E Procurement 2014

Slide 7.
E-procurement
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, Marketing Insights Limited 2009
Slide 7.2
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 servicesthings 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)
Slide 7.3
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
Slide 7.4
Figure 7.1
Key procurement activities within an organization

Slide 7.5
Figure 7.2
Electronic procurement system
Source: Tranmit plc

Slide 7.6
Use of different information systems for different aspects of the

fulfilment cycle
Figure 7.4
Slide 7.7
Figure 7.5
E-mail notification of requisition approval
Source: Tranmit plc

Slide 7.8
Document management software for reconciling supplier invoice with

purchase order data
Figure 7.6
Source: Tranmit plc

Slide 7.9
Figure 7.7
The three main e-procurement model alternatives for buyers

Slide 7.10
Figure 7.8
Integration between e-procurement systems and catalogue data

Slide 7.11
Practical examples
http://www.yale.edu/procurement/eprocurement
/training/videos/TourV2.htm
https://www.supplycollins.com/portal/server.pt
?
Slide 7.12
Measurement of e-procurement
benefits
PeterTrkmanPh.D.
assistantprofessor
Thispresentationisbasedon:Trkman,P.&McCormack,K.(2010)Estimatingthebenefitsand
risksofimplementingeprocurementIEEETransactionsonEngineeringManagement,inpress.
Dave Chaffey, E-Business and E-Commerce Management, 4 Edition, Marketing Insights Limited 2009
th
Slide 7.13
Content
Motivation
Importance of evaluation
E-procurement: benefits and challenges
Methodology
Value-at-Risk use in e-procurement
Conclusion & Further research
Slide 7.14
Important!
Purchasing has undergone a transformation from merely being
a necessary function to one that has become more strategic
with a focus on generating a competitive business
advantage
Elektronskoposlovanje
14
Slide 7.15
Purpose
The challenge that remains is how to measure the increase in
efficiency (both value and risks) of e-procurement
implementations and simultaneous changes in the
organization and strategy.
15
Slide 7.16
Expected benefits
The main benefits of e-procurement are an increase in firms
competitiveness through cost reduction and/or boosted
efficiency with inbound logistics.
Those benefits can materialize in a reduction of purchasing
transactions costs, order fulfillment and cycle time, a
reduction of the number of suppliers or even a reduction in
the price paid and the number of staff to support purchase
transactions
16
Slide 7.17
Importance of P2P process

E-procurement is the use of electronic means (the internet,
web, e-mail) to enable the purchase of products and
services over the internet
One of the major processes (global sourcing)
Both savings & risks are important
Important to study the whole process!
Slide 7.18
P2P process
Slide 7.19
Importance of benefits estimation

Previous estimates (up to 40-60% of total transactions costs)
no methodology reported
different companies may have different savings
Important to:
justify such investments
monitor the projects
evaluate the benefits
in a specific company settings
Slide 7.20
EB evaluation importance
Organizations lose up to 600 billions $ per annum due to
unsuccessful IT/EB projects (Gartner)
40% of IT/EB expenditures does not bring any value to the
organization (IBM research)
Slide 7.21
EB evaluation importance - 2
despite the importance of EB investment the companies are still
unsure about the benefits and way to measure the value and
what influences this value (Subramaniam, Shaw, 2004).
There is a lack of understanding which methods and techniques
are appropriate for evaluation of EB investment (Love et al.,
2005)
Therefore the companies often see no real benefit of EB
investment (Gunasekaran et al., 2008)..
.and the expectation of EB investment are rarely fullfiled
(Tanner et al., 2008)
Slide 7.22
You get what you measure
Slide 7.23
Tangible & intangible benefits

Tangible benefits:
- increase in sales
- stock turnover
- transaction costs reduction
- quality (e. g. number of mistakes per million products)
- lead times
Intangible benefits:
improved image of a company
satisfied employees
better team-work
Slide 7.24
Qualitative methods for evaluation
Source:Brunetal.,2006
Slide 7.25
Cost-benefit analysis
Slide 7.26
Quantitative methods for evaluation
Vir:Brunetal.,2006
Slide 7.27
Back to our case!
27
Slide 7.28
Main questions
how can the reduction of procurement cost, lead times and
employee workloads be measured; and
which advantages and potential risks do organizational changes
(in our case a change in approval procedures) bring to the
procurement process?
28
Slide 7.29
Methodology
Six major companies P2P (different industries) process were
examined from 2006 to 2008 via interviews and analyses of
transaction data
Process maps developed
The results were validated with the company employees
249,295 orders of an American multinational company used as
inputs
Business process simulations (Igrafx 2007) for each scenario
Slide 7.30
Why simulations?
It enable the mapping of current and future state and the
estimation of reingenering benefits (Caridi et al., 2004)
Can be used for evaluation of various scenarios (Cho et al., 2005)
Enables the comparison of various business process
configuration (Roeder et al., 2004)
Several successful examples of use in e-procurement projects
(Mohebbi et al.,, 2007; Changchien et al., 2002; Reiner et al., 2004).
Slide 7.31
Simulations - problems
The main problems
relatively expensive {Vergidis et al., 2008),
hard to acquire the neccessary knowledge (specially for SMEs)
(Berlak et al., 2004),
the model is always a simplification of reality. Verification and

