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E-Procurement Issues & Perspectives 1 Group 4 Presented By: Narayan Kumar26Sameer Karwal40 Puneet Puri30Saurabh Kumar00 Rahul Soni32Vijay Pratap00 Sachit.

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Presentation on theme: "E-Procurement Issues & Perspectives 1 Group 4 Presented By: Narayan Kumar26Sameer Karwal40 Puneet Puri30Saurabh Kumar00 Rahul Soni32Vijay Pratap00 Sachit."— Presentation transcript:

1 E-Procurement Issues & Perspectives 1 Group 4 Presented By: Narayan Kumar26Sameer Karwal40 Puneet Puri30Saurabh Kumar00 Rahul Soni32Vijay Pratap00 Sachit Bhatia38Kapil Vuthoo 00

2 E-Procurement Issues & Perspectives 2 Group 4 Presentation Flow… Procurement Procurement E-Procurement E-Procurement Benefits Benefits Best Practice Approach Best Practice Approach E-Procurement Models E-Procurement Models Global Perspective Global Perspective Indian Perspective Indian Perspective Challenges & Risks Challenges & Risks Enablers Enablers Trends & Future Trends & Future Conclusion Conclusion Procurement Procurement E-Procurement E-Procurement Benefits Benefits Best Practice Approach Best Practice Approach E-Procurement Models E-Procurement Models Global Perspective Global Perspective Indian Perspective Indian Perspective Challenges & Risks Challenges & Risks Enablers Enablers Trends & Future Trends & Future Conclusion Conclusion

3 E-Procurement Issues & Perspectives 3 Group 4 Procurement Process Planning Tender Notice Receipt of bids Tech bid Evaluation Fin. bid Evaluation Award Receipt of Goods Payment

4 E-Procurement Issues & Perspectives 4 Group 4 What is E-Procurement? Suppliers Buyer Web Based Application Software E-Procurement is the value-added application of Internet and e- commerce solutions to facilitate, integrate and streamline the entire procurement process, from buyer to supplier and back.

5 E-Procurement Issues & Perspectives 5 Group 4

6 E-Procurement Issues & Perspectives 6 Group 4 Supports Online Reverse Auction Supports Online Reverse Auction Core Objectives Of e-procurement Core Objectives Of e-procurement Real Time Monitoring Real Time Monitoring Process Efficiency Process Efficiency New supplier discovery New supplier discovery Cost Reduction Cost Reduction Paper less environment Paper less environment Transparency Benefits of e-Procurement Streamlining Procurement processes

7 E-Procurement Issues & Perspectives 7 Group 4 Benefits of e-Procurement Strategic Benefits Strategic Benefits Align Procurement strategy with procurement Goals Align Procurement strategy with procurement Goals Strengthen Alliances for product innovation Strengthen Alliances for product innovation combining complementary capabilities in discovery and development stage. combining complementary capabilities in discovery and development stage. Exchanging key suppliers with market information Exchanging key suppliers with market information Reduces Risks Reduces Risks Diversify risk with key suppliers for product failure. Diversify risk with key suppliers for product failure. Reduces Spending and Time Reduces Spending and Time 90% Conversion of spot purchasing into contract purchasing 90% Conversion of spot purchasing into contract purchasing Strategic Benefits Strategic Benefits Align Procurement strategy with procurement Goals Align Procurement strategy with procurement Goals Strengthen Alliances for product innovation Strengthen Alliances for product innovation combining complementary capabilities in discovery and development stage. combining complementary capabilities in discovery and development stage. Exchanging key suppliers with market information Exchanging key suppliers with market information Reduces Risks Reduces Risks Diversify risk with key suppliers for product failure. Diversify risk with key suppliers for product failure. Reduces Spending and Time Reduces Spending and Time 90% Conversion of spot purchasing into contract purchasing 90% Conversion of spot purchasing into contract purchasing

