process, improved collaboration with the suppliers and a possibility to reduce

process cost.

Canada Rankin et al (2005) opined E-procurement as one of the way to increase the top line. The

main barriers for adoption of E- procurement in Canadian construction industry are

organizational and technical issues. Organization characteristics also have an impact on E-

procurement and broadly depend on organizational type, structure, revenues and management

level. In today‟s competitive world personal contact is important for long – term relationships

with customer, as well as the learning curve of using new technologies.

United Kingdom Eadia et al (2010) has discussed barriers and drivers for E- procurement in UK construction

industry. The most important drivers of E procurement were identified as process, transaction

& administration Cost saving. The most important barriers were Prevention of tampering

with Documents, followed by insufficient assessment of systems prior to installation and

confidentiality of Information or unauthorised viewing.

Malaysia Deraman et al (2012) has found out 26 critical success factors (CSF) in E- purchasing

through literature review. Nevertheless, results from the exploratory study reveals that only

fourteen factors exist and specific to construction organization in context of Malaysia.

Daud et al, (2013) has applied an extended Technology Acceptance Model (TAM) (Davis et

al., 1989) model in a new context of E-procurement. Study has used descriptive analysis for

finding out the factors influencing the usage of E- procurement among contractor companies

in Malaysia. Five factors identified in the study are :Usage of E- procurement, Perceived ease

of use, Perceived usefulness, Attitude toward using E-procurement to understand, Intention

to use E- procurement.

Hashim et al, (2013) has studied perceived value of E-Procurement in the construction

industry in Malaysia. This study concluded that tactical and operational values are more

important than strategic values. Important variables in different heads were defined as

follows:

Tactical Value

• Lower procurement cost

• Reduced time of preparing cost plans

Operations Value

• Reduced non value added activities

• Order process more efficient

Strategic Value

• Improved firm growth and success

• Reduced and eliminate problem with suppliers


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Kuwait Baladhandayutham & Venkatesh (2012) had defined model from supplier‟s perspective. Cost,

time and opportunity benefits were positively correlated whereas relationship barrier was

negatively correlated in E- procurement adoption in Kuwait construction industry.

Kuwait construction material suppliers can develop appropriate E-procurement strategies

base on drivers and barrier.

Exhibit1:E-procurement adoption model in Kuwait construction industry (Baladhandayutham

& Venkatesh 2012)

Tanzania

Mohamed, Kayungi S.(2013) had explained that manual procurement system is considered

inadequate for construction industry due to lack of transparency in various stages of

construction procumbent such as tender evaluation and award. The Manual procurement

system is full of tedious paper work leading to wastage of time and money. Research

(Towards E-procurement implementation in Tanzania: construction industry preparedness)

has found out that low adoption of E-procurement in Tanzania construction industry is mainly

due to of lacks policies & frameworks and low level of awareness of E-procurement to

stakeholders. Model for E-procurement adoption for Tanzania construction industry has

explained three stages for E-procurement adoption, first policy framework stage, second

technology, people and process stage and finally efficiency and transparency stage.

Turkey Isikdag et al( 2011) has explained the E- procurement provides opportunity for improving

communication and coordination along with expanding marketplace for both suppliers and

buyers. The study has discussed about E-procurement from both supplier and buyer

perspectives in relation to the Turkish Architect, Engineering and construction (AEC)

industry. Legal issues and lack of a legal infrastructure in particular (i.e. rules and regulations

for support of E-Procurement), were identified as a key barrier towards industry-wide

adoption of E-Procurement within the Turkish AEC industry. From strategic perspective, the

top-management of organisations are still very much focused on operational everyday tasks

not focusing on E- procurement for long term benefit. Furthermore, there is a lack of

Cost benefit

Time benefit

Opportunity

benefit

Relationship

barrier

Supplier‟s

dimensions

E-procurement

adoption


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awareness towards the real benefits of E-Procurement.

