1. BPT3133 – PROCUREMENT IN INDUSTRIAL MANAGEMENT
e - PROCUREMENT
BPT3133 – PROCUREMENT IN INDUSTRIAL MANAGEMENT

2. Chapter Outline What is e-procurement? Drivers of e-procurement
The benefits of e-procurement
The current state of e-procurement initiatives
The barriers of adoption
Measuring the benefits of e-procurement
E-Business applications

3. Learning Objective Understand the concept of e-procurement
Identify the benefits and potential barriers to the successful adoption of e-procurement
Explain the applications of e-procurement

4. What is e-Procurement?
“the term used to describe the use of electronic methods in every stage of the buying process from identification of requirement through to payment and potentially to contract management” OR “using the internet to operate the transactional aspects of requisitioning, authorizing, ordering, receipting and payment processes for the required services or products”

5. What is e-Procurement? Key processes in most e-procurement models:
E-sourcing – for contractual processes
tools include e-tendering, e-RFQs (request for quotations) and e-auctions
E-procurement – for transactional processes
tools includes marketplaces using techniques such as e-catalogues
E-payment
tools include virtual or embedded PC (procurement cards), e-invoicing and self-billing

6. e - Procurement

7. Drivers of e-Procurement
Internal and external strategic integration
Globalization and communication
Data information management
New business processes
Replacement of legacy systems
Strategic cost management

8. Benefits of e-Procurement
Reducing purchasing cycle time
Enhancing budgetary control
Eliminating administrative errors
Increasing buyer’s productivity
Lowering prices through product standardization and consolidation of purchasing power
Better information management

9. Benefits of e-Procurement

10. Current State of e-Procurement
Successful of e-procurement initiatives generally occur in two areas:
Procurement of office equipment and supplies using stand-alone desktop requisitioning tools
focus has been on simple, indirect materials sometimes called MRO goods (maintenance, repair and operations)
often failed to integrate with the supply chain and do not enable supply to be matched precisely to demand
Strategic sourcing using e-requests for quotation and for proposal (often jointly known as e-RFX) as well as online auction tools
to lower the input cost of goods and services and the procurement process costs
goods and services can be uniquely defined and categorized

11. Barriers of Adoption
Potential high cost of integrating e-procurement tools with enterprise resource planning (ERP) systems
Difficulty of building a solid business case for another e-procurement project
Current spend by some of the commodities groups is unknown

12. Barriers of Adoption

13. Measuring the Benefits
Principal metrics that will demonstrate a return of investment in e-procurement are:
Hard (direct measurable) benefits:
price savings
process cost reduction
reduction in cycle times (days / weeks)
consequent reductions in inventory holdings (value / stock turnover ratios)
Soft (indirectly measurable) benefits:
increase individual time freed up through more efficient processes
enabling staff to spend more time on value-added aspects such as supplier development or contract management

14. Measuring the Benefits

15. E-Business Applications
Integrate suppliers and distributors
Share information
Link ERP systems to sales personnel in the field
Outsource manufacturing and logistics systems
Facilitate supplier, on-site engineering and maintenance activities.

16. E-Business Applications
Enterprise Systems
ERP Systems

17. Summary
Implementing e-procurement requires systematic planning coupled with process and behavioral changes
Organizations must address the current flawed designs of their existing procurement process and only then build these applications around their re-engineered networks.