Chioma Francisca Nwabuaju

How E-procurement changes purchasing supplier relationships Aberdeen Groups in 2008 reviewed past procurement and present drivers that pressure procurement automation, such as improved compliance, lower requisition to order costs, reduction of expenses, and reduction of requisition to order cycle times, lack of requisition to order efficiency. They believed that E-procurement has removed manual tasks, replacing it with technology solutions that improved visibility in spending, centralize operations, drives employees adoption to process, aids integration and helps to rationalize supplier’s base. E-distribution system enhances reliance’s on cyber-mediaries & facilitators, causing the reduction of traditional middlemen, lowers inventory & shortens inventory cycles, tightens relationships between buyer-suppliers, causes power shifts, lowers prices, enables product varieties and increases responsiveness (Dwyer, C.J. & Gupta, A. (2008). . Benefits of E-procurement to organizations: E-procurement aids organizational decentralization and operation procurement process; whereas companies handle its strategy and operation activities; especially routine administrative tasks, individual transactions, converting of purchase request and invoice allocation using E-procurement tools. Giuinipero and Sawchuk (2000) believed that strategy might not be considered as the top priority of E-purchasers but faster, more efficient operational processes; enabling the rest of the purchasing department to focus on the strategic task. Below illustration demonstrates the significant effect of E-procurement to purchasing strategy in the supply chain; E-procurement strategy according to (Peiske, 1995), is essential in comparing goals, horizon by utilizing a qualitative & quantitative benchmarking that compares sustainable improvement of a company with its competitors. Quantitative benchmarking enables organizations to compare key performance indicators, objective criteria in E-procurement to other goals sets by competitive organizations. Such comparison includes the reference concepts, methods, models and previous success.  Boutellier et al., 1999 reviewed the use of organizational horizon method to company best practices of external processes of the organization. The qualitative comparison must be channeled to reflect project introduction, organizational procurement method, content and catalog management, process & system architecture & efficiency level.  Analyze how the use of an E-procurement system changes the strategic contribution of purchasing  Similar to the procurement strategy, the E-procurement strategy via benchmarking must compare with criteria, the preparation phases, project design, final design in the consortium meetings with suppliers. The new entrant must compare with research methods successful competitors E-procurement strategies using four phases; such as preparation phases that consider the definition of objects & criteria. The second phase must screen the identified benchmarked partners and compare their questionnaires, telephone interviews & case studies. The third aspect follows the evaluation of successful selection practices while the fourth phase includes site visitation data analysis, generic concepts & critical success factors.   The significance of the benchmarking project is to highlight factors that aid the implementation of E-procurement in an organization. Such factors include realignment of purchase operations & reorganization of the procurement process, catalog preparation, supplier’s embracement at the early stage and E-procurement integration using back-end systems (Puschmann, T. & Alt, R. 2005). Use of E-procurement in organizations: Most organizations have managed to simplify their MRO process, reduce operational workloads, eliminates authorization workflow by optimizing purchase operations; which subdued paper-based procurement, numerous authorizations stages that incur cues and countless workloads to project managers. With E-procurement, organizations are reconsidering the hiring of multiple project managers to handle daily authorization and replaced with the process with invoice verification, credit system, content, and E-catalog operations.  Smeltzer discussed successful content & E-catalogue strategies by adopting the intranet catalog via Electronic multi-vendor pool enterprise. By indulging in punch-out catalog hosting on the supplier’s website and practicing auction price leveraging to reduce the price through supplier’s competition and lastly, by requesting for quotation (RFQ); in turn to set the low frequency and high complexity using the past published specifications to invite suppliers. The E-procurement framework design is characterized by criterion, number of orders, volume per order, number of requestor & suppliers, degree of standardization and competition. Its intranet catalog is characterized by high and low frequency, while the punch-out, RFQ & auction are described by low, high and medium frequency.  