Key technological issues that were identified in the Turkish AEC Industry are mainly related

to security of exchanging information (i.e. protecting competitively advantageous

information, digital signature). The lack of capabilities of re-engineering processes to

facilitating the new way of procurement also major barriers. The results indicate that the

stakeholders within the Turkish AEC Industry continue to refrain from implementing E-

Procurement unless E-procurement as a sine-qua-non in contract.

China Tran et al (2011) had developed theoretical model to assist the importance of government,

organization, and technology on a construction enterprises‟ E-procurement implementation

readiness level in developing countries. Readiness of enterprise depends on two factors-

enterprise‟s propensity and available capability in implantation of E- procurement.

Organization readiness level is changed over time in the innovation process. After analysing

the adoption of innovation theory was carried out and a Government-Organization-

Technology framework was proposed (GOT). The provided conceptual model needs to be

tested in actual world.

Exhibit 2: Impact-role-factor structure in E-procurement readiness by Tran et al (2011)

Review of Literature

E-Procurement adoption in construction industry

The term “E-business” has described Internet-enabled systems that provide information,

facilitate transactions or provide shared business processes (Bloor Research, 2005). There are

a number of processes that can be associated with E-business, four of the major processes

related to E-business are depicted in table 3 (MOIE,2003).

Organization aspect

Available

resources

Decision-

makers attitude

towards E-

procurement

Internal

organization

characteristic

External

business

relationships

Technology aspect

Perceived

benefits

Perceived

challenges

Government aspect

Government

leadership

Human

resource

management

IT

infrastructure

management

Legal and

regulatory

system

E-procurement

implementation

readiness level


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Table 2: E- business process (source: Guillermo et al ,2003)

Process Description

E-procurement Procuring material, services, expert and manpower. Dissemination and

gathering information about project

E-transactions Transactions across the space between the buyer and seller in the supply

chain

E-logistics Delivering parts, components, materials, plant, information

E-collaboration Facilitates coordination of various among supply chain partners.

Collaboration among teams in a virtual space such as collaborative

design, planning and project management.

E-procurement system adoption has been conducted across various geographies and sectors/

industries like manufacturing, construction and healthcare. Procurement process has evolved

electronically with the growth of electronic commerce (Carter et al. 2000). A study conducted

by Malhotra & Galletta (2003) found culture and organization structure play a vital role in E-

procurement adoption. Knowledge management (KM) can address the culture and

organization structure issue by communicating the benefit and the concern by regular

interaction with all the stakeholders. (Malholtra and Galletta, 2003).

E- Procurement benefit can be classified in different categories according to different

researchers as follows:

a) Strategic, tactical and operational benefits (Irani, 2002);

b) Tangible and intangible benefits (Gunasekaran et al., 2001; Irani and Love, 2002);

c) Financial and non-financial benefits (Irani and Love, 2002);

Adoption of E-Procurement is considerably low in construction industry, compare to other

industries such as manufacturing and retail industry (Alam, & Ahsan, 2007, Mansor &Abidin

2010., Tan et al,2009., Pierre & Robert 2010).

E- Procurement in construction industry can be improved by showing the value gain of

manufacturing industries by using E-procurement (Chen and Rankin, 2006). Constructions

companies are using web-based inter organizational information systems (IOISs) (Cash and

Konsynski, 1985) to support their inter-organizational processes with their key suppliers.

Oyegoke et al (2009) In construction projects many stakeholders are involved therefor

important to define the type of procurement route. Generally four type of procurement route:

a) Traditional – lump sum

b) Design and build – degree of risk transfer


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c) Management routes – degree of risk transfer ( combination of traditional and design

build route)

d) Partnering- very strong in public procurement

e) Cost reimbursable – contract provision of incentivize

Construction procurement categorization also depends on organization and method of

finance.

Exhibit3: Construction procurement categorisation based on organisation and financing

strategies by Miller (2002)

Naoum & Egbu(2015) elaborated a critical review of procurement method. Knowledge of

emerging trend in procurement method, will allow practitioners to appreciate as well as

concern in development of new techniques and principles such as build ability/

constructability, innovation, lean construction, supply chain management, sustainability and

value engineering. Integration of construction industry though continuous improvement and

value creation through team is paramount importance. Construction industry can deliver best

to changing client need by adopting better standardization and use of technology: e

procurement.