8 E-Procurement Issues & Perspectives 8 Group 4 Cost Benefits Cost reduction by 10% * Cost reduction by 10% * e-Tender, e-Auction and e-Contract Management e-Tender, e-Auction and e-Contract Management Avoid grouping of Bidders Avoid grouping of Bidders Avoid Mafia Avoid Mafia User friendly and paperless procurement process User friendly and paperless procurement process Savings in processing time by 30% - 40% * Savings in processing time by 30% - 40% * From e-Indent to decision making From e-Indent to decision making * (As per the report of PWC) Cost reduction by 10% * Cost reduction by 10% * e-Tender, e-Auction and e-Contract Management e-Tender, e-Auction and e-Contract Management Avoid grouping of Bidders Avoid grouping of Bidders Avoid Mafia Avoid Mafia User friendly and paperless procurement process User friendly and paperless procurement process Savings in processing time by 30% - 40% * Savings in processing time by 30% - 40% * From e-Indent to decision making From e-Indent to decision making * (As per the report of PWC)

9 E-Procurement Issues & Perspectives 9 Group 4

10 E-Procurement Issues & Perspectives 10 Group 4 Supplier Selection Best Practice BenefitsChallenges E-procurement Solution Feature Able to generate prospective list of suppliers from existing database Drastically cut time and logistics bills Lack of data aggregation, Cleansing and analytical capabilities Category Management, Search Capabilities and friendly user interface Accurate evaluation of suppliers based on multiple factors with attached documents Cuts time and cost in evaluation and reduce bias in supplier selection Difficulty in defining and integrating quantitative and qualitative parameters Portals for better internal collaboration, integration tools and analytics to evaluate bid options

11 E-Procurement Issues & Perspectives 11 Group 4 Contract Management Best Practice BenefitsChallenges E-procurement Solution Feature Clear definition of roles of people, process and standards Brings Accountability, Sets Standards reduces maverick spending, cuts overheads Resistance to change Resistance to change Change Management Change Management Contract Compliance tools Contract Compliance tools Standards and targets for contract set Improves performance Lack of Analytics to measure performance Contract evaluation Strong external compliance To ensure reliability and compliance of appropriate contract terms Inability to real time tracking and communication with suppliers Portals for real time communication. Portals for real time communication. Automatic triggering of events Automatic triggering of events Strong internal compliance Reduce Maverick spending Lack of purchase standards and manual errors Automation of events to eliminate manual errors.

12 E-Procurement Issues & Perspectives 12 Group 4 Procurement Process Best Practice BenefitsChallenges E-procurement Solution Feature Automation of possible Procurement activities: From Purchase requisition to payment. Dramatically cuts time and cost and increases reliability Lack of coordination of departments and segregated data and documents and Supplier Behavior Lack of coordination of departments and segregated data and documents and Supplier Behavior Portals both for internal as well as external communication Portals both for internal as well as external communication Integration of applications Integration of applications

13 E-Procurement Issues & Perspectives 13 Group 4

14 E-Procurement Issues & Perspectives 14 Group 4 Buyer-Centric E-Procurement Model The buyer is at the hub with suppliers connected at the end of the spokes

15 E-Procurement Issues & Perspectives 15 Group 4 Buyer-Centric E-Procurement Model Buying Organization Implements Software Obtains Catalogue Data Aggregates Data Single Catalogue

16 E-Procurement Issues & Perspectives 16 Group 4 Seller-Centric E-Procurement Model The seller is the centre of the hub, with buyers connected at the spokes Buyer Use Suppliers Internet Browses Catalogue Places Orders

17 E-Procurement Issues & Perspectives 17 Group 4 System', provided by a third party, is at the hub Buying and selling organizations trade The common marketplace Hosts Supplier Catalogues provides electronic transaction capabilities E-Market Place

18 E-Procurement Issues & Perspectives 18 Group 4 Buyers implement software Maintain Local Catalogue Access Suppliers Catalogue Open Trading Environment Model Suppliers are Free to Choose Maintain Catalogue or Marketplace Visible to Widest Possible Market Flexibility

