Slide 7 1 CHAPTER 7 EPROCUREMENT Dave Chaffey

Slide 7. 1 CHAPTER 7 E-PROCUREMENT Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 2 Learning outcomes Identify the benefits and risks of e-procurement Analyze procurement methods to evaluate cost savings Assess different options for integration of organizations’ information systems with e-procurement suppliers. Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 3 Management issues What benefits and risks are associated with e-procurement? Which method(s) of e-procurement should we adopt? What organizational and technical issues are involved in introducing e-procurement? Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 4 How important is procurement? We estimate that for every dollar a company earns in revenue, 50 cents to 55 cents is spent on indirect goods and services – things like office supplies and computer equipment. That half dollar represents an opportunity: By driving costs out of the purchasing process, companies can increase profits without having to sell more goods. Hildebrand (2002) Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 5 What is e-procurement? The electronic integration and management of all procurement activities including purchase request, authorization, ordering, delivery and payment between a purchaser and a supplier Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 6 The 5 rights of E-procurement at the right price delivered at the right time are of the right quality of the right quantity from the right source. Baily et al. , 1994 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Figure 7. 1 Key procurement activities within an organization

Figure 7. 2 Electronic procurement system Source: Tranmit plc

Slide 7. 9 Types of procurement Production-related procurement Non-production related procurement How items are bought: Systematic sourcing Spot sourcing Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 10 Drives of e-procurement Cost reduction Enhanced budgetary control Elimination of administrative errors Increasing buyer’s productivity Improving information management Improving the payment process Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 11 Risks and impact of eprocurement Organizational risks Need to redeploy staff Technology risks Integration with existing financial systems Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Slide 7. 12 Implementing e-procurement Stock control system CD/web-based catalogue E-mail/workflow system Order-entry on web site Accounting systems ERP systems Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Use of different information systems for different aspects of the fulfilment cycle Figure 7. 3

Figure 7. 4 E-mail notification of requisition approval Source: Tranmit plc

Document management software for reconciling supplier invoice with purchase order data Figure 7. 5 Source: Tranmit plc

Figure 7. 6 The three main e-procurement model alternatives for buyers

Table 7. 6 Assessment of the procurement model alternatives for buyers

Figure 7. 7 Integration between e-procurement systems and catalogue data

Figure 7. 8 An online catalogue of items for purchase Source: Tranmit plc

Figure 7. 9 Ford supplier portal provided by Covisint Source: Covisint. com

Figure 7. 10 Supplier Route to Government Portal (www. supply 2. gov. uk)

Slide 7. 22 Government marketplace exchanges Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007

Types of marketplace Types of B 2 B marketplaces identified by Kaplan and Sawhney (2000) with examples Table 7. 7 Source: Adapted and reprinted by permission of Harvard Business Review from table on p. 99 from ‘E-hubs: the new B 2 B marketplaces , ’ by Kaplan, S. and Sawhney, M. , in Harvard Business Review, May–June 2000. Copyright © 2000 by the Harvard Business School Publishing Corporation, all rights reserved