Lam et al (2015) due to increase complexity of building need to reduce design and time of

construction and improvement in project performance creates pressure to gets the project

through tradition method. CSF (critical success factor) is very important for successful

completion of the project. Since all activities are interrelated, therefore, very important to

have integrated view of the projects. Six CSF are important as postulated in this paper-

project characteristic, project procedure, project management strategy, project work

atmosphere, project environment and project participants.

Md Mahbubur Rahim (2008) posit the point that majority of research focused on factor

effecting adoption of e procurement but not much of focus of factors effecting adoption of e

procurement by the employee. To find out the factor important for employee adoption of e

Fragmentedd

Integrated

Direct

Indirect

DBB-Design bid build CM -Cost Management MC -Management contract

DB Trunkey

DBO-Design build operate BOO- Build own operate BOT – Build operate transfer DBOM- Design build operate Maintain BOOT- Build own operate transfer DBFO- Design build finance operate

Direct

Indirect


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procurement, researcher has done empirical case study of Australian city council. Below are

the factors affecting employee adoption?

Exhibit4: Identifying factors affecting acceptance of E-procurement systems:

An Initial qualitative study at an Australian City Council By Md Mahbubur Rahim (2008)

Qualitative analysis of case study has established the facts about e procurement adoption by

employee that active support of council management indirectly supported the acceptance

level of employee. Through its influence by factors: employee involvement, customized

training and ease of use.

Onosakponome et al (2011) this research investigate the impact of procurement system on the

performance of East Malaysia construction project in the aspect of time, cost and quality.

Tradition procurement system (TPS) Design and construction carried out by different

companies. In TPS system cost and quality are being achieved but on the cost of time. There

are four stages in TPS:

a) Design build and procurement system (DBPS) single organization is responsible for

design and construction. DBPS achieves the cost and time but not quality.

b) Construction management procurement system (CMPS) All the construction

activities base on fee basis between the client and speciality firm for particular

domain like design, construction etc. DBPS achieves the cost and time but not

quality.

c) Management construction procurement system (MCPS) Construction organization

appoints the professional team during initial stage of a project to provide expertise

of construction management under the direction of contract administration. This fast

track procurement system which overlap the design and construction stage and al-

Management support

Perceived usefulness of e procurement system

E-procurement system eases of use

Employee involvement

Reliability of e procurement system

Customized training for employee Vendor support

Acceptance of e procurement system

Management support

Perceived usefulness of e procurement system

E-procurement system eases of use

Employee involvement

Reliability of e procurement system

Customized training for employee Vendor support

Acceptance of e procurement system

Management support


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lows early alignment of construction process. MCPS achieves the quality as well as

time but on the cost.

Gioconda Quesada et al (2010) defined the research framework on three aspects- e procure-

ment technology usage (EPT), procurement practice (PPR) and procurement performance

(PP). A empirical data shows that EPT has positive impact on PPR. E procurement impacts

on strategically nature in longer terms. Firms pursue better PPR achieve higher level of PP.

Mukhopadhyay et al(2002) explained the operation and strategic benefit of B2B procurement.

A supplier gets the strategic inputs as soon as customer initiates the order process. Fast order

processing is the operation benefit. Research framework explains the three steps approach- 1)

EDI technology adoption 2) Direct strategic and operational impact 3) Longer term strategi-

cally impact.

Shamil Naoum and Charles Egbu(2015) in construction industry various procurement method

has been used like management contracting, project management and design and build. All

the method has been selected on criteria of time, cost and quality. Also depicted the various

trend in procurement method which allow the practitioner to appreciate the key concern in

developing their modern principle and techniques such as supply chain, innovation, lean

construction, sustainability, value engineering and e procurement and BIM (building

information modelling).

Rafikullah Deraman and Abdul Aziz Abdullah(2012) Many of organizations undertaking the

B2B e commerce initiatives. E procurement is one of the initiative that has a far reaching im-

pact on electronic communication, information exchange and business transaction. Driving

factors that promote e procurement can be categorised into four groups- cost, time, quality

and competitive advantage.

