E-Procurement under Purchasing and Supply Management - Literature review Example

E-procurement under purchasing and supply management [Course Title] [Student’s Name] [Instructor’s Name] [Date] Executive summary This is a report on e-procurement as it relates to purchasing and supply management. The report will define and describe e-procurement and provide a concise explanation of how it originated and its evolution. The report will also highlight how e-procurement differs from traditional purchasing techniques and discuss the major advantages and disadvantages it has for the purchasing process. In addition, the report will describe some common terms used in e-procurement such as e-auction, e-catalogue, e-marketplace and e-payment. It has been shown in the report that there are numerous advantages of web based procurement that will help entrepreneurs expand their companies at a much faster rate. Table of Contents [Date] 1 Executive summary 2 Introduction 4 History of e-procurement 4 Differences between e-procurement and traditional purchasing techniques 4 Advantages of e-procurement for the purchasing process 5 Disadvantages of e-procurement for the purchasing process 6 Other terms relevant in e-procurement 8 Challenges of e-procurement 8 Conclusion 9 References 10 e-procurement Introduction As noted in Mueller (1996) e-procurement refers to electronic procurement and is the business to business (B2B) or government to business (G2B) purchase and sale of goods and services through the internet. This system uses ICT when managing, processing and reporting the acquisition of goods and services through the internet. History of e-procurement Baily (2008) observes that e-procurement amplified in the year 1999 when auctions through internet and web posting of product catalogues became apparent on the internet and expanded greatly. Its early adoption can be traced when Wal-Mart and General Electric created buying and selling hubs over the internet. Before the emergence of the latest Internet tools and technologies, people were establishing their web based appearances through a website with a basic template that was frequently sufficient to catch people’s attention towards business products and services. However, at the present time, the situation has completely changed, now the majority of medium and small sized business proprietors are well familiar with that. At the present, organizations realize that they need more and more sophisticated tools and communication methods in an attempt to catch clients and customers’ attention. Differences between e-procurement and traditional purchasing techniques It is evident in Schein (1992) that e-procurement replaces its offline version commonly referred to as tendering. Traditional purchasing technique is usually done face to face or through the telephone and you can identify the person whom you are dealing with high level of certainty. On the other hand e-procurement is done online and there are minimal restrictions of the person you are dealing with. This means that traditional purchasing technique involves a lot of paperwork and is conversation based usually through the word of mouth and procurement officers have to be involved in the process. However, with e-procurement these officers are better used in strategic function where they seek for a supplier who conforms with the overall strategy of the company. Advantages of e-procurement for the purchasing process The benefits of e-procurement are becoming more evident as its uses become apparent. The main reason that businesses have adopted e-procurement is in order to increase productivity, ease availability of needed supplies for users and provide visibility into transactions (Sloman and Jones, 2011). The advantages of e-procurement parallel the universal benefits of internet. Some of the advantages of e-procurement are explained below. I. Reducing costs: e-procurement eliminates a lot of paperwork, rework and a host of errors while enhancing quality and supplier performance. II. Visibility of spend: since transactions are centralized, it enables full reporting on orders processed, payments made, requisitions and items purchased. III. Productivity: staffs in procurement department can concentrate on strategic sourcing and enhancing supplier relationship since they no longer deal with processing orders and handling transactions of low value. IV. Controls: policy compliance is enhanced since users can easily locate products and services from their choice supplier and are in a position to make preferred purchases. V. The application of ICT tools and communication methods offers a wide variety of advantages through the internet procurement support that are offering a great deal of support and capability to show up the right way to customer coming to their web based platform. VI. The web based procurement facilitates the business organizations to attract prospective clients who are previously looking for the services and products that they offer which facilitates them to reel in those scenarios that are organized to make a commitment. VII. The application of web based communication and collaboration tools for procurement offers a business, an effective web based support for the targeted marketing to draw more and more customer attention. VIII. The web based procurement facilitates businesses in drawing a great deal of customer attention through web based platform. IX. The increase in web based visitors leads to increased web based promotion that ultimately leads to enhanced customer attraction and sales. Disadvantages of e-procurement for the purchasing process Baily (2008) argues that e-procurement has met several challenges especially in its implementation and has not been easy for most business managers and procurement departments to accept it. Most disadvantages of e-procurement fall on the side of the supplier. Some of the disadvantages of e-procurement are explained below. I. High training costs: there is need to