Lecture 01-Introduction

Agenda
• Introduction.
• Definition of E-Procurement.
• Forms of E-Procurement.
• E-Procurement and the Procurement Process.
• EP and the Supply chains
• Business implications
• Conclusions.
Introduction
Before 1998, the word ‘E-
Procurement’ did not exist, but more
and more Purchasers used the
Internet for getting information from
external sources.
- i.e. 'Surfing’.
The Internet was not used yet for
Business transactions
The Beginning of ‘E-Procurement’
• ‘E-Procurement’ a ‘young’ aspect of Procurement.
• In 1998, the word ‘E-Procurement’ was born (Telgen 2003).

E-Procurement: Using Internet Technology

in the Procurement Process
The Procurement Process: A brief
Review….
• Stages:
• Specification
• Supplier Selection
• Contracting
• Monitoring
• Expediting
 Process….

• Stages Combined……

Specification Selection Contracting Monitoring Expediting

E-Procurement: How….?
• It means…..

All the Processes (Sub-Processes),

or activities or stages of the Procurement
Process are Performed using
Internet Based Systems.

Electronic Procurement is a way of using the Internet to make it

easier, faster and less expensive for Business to purchase the goods and
services they require.
[easier = Simple, faster =less time, less expensive = reduced costs]
 E-Procurement in relation to E-Commerce..

• E-Procurement: E-Commerce from the Purchasing

Perspective.

Electronic Business (E-Business)

E-Procurement
E-Commerce
-E-marketing
-E-Sales
E-Procurement Forms
E-Procurement forms
• Facts…..??

 Several forms: Considering the

Procurement Process activities and related
demands for efficiency and Effectiveness.
 As many forms as the number of activities
involved in……!!
Forms of E-Procurement
• e-Sourcing
• e-Ordering
• e-Web based ERP
• e-Tendering
• e-Reverse Auctioning
• e-Contracting
• e-Contract Management
• e-Collaboration
• e.t.c. …
Defining E-Procurement Forms: E Sourcing
• E-Sourcing
• Specifying needs,
• Finding new suppliers for spend categories,
• Contacting suppliers (e-mail/hyperlink)
• Using a Sourcing Catalog System with:
-as many suppliers as possible
-as many goods and services as possible
- Against list prices.
Defining e-Procurement forms: e-sourcing
• Effects of e-Sourcing.
• Improved quality of programme of requirements
• Decrease of Purchasing price (combined with
possible increase of Logistical costs)
• Decrease of supply risk (related to Kraljic’s Matrix).
• Increase of supplier risk (language, Culture, Money,
geography, e.t.c. ……)
• Improved way of getting information
• Increase of Internal Client satisfaction for unusual
operational needs.
• More (honest) competition between suppliers
• e.t.c.
Defining e-procurement forms: e-tendering
• E-tendering
• Developing the RFIs/ RFPs
• Determining the assessment criteria
(supplier and bid related)
• Selected suppliers for the RFI/RFP (long list)
• Sending out RFIs /RFPs ARIBA
ARIBA
• Receiving information from suppliers
• Assessing information/proposals
• Selecting suppliers (short list, preferred
suppliers)
ORACLE ARIBA
TED (Tenders Electronic Daily) is the online version of the
'Supplement to the Official Journal' of the EU, dedicated to
European public procurement.
TED publishes 520 thousand procurement notices a year,
including 210 thousand calls for tenders which are worth
approximately €420 billion.
TED provides free access to business
opportunities from the European Union, the
European Economic Area and beyond.
Every day, from Tuesday to Saturday, a further
2,000 public procurement notices are published
on TED.

You can browse, search and sort procurement

notices by country, region, business sector and
more.
Information about every procurement document
is published in the 24 official EU languages.

All notices from the EU's institutions are

published in full in these languages.
Defining e-procurement forms: e-tendering
• Effects of e-tendering
• More efficiency in the tactical purchasing process.
• Less direct/personal contact between buying organisation
and supplier.
• Decrease of lead time in tactical purchasing process.
• 25% to 30% reduction of lead time (Aberdeen)
• Improved time management of tendering procedures.
• Equal treatment of suppliers.
• Increased objectivity in the tendering process.
• Reduction in (legal) errors.
• A clear audit trail.
• e.t.c. …
Defining e-procurement forms:
e-reverse auctions
• e-reverse auctions
• Interactively bidding on goods and services.
• Using an e-reverse auction system.

