E-Procurement Tools Training Module

Developed By: Benjamin Maughan Operations 361

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Purpose

Define E-Procurement Explain its role as an E-Business Tool Identify E-Procurement in Your Organization Create E-Procurement Flow Chart Summarize Learning Points Identify Next Step
Overview Nov 2005

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Exercises

Process Flow Diagram Process Flow E-Procurement Analysis Streamlined Process Flow using EProcurement Cost Analysis

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Overview Nov 2005

E-Procurement

Using internet or intranet based information systems software to coordinate the buying, shipping, inventory management, supplier selection, and approval process of vital business acquisitions within the organizations core competency.

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Define E-Procurement Nov 2005

E-Procurement

Purchasing Process - Preliminary Actions

Need/Specification Identification Supplier Selection Terms Negotiation Regulations

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Define E-Procurement Nov 2005

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Purchasing Process - Buying Process

Purchase Order Delivery Process Purchase Order Receipt Process Order Fill Timing Order Accuracy Order Receipt Order Inspection Order Payment Process
Define E-Procurement Nov 2005

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E-Procurement

Purchasing Process - Concluding Actions

Order Record Storage & Organization Order Reviews Benchmarking Comparative Analysis

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Define E-Procurement Nov 2005

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Purchasing Process
Purchase Order Prep Follow-up Receipt/Inspection Payment Records Management Specifications

Needs Identification

Supplier Evaluation Supplier Selection

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Define E-Procurement Nov 2005

E-Procurement

Software Tool Encompasses:

Preliminary Actions
Coordinates inventory management systems with purchasing systems. Coordinates new business ventures with purchasing systems. Creates List of Needed Items (Inputs) Archives that List

E-Procurements Role Nov 2005

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E-Procurement

Encompasses:

Preliminary Actions
Maintains Record of Suppliers Maintains Record of Supplier Profiles Maintains Record of Supplier Capabilities Maintains Record of Negotiated Prices Maintains Record of Negotiated Terms Maintains Record of Contracted Limitations

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Encompasses:

Buying Actions
Sends Purchase Order Delivery directly to Supplier Maintains Real-time Order Status Records Order Delivery timing Records Order Accuracy Records Order Inspection Data Submits Payment Request Coordinates Payment Approval Process

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Encompasses:

Concluding Actions:
Sends Electronic Receipts to suppliers, archives, managers Maintains on-demand records for order reviews Allows reports and analyses for benchmarking Facilitates comparative and costs analyses

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E-Procurement

Benefits

Streamlines procurement process Increases communication Increases procurement speed Eliminates non-value added personnel Reduces DEAD time

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Benefits

Provides records Produces reports Facilitates improvements

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Detriments

Limits flexibility for extensive notations Poor performance for exception items

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In your organization:

Understanding Process Flow

Beginning Points End Points Inputs/Outputs Gray Boxes Black Holes Miracles Transformation Activities

E-Procurement in Your Organization Nov 2005

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E-Procurement

In your organization:

Mapping Symbols

Start Point/Finish Point Symbol

Process Activity/Step Symbol

Decision Point Symbol Input/Output Symbol

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E-Procurement

In your organization:

More Mapping Symbols

Document Created Symbol

Delay Symbol
Inspection Symbol Move Activity Symbol

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Identify Buying Steps as Flow Symbols

Engineer requests four computers using ERP. (A procurement software program) What symbol is this request?

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Identifying Buying Steps as Flow Symbols

Manager approves request for four computers. What two symbols would result for this action?

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Identifying Buying Steps as Flow Symbols

With manager approval Procurement sends purchase order to Computer Provider Inc. What symbol would result from this action?

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Identifying Buying Steps as Flow Symbols

Purchase Order sits in suppliers bottleneck instead of going straight to suppliers pack and ship department.
What symbol would result from this action?

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E-Procurement

Example - Customer Request Five Servers

What are some of the possible process components? Be Creative!

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Example - Customer Requests Five Servers

Input: Salesperson fills out specification form 10W Delay: 10W sits in new order pile Activity: 10W is faxed to assembly. Activity: Assembly manually collects the inventory items. Document: Assembly creates order form 10A for out of stock items. Activity: Assembly delivers 10A to supervisor for approval
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Example - Customer Requests Five Servers

Delay: 10A sits in supervisor to do pile. Activity: Supervisor approves request. Activity: Supervisor gives 10A to secretary Activity: Secretary gives 10A to assembly Activity: Assembly faxes 10A to approved supplier Activity: Supplier has E-Procurement Software and ships items in 4 hours.

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E-Procurement

Example - Customer Requests Five Servers

Inspection: Assembly inspects shipment Activity: Assembly puts items in the five servers Inspection: Quality Assurance inspects servers Document: Quality Assurance creates 10C - Inspection Activity: Assembly moves servers to shipping Activity: Shipping sends servers to Customer Document: Shipping records shipment items and date

Even simple requests require many components

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E-Procurement

Creating a List of Flow Chart Components in your Procurement Process

Remember to include:
Approvals Documents created and archived Delays Inspections Any other item that is part of the process

This can be extensive - Take 15 minutes.

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Procurement Process Streamlining

Non-Value Added Actions

Inspections Records Benchmarking

Delays
Dead Time Wait Time Ship Time

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Procurement Process Streamlining

Unnecessary approvals
Direct Supervisors Accounting Process impediments

Unnecessary steps
Secretary Handling Shifting products around Factory

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Procurement Process Streamlining Identify unnecessary steps:

Input: Salesperson fills out specification form 10W Delay: 10W sits in new order pile Activity: 10W is faxed to assembly. Activity: Assembly manually collects the inventory items. Document: Assembly creates order form 10A for out of stock items. Activity: Assembly delivers 10A to supervisor for approval

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Procurement Process Streamlining Identify unnecessary steps:

Delay: 10A sits in supervisor to do pile. Activity: Supervisor approves request. Activity: Supervisor gives 10A to secretary Activity: Secretary gives 10A to assembly Activity: Assembly faxes 10A to approved supplier Activity: Supplier has E-Procurement Software and ships items in 4 hours.