Alan Smart (2010) this paper has investigated, the extent of business adoption of e procure-

ment in Design/methodology/ approach. Researcher has developed four level frameworks of

drivers for e procurement adoption:

1) Establish a business case for e procurement

2) Criteria- control, cost, process, suppliers and role

3) Compliance, buying leverage, common process, reduce suppliers number and knowledge

sharing

4) Buy side RTA, Sell side- catalogue, e market/ exchange, reserve auction, e RFX .

T.Baladhandayutham, Shanthi Venkatesh(2015) Macro economic factors such globalization,

rules &regulations, outsourcing and supply market instability are driving more companies to

see procurement as catalyst not only for cost reduction but also for market expansion , prod-

uct innovation and compliance. Enterprises are working hard for optimization and continuous

improvement in supply cost and performance of supply chain. Therefore, increase number of

organizations is transferring towards centre led procurement (CLP). The hybrid model of

CLP comprise of spend leverage, process standardization, procurement automation, knowl-

edge resource sharing, local empowerment and execution characterises of decentralized

model. Since Indian has proposed infrastructure investment of around $1 trillion in twelfth

five year plan (2012-17). This investment will create more infrastructure job and intent lead


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to more of e commerce in India due to poor distribution network in the manufacturing sector

and large demand of construction materials. Success of construction procurement is being

monitored on service, cost and time basis. Mainly two type of procurement methods used by

construction companies:

a) De centralized procurement

b) Centralize procurement

None strategic commodity suited for de centralized procurement and strategic commodity

suited for centralize procurement.

T.Baladhandayutham, Shanthi Venkatesh(2015) explained the hybrid CLP for construction

projects

High R is k / Low Value

Contributes:

5% of Transactions

5% of Value of S pend

Centralized Procurement

at Regional Procurement Dept

Using Hos ted VMI e -Catalogs

High R is k / High Value

Contributes :

5% of Transactions


C enter Led Decision at Corporate,

Centralized e-Sourcing &

e-Procurement at

Regional Procurement Dept

Low R is k / Low Value

Contributes :

10% of Transactions


De-Centralized Procurement

at Projects Using P -Cards and

Procurement Automation

Low R is k / High Value

Contributes :

80% of Transactions


Centralized Procurement at

Regional Procurement Dept using

E -Catalogs, Reverse Auctions

and Procurement Automation

There are major Indian companies like L& T, HCC and Bechtel are using CLP in their con-

struction projects. Success of CLP depends on cross functional team, standard process and

policy, incentives and coordination metric and procurement information systems.

T.Baladhandayutham, Shanthi Venkatesh (2012) B2B has developed the efficient procure-

ment process between the business relationships. Primarily B2B relationship is buy side mar-

ket place. E markets needs to adopt the supplier‟s part in online market place. Common per-

ception of e procurement has explained buyer‟s benefits than suppliers. Many suppliers

forced to e market place, fear to lost trade. Since the surge of growth, the construction indus-

try faces issue of material price fluctuation and limited availability of skill resources. Today

big challenge of construction industry to improve supply chain to improve the efficiency and

effectiveness through innovative project delivery mode and procurement practices.

Study posited the not enough awareness in Kuwait market about e procurement. However,

cost saving is the only perceived factor by construction material buyers in the adoption of e

procurement.


2016 AJMR-AIMA

Supplier‟s adoption is very critical in successful implementation of e procurement. Since

every supplier had different needs, hence, once size fit for all cannot be application in suppli-

er‟s adoption strategy.

