Transcript Week 7 - cda college

Slide 7.1
Chapter 7
E-procurement
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.2
Learning outcomes
• Identify the benefits and risks of
e-procurement
• Analyse 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, 4th Edition, © Marketing Insights Limited 2009
Slide 7.3
Management issues
• What benefits and risks are associated with eprocurement?
• 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, 4th Edition, © Marketing Insights Limited 2009
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, 4th Edition, © Marketing Insights Limited 2009
Slide 7.5
Procurement and E-procurement
• Procurement refers to all activities of obtaining
items from a supplier, include purchasing as
well as inbound logistics, warehousing, etc.
• E-Procurement—the E integration and
management of all procurement activities
including purchase request, authorization,
ordering, delivery, and payment
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
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, 4th Edition, © Marketing Insights Limited 2009
Slide 7.7
Figure 7.1
Key procurement activities within an organization
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.8
Figure 7.2
Electronic procurement system
Source: Tranmit plc
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.9
Mini Case 7.1 Schlumberger
• Read the mini case study on p. 383 and
answer these questions
– What special about the procurement process
at Schlumberger?
– What purchasing software do they use?
– What advantages does this software provide
than the traditional EDI?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.10
Activity
• Read the Activity 7.1 on p. 385
• Answer the questions at the end
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.11
Types of Procurement
• What is bought?
– Production-related
– Non-production related
• How are items bought?
– Systematic sourcing—long term relationships
– Spot sourcing—fulfillment of immediate need
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.12
Online Procurement
8 types of intermediaries
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–
–
–
–
–
–
–
Tradition manufacturers
Direct sales manufactures
Value added procurement partners
Online hubs
Knowledge expert
Online information services
Online retailers
Portal communities
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.13
Figure 7.3
E-business e-value grid
Source: Riggins and Mitra (2007)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.14
Drivers of e- Procurement
Case Study 7.1
• Read the case on pp. 388-389 and answer
the questions on p. 389
• Ref. p. 390 for a summary of benefits and
berriers
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.15
Estimate e- Procurement Cost
• Savings = requisition No *(Cost1-Cost2)
• Impact of cost saving on profitability
– Ref. table 7.3 on p. 391 for procurement cost
in different industries
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.16
Activity
• Using Excel to complete the Activity 7.2 on
pp. 391-392
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.17
Risks and Impact of e-Procurement
• What are the main reasons for low adoption of
e-Procurement?
• According to Potter(2000), Security and faith
in trading partners.
• What are the main organizational risks?
– Displace employees and Maverick purchase.
• Activity 7.3
– Complete the Activity exercise on p. 393
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.18
Risks and Impact of e-Procurement
• Failure to Achieve real cost reductions
• Technology risks
– New technologies and models are emerging
on an on-going basis. Hard to decide which
one to use.
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.19
Implementing e-Procurement
• Companies should consider improving
business processes rather simply automate
the existing process
• The biggest challenges are
– Training / Change management
– Supplier relationship management
• IS manager and procurement team must work
together
• Different types of IS can be used for different
parts of procurement cycle
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.20
Use of different information systems for different aspects of the
fulfilment cycle
Figure 7.4
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.21
Figure 7.5
E-mail notification of requisition approval
Source: Tranmit plc
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.22
Document management software for reconciling supplier invoice with
purchase order data
Figure 7.6
Source: Tranmit plc
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.23
Implementing e-Procurement
Integrating with Supplier Systems
• There are typically 3 alternatives to look at:
1:M, M:1, and M:M. Ref. Fig. 7.7on p.398
• The pros and cons are summarized in Table
7.6 on p. 399
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.24
Figure 7.7
The three main e-procurement model alternatives for buyers
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.25
Figure 7.8
Integration between e-procurement systems and catalogue data
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.26
Figure 7.9
An online catalogue of items for purchase
Source: Tranmit plc
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.27
B2B Marketplace
• Mini Case Study
– Visit Alibaba.com to see what opportunities it
opens to SMEs
• Case Study
– Read the case study Covisint on pp. 403 -404
– Discuss the question on p. 404
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.28
Figure 7.10
Jack Ma, CEO Alibaba.com
Source: FT.com
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.29
Figure 7.11
Ford supplier portal provided by Covisint
Source: Covisint.com
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.30
Figure 7.12
Supplier route to government portal (www.supply2.gov.uk)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.31
Types of Marketplace
• Vertical marketplace—serves the same
industry
• Horizontal marketplace—serves multiple
industries
• Reverse aggregation—combines the
purchase power
• Forward aggregation—combines multiple
suppliers or supply chain functions
• Other categories—ref. p. 406, table 7.7
• Metamediaries
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.32
The Future of e-Procurement
• Software agent—software that can assist
human by automatically gathering information
from internet based on user input
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 7.33
NEXT CLASS
• Read the Econsultancy Interview on pp. 415416 of Chapter 8 and visit the Guess.com to
answer the following questions:
– Do you see the branding or the store when you
first visit the Guess.com?
– How do they choose online partners?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009