• Note that:
• e-reverse auctioning has online competition.
• e-reverse auctioning usually focuses mainly
on the price of the goods or services needed.
• e-reverse auctioning usually has a shorter
time frame.
B2B B2E
Defining e-procurement forms:
e-reverse auctioning
• Effects of e-reverse auctions
• Increased efficiency of (price) negotiations.
• Improved usage of blanket contracts
• Increase of market transparency
• Disturbed supplier relationships.
• e.t.c. …
Defining e-procurement forms: e-ordering
• E-Ordering
• requisitioning., approving, ordering, monitoring,
receiving, ……
• Indirect goods and services
• Initiated by employees
• Using an ordering catalog system that contains:
• Selected suppliers
• Selected goods and services
• Contract prices
Defining e-procurement forms: e-ordering
• e-ordering
• Indirect goods and services

Purchasing Purchasing Internal

Volume Volume Purchasing costs

Direct
Direct Direct

Scope
indirect
indirect of
indirect reordering

Perception Reality Forgotten reality

Defining e-Procurement forms: e-ordering
• E-ordering
• Indirect goods and services

Direct
Direct
Scope
Of indirect
indirect E-ordering
Examples:
Examples:
-Xerox
-Xerox~~$$1.3
1.3
bn
bn
-Philips
-Philips~~$$88bn
bn Reality Forgotten reality
-Ford
-Ford ~~$$16 16bn
bn
Defining e-procurement forms: e-ordering

Many ………………………to one………………………. to many

• How ….? Suppliers

Market Site
Defining e-Procurement forms: e-ordering
• Effects of e-ordering
• Increase of contract compliance
- 40% of Purchasing is not contract based.
- Using contracts decreases the purchase
price paid by
- 5 to 10 % (Aberdeen Group)
- 5 to 25 % (AMR, Tradematrix)
-59 % of interviewed companies indicate
up to 10% reduction (Angeles).
Effects of e-ordering
• Increased process efficiency
• Reduction in Purchasing process costs (call of process costs)
• 73 % reduction in process costs (Aberdeen)
• 44 to 50% reduction in process costs (Bogaschewsky, Davila)
• e.t.c ….
Effects of e-ordering
• Decrease of lead times
• Increased flexibility
• 70 to 80 % reduction in purchase order processing cycles
(Aberdeen)
• 20 to 50 % reduction in inventory costs
Effects of e-ordering..
• Increase of procurement control
• 5 to 15 % reduction in purchasing costs identified (Forrester).
• Better management of complete Purchasing Volume.
• Decentralisation of call off process.
• Spread of Purchasing knowledge
• Increased Internal Customer satisfaction

An average midsize
organisation can expect to save
So What…..?
About $2million per year
Defining e-procurement forms: e-market
places; from an organisational perspective.
• E-market places

Buying organisation 1
Supplier 1
Buying organisation 2
Supplier 2 e-market place

Buying Organisation 3
Supplier 3
Buying Organisation 4
 Defining e-Procurement forms:
e-market place
• Effects of e-market places
• All the effects that are related to each of the forms of e-
procurement.
• Organisation of market and market information
• One electronic meeting point
• One electronic information point
Defining e-procurement forms:
Purchasing Intelligence
• Supporting the realisation of Purchasing objectives by:
• Establishing relevant KPIs (Key Performance
Indicators).
• -formula
• -Data used (system, record, field)
• -time stamp of Data (monthly, weekly, real time….)
• target values
• Gathering data from several Data Bases.
• Generating information
• - realised values
• -comparison with target values
• Suggested actions
• Influencing the Purchasing transactional process
E-P forms and the Proc. Process.
Tactical Purchasing Process Operational purchasing process

Specifications Supplier Contracting OrderingMonitoring Expediting

Selection
Transactions

Direct Web-based ERP

e-sourcing

e-tendering

auctioning
e-reverse
Indirect e-ordering
Information

Electronic informing

Adapted from Harink, J.H.A. and Rooijen, G. van, IPSERA conference 2002
 Electronic Procurement is More than introducing
Internet technologies in the Procurement Process,
it is about smarter Procurement of goods and services,
and about simplifying the requisitioning
of those goods and services
E-Procurement and the Supply Chains

The role of e-procurement technologies in

the supply chain.
 E-Procurement and the Supply Chains

• Assignment I
• Write a brief paper (about 1,000 words) discussing “the
role of e-procurement technologies in the Supply Chains”.
From this paper extract a (Group) presentation that you
will show in the next lecture.
Assignment
• Relevant Readings
• Croom (2005) article “the impact of EP on
Supply Chain Management”
• Thomas P (2005) article “Successful use of
EP in Supply Chains”
• Gagliano et al (2003) article “E-Business
strategy; How companies are shaping their
Supply chains through the Internet”