19 E-Procurement Issues & Perspectives 19 Group 4

20 E-Procurement Issues & Perspectives 20 Group 4 E-Procurement – Global Phenomena E-Procurement is not a local phenomena but a global one, E-Procurement is not a local phenomena but a global one, Enabled global sourcing Enabled global sourcing of goods and services of goods and services Reduction of Costs Reduction of Costs Breaking Trade Barriers Breaking Trade Barriers Reduction in Agents Reduction in Agents Benchmark Report –04 by Aberdeen Group indicates the following Benchmark Report –04 by Aberdeen Group indicates the following Reduced requisition-to-order cycles by 66% Reduced requisition-to-order cycles by 66% Cost Reduction : up to 25% or more Cost Reduction : up to 25% or more E-Procurement is not a local phenomena but a global one, E-Procurement is not a local phenomena but a global one, Enabled global sourcing Enabled global sourcing of goods and services of goods and services Reduction of Costs Reduction of Costs Breaking Trade Barriers Breaking Trade Barriers Reduction in Agents Reduction in Agents Benchmark Report –04 by Aberdeen Group indicates the following Benchmark Report –04 by Aberdeen Group indicates the following Reduced requisition-to-order cycles by 66% Reduced requisition-to-order cycles by 66% Cost Reduction : up to 25% or more Cost Reduction : up to 25% or more

21 E-Procurement Issues & Perspectives 21 Group 4 E-Procurement – Europe Adoption from year 2000 Adoption from year 2000 E-procurement accounts for 33% of E-business activities. E-procurement accounts for 33% of E-business activities. UK is the most prominent player in Europe. UK is the most prominent player in Europe. Followed by Nordics, Switzerland, the Netherlands. Followed by Nordics, Switzerland, the Netherlands. Germany and France less dominating role in B2B ecommerce, Germany and France less dominating role in B2B ecommerce, Adoption from year 2000 Adoption from year 2000 E-procurement accounts for 33% of E-business activities. E-procurement accounts for 33% of E-business activities. UK is the most prominent player in Europe. UK is the most prominent player in Europe. Followed by Nordics, Switzerland, the Netherlands. Followed by Nordics, Switzerland, the Netherlands. Germany and France less dominating role in B2B ecommerce, Germany and France less dominating role in B2B ecommerce,

22 E-Procurement Issues & Perspectives 22 Group 4 E-Procurement – Asia Adoption from year 2002 Adoption from year 2002 E-procurement mostly in private businesses. E-procurement mostly in private businesses. South Asians countries (Spore,Malaysia,Thailand) topmost users. South Asians countries (Spore,Malaysia,Thailand) topmost users. Followed by Japan & Korea. Followed by Japan & Korea. India – Increasing rapidly India – Increasing rapidly China – Its growing China – Its growing

23 E-Procurement Issues & Perspectives 23 Group 4 Lumen AG Company Company commercial lighting repair company commercial lighting repair company 8 locations in Europe, 8 locations in Europe, Problem Problem streamline its purchasing process streamline its purchasing process for both repair parts and ordinary office supplies and materials. for both repair parts and ordinary office supplies and materials. Wait Time > 1 week Wait Time > 1 week Central purchasing group spent time chasing paper Central purchasing group spent time chasing paper No focus on locating new suppliers No focus on locating new suppliers and securing better prices and terms. and securing better prices and terms.

24 E-Procurement Issues & Perspectives 24 Group 4 Lumen AG Solution Solution An Internet-based e-procurement system An Internet-based e-procurement system Empowering staff Empowering staff Distributed Delivery Distributed Delivery Central purchasing group was relieved of overseeing transactions below a set threshold. Central purchasing group was relieved of overseeing transactions below a set threshold. Direct real-time link to suppliers Direct real-time link to suppliers Increased flexibility Increased flexibility Purchasing authority for dispersed employees, Purchasing authority for dispersed employees, Simplified buying processes Simplified buying processes

25 E-Procurement Issues & Perspectives 25 Group 4 FORDFORD Company Company Auto manufacturer Auto manufacturer Locations Worldwide Locations Worldwide Problem Problem High Purchase costs High Purchase costs Lot of procedures & processes Lot of procedures & processes Tedious approval process Tedious approval process Solution – E-Procurement System Solution – E-Procurement System New purchasing process, New purchasing process, Empowerment of Employee to place orders online. Empowerment of Employee to place orders online. Purchase approval in minutes Purchase approval in minutes Cost Cutting by 30%. Cost Cutting by 30%.

