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1
E-sourcing. Finding potential new suppliers using the Internet during the information‑
gathering step of the procurement process.
2
E-tendering. The process of screening suppliers and sending suppliers requests for infor‑
mation (RFI) or requests for price (RFP).
3
E-informing. Qualification of suppliers for suitability. It doesn’t involve transactions
but instead handles information about the supplier’s quality, financial status or delivery
capabilities.
4
E-reverse auctions. Enable the purchasing company to buy goods and services that
have the lowest price or combination of lowest price and other conditions via Internet
technology.
5
E-MRO and web- based ERP. These involve the purchase and supply of products which
are the core of most e‑procurement applications. The software used manages the process
of creating and approving purchasing requisitions, placing orders and receiving the goods
or service ordered.
Drivers of e‑procurement
Smart (2010) has completed a review of the business benefits of e‑procurement through case
studies of three companies. He identifies five key drivers or supplier selection criteria for
e‑procurement adoption related to improving:
●
Control – improving compliance, achieving centralisation, raising standards, optimising
sourcing strategy and improved auditing of data. Enhanced budgetary control is achieved
through rules to limit spending and improved reporting facilities.
●
Cost – improved buying leverage through increased supplier competition, monitoring
savings targets and transactional cost reduction.
●
Process – rationalisation and standardisation of e‑procurement processes giving reduced
cycle time, improved visibility of processes for management and efficient invoice
settlement.
●
Individual performance – knowledge sharing, value‑ added productivity and productivity
improvements.
●
Supplier management – reduced supplier numbers, supplier management and selection
and integration.
Direct cost reductions are achieved through efficiencies in the process, as indicated by
Tables 7.1 and 7.2 . Process efficiencies result in less staff time spent in searching and order‑
ing products and reconciling deliveries with invoices. Savings also occur due to automated
validation of pre‑ approved spending budgets for individuals or departments, leading to
fewer people processing each order, and in less time. It is also possible to reduce the cost of
physical materials such as specially printed order forms and invoices.
There are also indirect benefits from e‑procurement; Tables 7.1 and 7.2 show how the
cycle time between order and use of supplies can be reduced. In addition e‑procurement may
enable greater flexibility in ordering goods from different suppliers according to best value.
E‑procurement also tends to change the role of buyers in the purchasing department. By
removing administrative tasks such as placing orders and reconciling deliveries and invoices
with purchase orders, buyers can spend more time on value‑ adding activities. Such activities
may include more time spent with key suppliers to improve product delivery and costs or
analysis and control of purchasing behaviour.
A useful framework for evaluating the benefits of e‑procurement and e‑SCM has been
created by Riggins and Mitra (2007, Figure 7.2 ). This can also be used to review strategy since
Drivers of e‑procurement
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Chapter 7 E‑procurement
it highlights potential benefits in terms of process efficiency and effectiveness and strategic
benefits to the company. Some of the main dimensions of value highlighted by the approach
include:
●
Planning – this shows the potential for an e‑procurement system to increase the quality
and dissemination of management information about e‑procurement.
●
Development – e‑procurement systems can potentially be incorporated early in
new product development to identify manufacturing costs; this can help accelerate
development.
●
Inbound – this is the main focus of e‑procurement with efficiency gains from paper‑
less transactions and more cost‑ effective sourcing possible through hubs or market‑
places. A strategic benefit is
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