B.

TECH IV Year I Semester CSE

C. E-COMMERCE (A6682)
(Open Elective) - VCE-R20
UNIT-5
E-Procurement

VARDHAMAN COLLEGE
OF ENGINEERING
(AUTONOMOUS)
Shamshabad – 501218, Hyderabad, AP
 Course Overview
 The tremendous growth of the Internet and World Wide Web is having
great impact on businesses, governments and individuals throughout
the world.
 In this course, we will attempt to understand the phenomena,
technological, economic and social, behind these rapid changes, and
how organizations successfully conduct Internet-based activities.
 We will also study some of the technology of the Internet.
 This course provides an overview of e-commerce from both
technological and managerial perspectives.
 It introduces e-commerce frameworks, and technological foundations;
and examines basic concepts such as strategic formulation for e-
commerce enterprises, management of their capital structures and
public policy.
 It is particularly important that the student place a great deal of
emphasis in understanding the different E-Commerce system design
principles.

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 UNIT – 5 CONTENTS

E-PROCUREMENT:

• What is e-procurement

• Drivers of e-procurement

• Focus on estimating e-procurement cost

• Implementing e-procurement

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 E-PROCUREMENT
4.1 What is e-procurement
 Electronic procurement (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.
 Electronic procurement system (EPS): An electronic system used to
automate all or part of the procurement function by enabling the
scanning, storage and retrieval of invoices and other documents;
management of approvals; routing of authorization requests;
interfaces to other finance systems; and matching of documents to
validate transactions.
 Understanding the E-procurement process flow analysis:
1) Search for goods 20 min
2) Order on web 10 min
3) Delivery from supplier 1 day
4) Generate invoice 10 min
5) Cheque payment 10 min
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 Types of procurement
 There are two broad categories of procurement:
1) Production-related procurement: those that relate to manufacturing of
products and
2) Operating or nonproduction: related procurement that supports the
operations of the whole business and includes office supplies,
furniture, information systems, Maintenance, Repairs and Operations
(MRO) goods and a range of services from catering, buying travel, and
professional services such as consulting and training.

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 4.2 Drivers of e-procurement
Dimensions of e-procurement
1) Planning – the potential for an e-procurement system to increase the
quality and dissemination of management information about e-
procurement.
2) Development – e-procurement systems can potentially be
incorporated early in new product development to identify
manufacturing costs.
3) Inbound – the main focus of e-procurement with efficiency gains
from paperless transactions and more cost-effective sourcing possible
through hubs or marketplace.
4) Production – the integration of systems managing manufacture with
the procurement systems used to ensure that manufacturing is not
limited by poor availability of parts.
5) Outbound – management of fulfilment of products to customers.

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 Benefits of e-procurement
Benefits of e-procurement as follows:
 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 themto 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).

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 4.3 Focus on estimating e-procurement cost
 To calculate cost savings from e-procurement we perform the
following calculation:
 Savings = No. of requisitions × (Original cost – New cost)
The impact of cost savings on profitability:
 The cost savings achieved through e-procurement may have a
significant effect on profitability.
 The savings will vary between companies according to their buying
characteristics.
 The largest savings and impact on profitability will typically be for
manufacturing companies in which procurement is a major cost
element and there are many requisitions for relatively low-value items.
 Service industries have lower potential for savings. The consequence
for this is that there will be a wide variation in potential savings
according to industry.

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 4.4 Implementing e-procurement
 Implementing e-procurement has the challenges of change
management associated with any information system.
 Figure shows how different types of information system cover
different parts of the procurement cycle.

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 Different types of information system
 The different type of systems are as follows.
 Stock control system– this relates mainly to production-related
procurement; the system highlights when reordering is required when
the number in stock falls below reorder thresholds.
 CD or web-based catalogue – paper catalogues have been replaced by
electronic forms that make it quicker to find suppliers.
 E-mail- or database-based workflow systems integrate the entry of the
order by the originator, approval by manager and placement by buyer.
The order is routed from one person to the next and will wait in their
in box for actioning. Such systems may be extended to accounting
systems.
 Order-entry on web site – the buyer often has the opportunity to order
directly on the supplier’s web site.
 Accounting systems – networked accounting systems enable staff in
the buying department to enter an order which can then be used by
accounting staff to make payment when the invoice arrives.
 Integrated e-procurement or ERP systems – these aim to integrate all
the facilities above and will also include integration with supplier1s5’
systems.
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