26 E-Procurement Issues & Perspectives 26 Group 4 LabinalLabinal Company Company an automotive and aeronautics group an automotive and aeronautics group Problem Problem High Purchase costs High Purchase costs Lot of procedures & processes Lot of procedures & processes Indirect purchases Indirect purchases Solution – E-Procurement System Solution – E-Procurement System Web Based Tool, Web Based Tool, More efficient than manual process More efficient than manual process 25% reduction in non-production procurement cost 25% reduction in non-production procurement cost Halved unit acquisition costs. Halved unit acquisition costs.

27 E-Procurement Issues & Perspectives 27 Group 4 CompranetCompranet Company Company A Mexican Government Initiative A Mexican Government Initiative Problem Problem No consistent controls on purchases No consistent controls on purchases procurement processes were costly procurement processes were costly plagued by corruption; plagued by corruption; acquisitions were overpriced; acquisitions were overpriced; suppliers were concentrated in the Mexico City area. suppliers were concentrated in the Mexico City area. Solution – E-Procurement System Solution – E-Procurement System Web-based on-line procurement system Web-based on-line procurement system Variety of hardware and software. Variety of hardware and software. government suppliers can submit their proposals via the Web site. government suppliers can submit their proposals via the Web site. Increased transparency Increased transparency

28 E-Procurement Issues & Perspectives 28 Group 4 GlaxoSmithKlineGlaxoSmithKline Company Company Research-based pharmaceutical company Research-based pharmaceutical company 80 manufacturing sites in 37 countries 80 manufacturing sites in 37 countries 24 research and development centers globally. 24 research and development centers globally. Annual revenues total $37.2 billion Annual revenues total $37.2 billion Problem Problem GSK relied on paper catalog and phone communication GSK relied on paper catalog and phone communication Waste valuable time scientists Waste valuable time scientists Archaic buying process Archaic buying process No benefit of negotiated deals with suppliers. No benefit of negotiated deals with suppliers. GSK needed a way to make the most of their GSK needed a way to make the most of their

29 E-Procurement Issues & Perspectives 29 Group 4 GlaxoSmithKlineGlaxoSmithKline Solution Solution Solution contract compliance improved > 20% Solution contract compliance improved > 20% supplier content directly allowed GSK supplier content directly allowed GSK saving more than $500,000 a year. saving more than $500,000 a year. streamlined GSKs procurement process streamlined GSKs procurement process Manual purchase orders have been eliminated, Manual purchase orders have been eliminated,

30 E-Procurement Issues & Perspectives 30 Group 4 Rolls-RoyceRolls-Royce Company Company Leading producer of power systems Leading producer of power systems Operates in 4 global markets civil aerospace, defense aerospace, marine, and energy. Operates in 4 global markets civil aerospace, defense aerospace, marine, and energy. Problem Problem Large quantity of non-value-added products Large quantity of non-value-added products Poor Visibility into annual spending on low value goods & services Poor Visibility into annual spending on low value goods & services No Consolidation based on Suppliers No Consolidation based on Suppliers Humongous paperwork Humongous paperwork Manual Key Entries of records leading to inefficiencies Manual Key Entries of records leading to inefficiencies

31 E-Procurement Issues & Perspectives 31 Group 4 Rolls-RoyceRolls-Royce Solution Solution web-based catalog-ordering system web-based catalog-ordering system Direct purchasing Direct purchasing No pre-approvals No pre-approvals No involvement of purchase department for non vale added goods No involvement of purchase department for non vale added goods Supplier base rationalized (5000 reduced to 10) Supplier base rationalized (5000 reduced to 10) Development of strategic partnerships with suppliers Development of strategic partnerships with suppliers Reduction in inventory stock value levels Reduction in inventory stock value levels

32 E-Procurement Issues & Perspectives 32 Group 4

33 E-Procurement Issues & Perspectives 33 Group 4 MetalJunction.comMetalJunction.com Re-engineering of the buying and selling