Prabir Panda and GP Sahu(2012) adoption of e procurement in government entities to opti-

mise and rationalize the public procurement considered as panacea from all the major issues

like corruption and bureaucratic red- tapism. To achieve the objective of optimization of gov-

ernment procurement, govt. has introduction of National e Governance project (NeGP) in

2006, but e procurement progress has been dismal. Researcher has explained Critical Success

Factor (CSF) for successful implementation of e procurement projects.

a) Top management support; Chhattisgarh and Andhra Pradesh successful implemented

e procurement because of top management support.

b) E-procurement implementation strategy; major focus on existing opportunities, ag-

gregation of demand is very important in government procurement (cost reduction).

c) Business case and project management; proper addressable of inertia of procurement

officers can be address with best case and this success story will ensure the project

management.

d) Business process Re-engineering; redefining all the process will assisting in e pro-

curement project.

e) Technology standard; implementation would undergo all side of the system , it is im-

portant that system should adopt best and well accepted technical, content and

process.

f) Security and authentication; ensure the best security due to financial data and dealing

involved.

g) System integration ; system should integrate with existing system

h) Change management; effective change management plan and training of all the stake-

holder will help to address their concerns.

i) Performance measurement; system objective will clearly spell

j) Training and education

k) Adoption by all the stakeholders

Elena Vitkauskait, Rimantas Gatautis(2008) In European economics construction sector plays

an important role, but the adoption of information communication technology(ICT) is very

low, in spite of potential increase of productivity and efficiency through e business. However,

current selection process of construction SMEs is based on four important factors: e tender-

ing, e site, e procurement and e quality. Now a day‟s construction is moving towards demand

driven sector where in product quality, user requirement and sustainability are much more

important than traditional objective of cost reduction. E procurement is very important proc-

ess to achieve the current pre requisition of construction industry that is demand driven.

Three important steps are followed by e procurement: discovery, evaluation and selection of

appropriate suppliers. Future of e procurement scenario would be based on two steps selec-

tion of suppliers and analysis of quotation & selection of suppliers.

Hashim et al(2014) has investigated resource and capabilities affecting e procurement value

in Malaysian construction firms. Research has taken resource base view (RBV) as well as

capabilities base on framework of technology- organization- environment (TOE). RBV the-


2016 AJMR-AIMA

ory explained technological, organization resource and capabilities with competitive advan-

tages. Two factors very important in e procurement value in construction firms in Malaysia-

IT competencies, trading partner relationship. Below is the conceptual model of e procure-

ment value in construction firms.

Exhibit5: E-Procurement Implementation in Malaysian Construction Industry by Hashim et

al(2014)

Quangdung Tran et al(2014) has done empirical study in Vietnam find out the important fac-

tors in initial adopters of construction firms and construction firms institutionalized the e pro-

curement in developing countries. Researcher has frame the conceptual mode base on tech-

nology- organization-environment (TOE) framework and theory of reasoned action

(TRA).Conceptual model:


2016 AJMR-AIMA

Exhibit6: Initial Adoption Versus Institutionalization of E-Procurement in Construction

Firms: An Empirical Investigation in Vietnam by Quangdung Tran et al(2014)

Factors important-Initial adopters of e

procurement by construction firms

Factors important- Institutionalization propensity

of e procurement by construction firms

Government leadership, legal and regula-

tory infrastructure

Government leadership,

Information technology infrastructure

External business characteristics, Top

management leadership style

Internal business characteristics, Manager ability

and perception

Subjective norms,

As per study the synch between the technology and internal organization characteristics are

very important factors in successful adoption of e procurement by construction firms, other-

wise same set of firms are not able to successfully implement the e procurement because of

no well thought strategy and no proper technology in business strategy.

Conclusions

Below is the conclusion on the above detailed analysis on e -procurement adoption in

construction industry:

a) Construction industry adoption of e procurement is low compare to automotive

industry. Since automotive industry concentrates on mass production and nearly

distribution to similar product. On contrary, construction industry highly customized

and every project is different from other project. Adoption of e procurement can be

improved in construction industry by showing the value gain of manufacturing

industries by using e procurement.

b) Main barriers in adoption of e procurement in construction industry are

organizational, technical, legal aspects

c) Main drivers in adoption of e procurement are transaction & administration cost

saving, reduce time, more transparency, improved communication between suppliers

and buyers.

d) Practitioners can use develop various new techniques like build ability, construction

ability, innovation, lean construction, sustainability and value engineering vario

through critical review of procurement method.

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