train staffs on how to purchase and supply their product through the internet since not all employees are conversant with the use of the internet. II. Risk of data compromising: every business is operating in a competitive environment and as such information relating to business should be secure. Gibson and Fraser (2011) explain that if such information falls on the hands of a competitor it can be used to fight against the business and this means loss of business. E-procurement provides an avenue for availing some of vital business information to the public and the competitor. III. Full organization restructuring: adoption of e-procurement will change organizational structure to be geared towards online business management. For instance, there will be head of IT department who will be an important person in the strategic management level unlike in traditional purchasing and supply where he is seen as a nobody. IV. Some suppliers who are used to dealing with customers in person usually find e-procurement uncomfortable since in many cases they do not know the person they are dealing with. Therefore, cases of deception usually arise as it is more difficult to know and verify an organization or a customer over the internet (Gale, Abraham and Krell, 2005). V. Rapidly growing multiple standards: purchasing and supplying is hampered with uncertainty of strong service provider due to multiple standards which increases costs for seller in its bid to satisfy multiple standards. Other terms relevant in e-procurement I. e-Auction: this refers to virtual auction that is conducted through the internet. The seller supplies the product or service to the highest bidder. According to Koon and Low (1996), this opens up new channels for selling new products and provides buyers with favourable purchasing conditions. II. e-Catalogue: this is a presentation on the internet of a range of products and services that are available for purchases. It includes the description of a product or service, price and ordering details. The procurer can also turn the pages online. III. e-Marketplace: this is a virtual online environment which provides a platform for firms and individuals to carry on business electronically. Trading online reduces purchasing costs, time and increases flexibility. IV. e-payment: this is payment made to supplier of products and services procured online which is made directly to the supplier from client’s bank accounts. Security features over the internet are used to process the transactions. It is a computer-based system commonly referred to as electronic funds transfer (EFT). Challenges of e-procurement Despite the many benefits of e-procurement there are still challenges that face the process. For instance some suppliers are not confident to procure through electronic means. Their concerns are majorly based on systems security and confidence in the encryption process (Johnston and Clark, 2008). Another concern they have is the integrity of the software especially control through password and audit trails. There is also limited access by suppliers especially the small medium enterprises (SMEs) due to politics. In addition, the infrastructure and web services are usually limited which prevents full support of e-procurement. Furthermore, the resources needed to develop, implement and maintain e-procurement are inadequate. Conclusion At the present, the Internet has become an essential tool for carrying out business activities (Kolb and Overdahl, 2006). At the present, the majority of business organizations make use of the Internet to procure market and promote their businesses. The use of the Internet offers a lot of advantages to the businesses. This paper has presented a detailed analysis of e-procurement attributes of an ideal business. This report has investigated some of the important terms and aspects regarding establishment of better e-procurement platform areas. This report will offer a great deal of analysis of better e-procurement services establishment. References Baily, P. J. H., 2008. Procurement principles and management. [e-book] Harlow, England:Prentice Hall Financial Times. Available through Emerald database [accessed 8 September 2012]. Gale, J., Abraham, D. and Krell, T., 2005. Organizational transformation and e-business implementation, Journal of organizational change management, [e-journal] 18(2). Available through Emerald database [accessed 8 September 2012]. Gibson, A. and Fraser, D., 2011. Business Law, 5th ed, [e-book]. Australia: Pearson Education. Available through Emerald database [accessed 8 September 2012]. Johnston, R. and Clark, G., 2008. Service operations management: improving service industry. [e-book]. New York: Prentice Hall. Available through Emerald database [accessed 8 September 2012]. Kolb, R. W. and Overdahl, J. A., 2006. Understanding e-procurement [e-book]. New York: Wiley- Blackwell. Available through Emerald database [accessed 8 September 2012]. Koon, B. and Low, H., 1996. Long-term Relationship in Industrial Marketing: Reality or Rhetoric. Industrial Marketing Management, [e-journal] 25, 23-25. Available through Emerald database [accessed 8 September 2012]. Mueller, F., 1996. Human Resources as Strategic Assets: An Evolutionary Resource-Based Theory. Journal of Management studies, [e-journal] 33(6). Available through Emerald database [accessed 8 September 2012]. Rosen, S., 1974. Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition, The Journal of Political Economy, [e-journal] 82(1): 34 – 55. Available through Emerald database [accessed 8 September 2012]. Schein, E. 1992. Critical Factors that Influence E-Procurement Implementation Success in the Public Sector. Journal of public procurement, [e-journal] 6(1). Available through Emerald database [accessed 8 September 2012]. Sloman, J. and Jones, E., 2011. Economics and the Business Environment, 3rd edition, [e-book] Harlow: FT Prentice Hall. Available through Emerald database [accessed 8 September 2012]. Read More