34 E-Procurement Issues & Perspectives 34 Group 4 MetalJunction.comMetalJunction.com Split into 2 Major Business Units (Commercejunction and Metaljunction) Split into 2 Major Business Units (Commercejunction and Metaljunction) Specific Requirements of Clients/Customers Specific Requirements of Clients/Customers Specific procedures for both the functions Specific procedures for both the functions Knowledge and Information management for the two functions Knowledge and Information management for the two functions Benefits given by various facets of MetalJunction: Benefits given by various facets of MetalJunction: e-Procurement : Cost Saving of 5.96% e-Procurement : Cost Saving of 5.96% e-Selling : Reduction of Cycle Time e-Selling : Reduction of Cycle Time e-Collection : Better Cash Management e-Collection : Better Cash Management Channel finance : Finance Generated in 2003 Rs 262 Cr. Channel finance : Finance Generated in 2003 Rs 262 Cr. Split into 2 Major Business Units (Commercejunction and Metaljunction) Split into 2 Major Business Units (Commercejunction and Metaljunction) Specific Requirements of Clients/Customers Specific Requirements of Clients/Customers Specific procedures for both the functions Specific procedures for both the functions Knowledge and Information management for the two functions Knowledge and Information management for the two functions Benefits given by various facets of MetalJunction: Benefits given by various facets of MetalJunction: e-Procurement : Cost Saving of 5.96% e-Procurement : Cost Saving of 5.96% e-Selling : Reduction of Cycle Time e-Selling : Reduction of Cycle Time e-Collection : Better Cash Management e-Collection : Better Cash Management Channel finance : Finance Generated in 2003 Rs 262 Cr. Channel finance : Finance Generated in 2003 Rs 262 Cr.

35 E-Procurement Issues & Perspectives 35 Group 4 CDACs etradehub.in Government department, PSUs can use Government department, PSUs can use e-tendering e-tendering e-Auctions e-Auctions Rate Contracts Rate Contracts Post Contract Management Post Contract Management etradehub supports the following procurement routes etradehub supports the following procurement routes e-tendering (supports all types of tenders) e-tendering (supports all types of tenders) e-Auction (supports all types of auction) e-Auction (supports all types of auction) e-Rate Contracts (Catalogue based Procurement) e-Rate Contracts (Catalogue based Procurement) Government department, PSUs can use Government department, PSUs can use e-tendering e-tendering e-Auctions e-Auctions Rate Contracts Rate Contracts Post Contract Management Post Contract Management etradehub supports the following procurement routes etradehub supports the following procurement routes e-tendering (supports all types of tenders) e-tendering (supports all types of tenders) e-Auction (supports all types of auction) e-Auction (supports all types of auction) e-Rate Contracts (Catalogue based Procurement) e-Rate Contracts (Catalogue based Procurement)

36 E-Procurement Issues & Perspectives 36 Group 4 Benefits of etradhub.in Buyers end Buyers end facilitates tendering authority to create online tender facilitates tendering authority to create online tender including technical bid and financial bid including technical bid and financial bid After receiving bids, software performs the evaluation task After receiving bids, software performs the evaluation task Result of tender evaluation can be viewed on the web. Result of tender evaluation can be viewed on the web. Supplier end Supplier end facilitates the bidders to download the tender document facilitates the bidders to download the tender document attend pre bid meeting electronically attend pre bid meeting electronically submission of EMDs thru secured payment gateway submission of EMDs thru secured payment gateway submission of digitally signed technical bid and financial bid submission of digitally signed technical bid and financial bid Buyers end Buyers end facilitates tendering authority to create online tender facilitates tendering authority to create online tender including technical bid and financial bid including technical bid and financial bid After receiving bids, software performs the evaluation task After receiving bids, software performs the evaluation task Result of tender evaluation can be viewed on the web. Result of tender evaluation can be viewed on the web. Supplier end Supplier end facilitates the bidders to download the tender document facilitates the bidders to download the tender document attend pre bid meeting electronically attend pre bid meeting electronically submission of EMDs thru secured payment gateway submission of EMDs thru secured payment gateway submission of digitally signed technical bid and financial bid submission of digitally signed technical bid and financial bid

37 E-Procurement Issues & Perspectives 37 Group 4 Govt. of Andhra Pradesh

38 E-Procurement Issues & Perspectives 38 Group 4

39 E-Procurement Issues & Perspectives 39 Group 4

40 E-Procurement Issues & Perspectives 40 Group 4 All Around Benefit Advantage to Govt. Advantage to Govt. In First Year of implementation : Tender Cycle Time reduced from 90 to 135 days In First Year of implementation : Tender Cycle Time reduced from 90 to 135 days Average reduction of 20% in cost Average reduction of 20% in cost Advantage to Private Party Advantage to Private Party Receives 0.24% as transaction fees on the total volume of each project Receives 0.24% as transaction fees on the total volume of each project Advantage to Bidder/ Supplier Advantage to Bidder/ Supplier Real time availability of tender status Real time availability of tender status Single Window contact for all information Single Window contact for all information

