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CH-five SCIS

Chapter five discusses the concepts of e-procurement, highlighting its broader definition compared to purchasing and its aim to improve performance across the 'five rights of purchasing.' It outlines the benefits of e-procurement, such as reduced costs and enhanced productivity, while also addressing barriers to adoption like supplier competition and organizational resistance to change. The chapter emphasizes the importance of understanding different types of procurement to fully leverage e-procurement systems.

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27 views9 pages

CH-five SCIS

Chapter five discusses the concepts of e-procurement, highlighting its broader definition compared to purchasing and its aim to improve performance across the 'five rights of purchasing.' It outlines the benefits of e-procurement, such as reduced costs and enhanced productivity, while also addressing barriers to adoption like supplier competition and organizational resistance to change. The chapter emphasizes the importance of understanding different types of procurement to fully leverage e-procurement systems.

Uploaded by

tsegaygelase
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter five: Concepts of E-

procurement
 The terms ‘purchasing’ and ‘procurement’ are sometimes used
interchangeably, but as Kalakota and Robinson (2000) point out,
‘procurement’ generally has a broader meaning. ‘Procurement’ refers to all
activities involved with obtaining items from a supplier; this includes
purchasing, but also inbound logistics such as transportation, goods-in and
warehousing before the item is used.
 E-procurement should be directed at improving performance for each
of the ‘five rights of purchasing’ (Baily et al., 1994), which are sourcing
items:
 1 at the right price
 2 delivered at the right time
 3 of the right quality
 4 of the right quantity
 5 from the right source.
Cont’d…
 E-procurement is not new; there have been
many attempts to automate the process of
procurement for the buyer using electronic
procurement systems (EPS), workflow
systems and links with suppliers through
EDI These involved online entry, authorization
and placing of orders using a combination of
data entry forms, scanned documents and e-
mail based workflow.
 It is convenient to refer to these as ‘first-
generation e-procurement’.
 The following Figure is an example of an
electronic procurement system that is
available through a company intranet
Types of procurement

 To understand the benefits of e-procurement, and also to highlight


some of the practical considerations with introducing e
procurement, we need to briefly consider the different types of
items that are obtained by procurement (what is bought?) and types
of ordering (how is it bought?).
 There are two broad categories of procurement: those that relate to
manufacturing of products (production-related procurement) and
operating or nonproduction- related procurement that supports the
operations of the whole business and includes office supplies,
furniture, information systems, MRO goods and a range of
services from catering, buying travel, and professional services
such as consulting and training.
 Raw materials for the production of goods and MRO goods are
particularly important since they are critical to the operation of a
business.
Benefits of e-procurement
 Reduced purchasing cycle time and cost
 Enhanced budgetary control (achieved through rules to limit
spending and improved reporting facilities)
 Elimination of administrative errors (correcting errors is
traditionally a major part of a buyer’s workload)
 Increasing buyers’ productivity (enabling them to concentrate on
strategic purchasing issues)
 Lowering prices through product standardization and consolidation
of buys
 Improving information management (better access to prices from
alternative suppliers and summaries of spending)
 Improving the payment process (this does not often occur currently
since payment is not always integrated into e-procurement systems).
Barriers to adoption of e-
procurement
 The following issues for suppliers which can act as barriers
to e-procurement:
 Competition issues, e.g. in exchanges using collaborative
purchasing
 Possible negative perception from suppliers, e.g. their
margins reduced further from e-auctions
 Negotiated procurement benefits may be shared with other
exchange users who may be competitors
 Creation of catalogues can be a long process and costly to
suppliers
 Culture profile within organizations, e.g. resistance to
change
Thank You

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