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E-Procurement

Procurement Process Streamlining Identify unnecessary steps:

Inspection: Assembly inspects shipment Activity: Assembly puts items in the five servers Inspection: Quality Assurance inspects servers Document: Quality Assurance creates 10C Inspection Activity: Assembly moves servers to shipping Activity: Shipping sends servers to Customer Document: Shipping records shipment items and date

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E-Procurement Flow Chart Nov 2005

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E-Procurement

Identify your procurement process unnecessary steps:

Be Creative! Try to take out ALL steps that a computer can do.

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E-Procurement

Steps 1 - 6 with E-Procurement

Input: Salesperson assists customer to customize servers using an online POS Delay: Fax delay time eliminated Activity: Online POS system sends the order specifications directly to assembly. Activity: Identifying out of stock eliminated Document: Order form for out of stock items eliminated Activity: Supervisor approval for out of stock order form eliminated
E-Procurement Flow Chart Nov 2005

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Steps 7 - 12 with E-Procurement

Delay: Supervisor approval time delay eliminated Activity: Supervisor approval is not required because of JIT inventory based on sales data. Activity: Transfer time to secretary eliminated Activity: Transfer time to assembly eliminated Activity: Order to Approved Supplier will come directly from the E-Procurement system integrated with the POS system. Emails sent to all pertinent parties. Activity: The supplier with E-Procurement will continue to have their items shipped in 4 hours.
E-Procurement Flow Chart Nov 2005

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Steps 13 - 19 with E-Procurement

Inspection: E-Procurement will log inspection results. Activity: Assembly will not change. Inspection: Q&A will not change. Document: An extended E-procurement tool can produce the inspection approval records. Activity: Assembly to Shipping move will not change Activity: Shipping to Customer will not change Document: An extended E-procurement tool can record shipment items and dates.

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E-Procurement

Create/Renovate your current procurement process with E-Procurement

Remember

A computer program can do all repetitive, limited thinking tasks.

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E-Procurement

Cost Analysis

Cost Savings
Excess personnel eliminated Inventory costs eliminated Supervisors approval time requirements decreased Customer dissatisfaction decreased. Competitive advantage

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Cost Analysis

Costs
Custom E-Procurement tools can be expensive Off-the-shelf E-Procurement tools are cheap, but not very robust

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Cost Analysis Example

E-Procurement rough estimate costs

Customized 35 supplier profiles, 3500 product EProcurement tool with 125 available reports and expansion capabilities: $150,000 Requires 10 dedicated servers: $50,000 Integration costs: $25,000 Training costs: $25,000 Maintenance costs: $10,000

Total Cost: $260,000

E-Procurement Flow Chart Nov 2005

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Cost Analysis Example

E-Procurement rough estimate savings

Eliminates 3 assembly jobs: $120,000 Eliminates related payroll expenses: $120,000 Eliminates inventory costs: $60,000 Eliminates order error costs: $10,000 Reduction wait time increases sales by: $100,000

Total E-Procurement Savings: $410,000

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E-Procurement Flow Chart Nov 2005

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E-Procurement

Cost Reduction = Savings - Costs

Cost Reduction = $410,000 - $260,000 Cost Reduction = $150,000

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E-Procurement

Using your new E-Procurement Process:

Identify your:
Eliminated personnel Comparable RPE Order error costs Increase in sales

Your company should be willing to pay up to this amount for the E-Procurement Tool
E-Procurement Flow Chart Nov 2005

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Learning Points

E-Procurement Tools are internet/intranet based Coordinate buying, inventory, supplier selection, and approval process of a company

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E-Procurement

Learning Points

Diagnosing the need for E-Procurement Tools

Step 1: Identify current procurement process Step 2: Identify unnecessary components Step 3: Recreate procurement process with an EProcurement tool in mind. Step 4: Create a cost analysis of savings Step 5: Buy or Develop an E-Procurement Tool

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E-Procurement

Next Step: Get E-Procurement Software

Some Suggestions

Choose a company that has experience Choose a company with exceptional customer service Choose a company that wants your company to succeed Identify your needs first then listen to their suggestions Ensure that your team lead understands basic software coding principles Ensure that your team lead understands process flow diagrams Ensure that this effort is in parallel to your companies core competency
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E-Procurement
Questions?? Contact: Benjamin Maughan BMaughan@byu.edu

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Readings

E-Procurement: From Strategy to Implementation. Dale Neef Business & Economics. 2001 E-Government: Towards Electronic Democracy. Michael Bohlen, Johann Gamper, Wolfgang Polasek. March 2005 Successful Global Account Management: Key Strategies and Tools for Managing Global Customers. Nick Speare, Kevin Wilson Business & Economics - 2001 Cyber Commerce Reframing: The End of Business Process Reengineering? Uwe G Seebacher - Computers - 2002. E-Business 2.0: Roadmap for Success. Ravi Kalakota, Marcia Robinson - Business & Economics - 2000. Introduction to E-Supply Chain Management. David Frederick Ross - Business & Economics - 2002. E-Business: Key Issues, Applications and Technologies. Brian Stanford-Smith, Paul T. Kidd - Computers - 2000.
Next Step Nov 2005

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