41 E-Procurement Issues & Perspectives 41 Group 4 Anand Group 33 Plants in 8 States 33 Plants in 8 States Decentralized Operations till 2004 Decentralized Operations till 2004 E-Procurement Initiative E-Procurement Initiative Centralized procurement of Key commodities Centralized procurement of Key commodities Centralized vendor selection Centralized vendor selection E-sourcing via Baazi.com E-sourcing via Baazi.com Procurement worth Rs Cr Procurement worth Rs Cr Savings realized 7 – 8% Savings realized 7 – 8%

42 E-Procurement Issues & Perspectives 42 Group 4 E-Procurement - Challenges Commitment of Top Management Commitment of Top Management Change Management Issues Change Management Issues Inability to Capture Required Benefits Inability to Capture Required Benefits Cost & Time Overrun Cost & Time Overrun Computerized Auditing Computerized Auditing Commitment of Top Management Commitment of Top Management Change Management Issues Change Management Issues Inability to Capture Required Benefits Inability to Capture Required Benefits Cost & Time Overrun Cost & Time Overrun Computerized Auditing Computerized Auditing

43 E-Procurement Issues & Perspectives 43 Group 4 E-Procurement - Risks Confidentiality Confidentiality Proving to buyers that the personal information will remain confidential Proving to buyers that the personal information will remain confidential Integrity Integrity Proving to buyers that the sellers are who they say they are Proving to buyers that the sellers are who they say they are Authentication & Non-Repudiation Authentication & Non-Repudiation Seller will not be able to refute the occurrence of a valid transaction Seller will not be able to refute the occurrence of a valid transaction Availability – 24 x 7 Availability – 24 x 7 Confidentiality Confidentiality Proving to buyers that the personal information will remain confidential Proving to buyers that the personal information will remain confidential Integrity Integrity Proving to buyers that the sellers are who they say they are Proving to buyers that the sellers are who they say they are Authentication & Non-Repudiation Authentication & Non-Repudiation Seller will not be able to refute the occurrence of a valid transaction Seller will not be able to refute the occurrence of a valid transaction Availability – 24 x 7 Availability – 24 x 7

44 E-Procurement Issues & Perspectives 44 Group 4 Enablers : Design Factors Technology Technology Security Mechanism Security Mechanism Procurement process knowledge base Procurement process knowledge base Integration with other Systems (Payment Gateways, Suppliers systems, MRPs etc) Integration with other Systems (Payment Gateways, Suppliers systems, MRPs etc) Audit Trail Mechanisms Audit Trail Mechanisms Notification Mechanisms Notification Mechanisms Technology Technology Security Mechanism Security Mechanism Procurement process knowledge base Procurement process knowledge base Integration with other Systems (Payment Gateways, Suppliers systems, MRPs etc) Integration with other Systems (Payment Gateways, Suppliers systems, MRPs etc) Audit Trail Mechanisms Audit Trail Mechanisms Notification Mechanisms Notification Mechanisms

45 E-Procurement Issues & Perspectives 45 Group 4 E-Procurement - Trends & Future Finding Suppliers - Reverse auctions Finding Suppliers - Reverse auctions Managing Suppliers - Supplier relationship management (SRM) Managing Suppliers - Supplier relationship management (SRM) Inventory tracking (e.g. RFID..) integrated with procurement through software applications. Inventory tracking (e.g. RFID..) integrated with procurement through software applications. Finding Suppliers - Reverse auctions Finding Suppliers - Reverse auctions Managing Suppliers - Supplier relationship management (SRM) Managing Suppliers - Supplier relationship management (SRM) Inventory tracking (e.g. RFID..) integrated with procurement through software applications. Inventory tracking (e.g. RFID..) integrated with procurement through software applications.

46 E-Procurement Issues & Perspectives 46 Group 4ConclusionConclusion E-procurement system must be an integral part of any companys supply chain and corporate strategy to enable it to sustain its competitive advantage.


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