validation of the models is of outmost importance (Persson et al.,
2002).
GIGO principle
Slide 7.32
32
Slide 7.33
The role of simulations

optimization
analysis of decision
identification of problems/bottlenecks
risk management
prediction of the future
Slide 7.34
Company name
Sales (per year in Headquarters
Industry/products
No. of purchase
million $)
Chemicalia
Judril
orders per year

(approx.)
3500 Houston, TX
250 Houston, TX
poly propylene,
ethylene resins
skid-mounted
poly
85,000
drilling,
48,000
equipment to oil field

Cementy
Energy
Company
500 Nazareth, PA
8000 Calgary,
Alberta
cement
28,000
oil sands mining and
85,000
production
Polymerco
multibillion Switzerland
various chemicals and

resins
52,000
Energocom
multibillion Houston, TX
gas pipeline company
68,000
34
Slide 7.35
Scenarios
Scenario 1 (scen1): 100% are buyer assisted (BA);
Scenario 2 (scen2): 80% BA, 10% Pcard, 10% e-catalog (EC),
Scenario 3 (scen3): 60% BA, 20% Pcard, 20% e-catalog (EC)
Scenario 4 (scen4): same as scen2, but approval levels tripled
(USD 3,000, USD 30,000).
Slide 7.36
Business process model

No
requisition (EC)
material
need
e-catalog
type
approval
1
needed?
No
Yesapproval level
1 (EC)
approval
2 needed
Yesapproval level
2 (EC)
generate order
(EC)
Approve & pay

invoice (EC)
End (EC)
PCard
requisition (PC)
buyer assisted
No
No
approval Yes
approval, level
1
1 (PC)
needed?
approval Yes
2 needed
approval level
2 (PC)
generate order
(PC)
Approve & pay

invoice (PC)
End (PCard)
No
requisition (BA)
No
approval Yes
approval, level
1
1 (BA)
needed?
approval Yes
2 needed
approval level
2 (BA)
generate order
(BA)
Approve & pay

invoice (BA)
End (BA)
36
Slide 7.37
Lead time distribution
Slide 7.38
Summary of results
Slide 7.39
39
Slide 7.40
Costs per approval level
40
Slide 7.41
Total costs & approval level
Slide 7.42
Value-at-Risk
Mainly used in financial industry
as the expected loss arising from an adverse market
movement with a specified probability over a period of time.
the sum of the probability of events times the monetary impact
of the events for the specific process, supplier, product or
customer (Supply Chain Council)
Still not widely used in supply chain/procurement management,
but its use is increasing.
Methodological approaches are needed (can be
computationally intensive)
Several other critics
Slide 7.43
VaR & approval level
scenario
scen2: more control
scen4: empowerment of
employees
approval/check
costs in USD
1,049,500
379,400
VaR (95% probability)

VaR (99%
in USD
probability) in USD
2,052,932
2,330,755
3,740,071
4,315,433
Whichoneispreferable?

E Procurement 2014

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

E Procurement 2014

Transféré par

Droits d'auteur :

Formats disponibles

Slide 7.

How important is procurement?

The 5 rights of e-procurement

at the right price

Baily et al., 1994

Key procurement activities within an organization

Electronic procurement system

Source: Tranmit plc

Use of different information systems for different aspects of the

E-mail notification of requisition approval

Source: Tranmit plc

Document management software for reconciling supplier invoice with

Source: Tranmit plc

The three main e-procurement model alternatives for buyers

Integration between e-procurement systems and catalogue data

Importance of P2P process

Importance of benefits estimation

You get what you measure

Tangible & intangible benefits

Qualitative methods for evaluation

Quantitative methods for evaluation

Back to our case!

the model is always a simplification of reality. Verification and

The role of simulations

prediction of the future

Sales (per year in Headquarters

orders per year

equipment to oil field

oil sands mining and

various chemicals and

gas pipeline company

Business process model

Approve & pay

Approve & pay

Approve & pay

Lead time distribution

Costs per approval level

Total costs & approval level

VaR & approval level

VaR (95% probability)

Vous aimerez peut-être aussi