E-Procurement

P. FRASER JOHNSON AND ROBERT D.KLASSEN

E-Procurement

is the business-to-business or business-to-consumer orbusiness-to-government purchase and sale of supplies, work, and services through the Internet as well as other information and networking systems, such as electronic data interchange and enterprise resource planning.[1] E-technologies and their applications within the supply chain including use by suppliers, manufacturers and retailers range from the simple automation of long-standing business practices to complex networked real-time linkages. One specific area e-procurement remains critical to building and maintaining competitiveness for manufacturing and service firms. Efficiencies would be-

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improved and procurement costs reduced;

the flow of information along the supply chain enhanced strategic partnerships between networks of firms deepened

E-Procurement compasses of

E-Sourcing. E-Coordination. E-Communities.

E-Sourcing

E-sourcing includes forward and reverse electronic auctions and online bidding and tendering, which are also referred to as electronic requests for quotations or proposals (eRFx). In particular, electronic reverse auctions, in which online sellers compete to offer a product to a single buyer at the lowest possible price, have attracted a great deal of research attention

Benefits of E-sourcing.

Potential benefits of reverse auctions include reducing direct costs, clearly establishing market prices, shortening cycle times and expanding reach, price visibility and market knowledge.
Several key factors support the successful adoption of reverse auctionsClear commodity specifications; large purchase lots sufficient to justify involvement by a number of suppliers; appropriate supply market conditions; and an existing organizational infrastructure

Particularly when potential suppliers experience low-capacity utilization, online reverse auctions can provide a useful way to set price and obtain satisfactory supplier performance.

Most important precondition leading to a successful reverse auction was investing time in the preparation stage to understand clearly the competitive situation in the supply market before conducting the auction

E-Coordination.

E-coordination technologies automate business processes, both within the organization and between a purchaser and existing suppliers.
Examples include electronic purchase-order systems, online catalogues and online linkages with suppliers to exchange information regarding fulfil-ment activities.

Divers for E-Coordination

Outdated information technology systems, Competitive pressures to reduce cost Dissatisfaction with the performance of the supply function by other members of the organization.

Five-stage implementation sequence:

analysis and segmentation of spending Redesign of process.

use of multiple technologies to support new process.

supply-base rationalization and reduction. electronic payments to suppliers.

Benefits of E-Coordination.

cost savings from process improvements and price reductions. greater visibility of orders. improved supplier competition.

Fewer requests for proposals that elicit no bids from suppliers.

E-Communities.

An e-Procurement community is defined as a group of organisations (buyers, suppliers) which use the same IT solution with a common set of electronic procedures for all aspects of the procurement process.
E-community Modelspublic e-marketplaces. industry-sponsored e-marketplaces.

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private exchanges.

E-marketplace adoption was greater for larger firms and whenever managers perceived greater external competitive pressure.

Industry-sponsored e-marketplaces appear suitable when there is an opportunity to leverage technology costs across companies in an industry, and where cross-enterprise collaboration is needed to capture the benefits from redesigning a process,

private exchanges have continued their growth and make sense where there is opportunity for competitive advantage or where there are no public- or industry-sponsored e-marketplaces

Implications for Performance

e-coordination did indeed positively affect performance outcomes, while e-sourcing generally did not. There is not a single solution to successful implementation of e-procurement systems.

found that the barriers to effective e-coordination are created by suppliers, customers and the firm itself.
Implementation must be designed to support the corporate goals and strategies of the individual firm. For example, a low-cost corporate strategy may employ e-sourcing technologies to identify low-cost sources of supply.

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