The essence of this characterization is to evaluate the right E-procurement strategy for commodity and organization solutions. Porter (2001) states that products or services with high degree coordination and low order frequency in E-procurement; might not be too good for an organization. However, organizations in that regard need to negotiate with suppliers and make a decision following criteria while bidding an auction to consider quality, technical ability, cost, lead time, delivery arrangement and payment methods & terms. The aforementioned points for consideration will reveal the supplier’s capabilities before the request of quotations, whilst the degree of standardization is relevantly reviewed using the qualification profile and the marketing brochure.   E-procurement architectures: Puschmann, T. & Alt, R. (2005) mentioned components and standards of E-procurement architectures in different organizations. Some organization makes use of lotus, SAP B2B, Ariba buyer E-procurement system that is configured in SAP R/3, Oracle and Peoplesoft HR. Companies using SAP R/3 make use of BME-CAT, Harbinger and Requisite while Oracle & PeopleSoft HR works better on Ariba. Products are classified with BME-CAT, UN/SPSC; whereas the communication standards are achieved with ASCII and XML.  Chireu and Kauffman (1999) proposed that the internet economy is gradually forcing industries to experience intermediation, disintermediation, and reintermediation (IDR) cycle, forcing new technologies to change the relationship between buyers, suppliers, and middlemen.  Operational Efficiency and Effectiveness of E-procurement: E-procurement success is measured by its level of efficiency & effectiveness in processes, products, inventory savings, proactive management of data, high-quality purchase decisions, efficiency in calculation, procurement and authorization stage. Cost reduction, data accessibility, speedier communication dedicated resource strategy, data accuracy and adequate system integration may also reflect the efficiency & effectiveness of E-procurement in an organization. The organization Enterprise resource planning (ERP) in handling material requirement planning (MRP) and it's being used to alter the cost and cloud computing in the success chain shows the effectiveness of E-procurement.  Johnson & Flynn (2015) maintains that adoption of E-procurement happens due to inefficiency in the internal compliance, high transaction costs, low spending visibility, low control of expenditure; whereas E-procurement can create a sustainable approach to the amount spent on the supplier, cost of the order, order cycles, and off-contract spending percentage.  Steps to improve skills related to E-procurement: ICT skills penetrations in the field of E-commerce & E-hub resulted in a consolidated E-services & E-market structure that is developed with web-based entities, flexibility for E-trade. Kaplan and Sawhney referred to it as “Quiet Revolution” that concentrates, route, switch and centralize buyer-supplier business relationship. According to Kaplan and Sawhney, Electronic hub (E-hub) act as an internet-based intermediary to diverse industries using host electronic markets to transact business. E-hubs are meant to add value to customers and producers who seek increased market liquidity, low prices, better quality of products and services, reduced transaction cost and a well-organized market service environment.  E-hub has helped to evolve skills in purchasing and aids multiple trading of people interested in finding, exchanging and prioritizing information, automating transactions via an inbound & out-bound E-hub and allowing the share of information, automatic execution, and value-added services.  ICT skills are required when incorporating E-hub and its implementation will create a global integration of output end of suppliers ERP system, flexible enough to be used to share information, commodity proposition and automation of online transactions.  Analyze how the use of an E-procurement system changes skill and knowledge requirements for personnel: Carr and Smetler (2000) took a Resource-Based View (RBV) on the relationship between specific skills and organizational overall performance. The research proves that technical skills are known to be major predictors of firm performance. In other words, skills are essential for the productivity & competitiveness of the organization in the E-procurement environment.  Thurow (1994) quotes “Show me an unskill person in the 21st century, and I will predict the economic situation ahead of him/her”. This further describes the sustainability of competitive advantage of skills and updating of existing skills and the use of it effectively. Giunipero et al. (2005) align entrepreneurial skills with purchasing skills by referring to it as a strategic quantitative needs utilized to achieve strategic thinking, supply base research, technology planning, supplier cost target, risk engagement, computational & technical skills; also required to read & understand blueprints and developmental specifications.  Kolchin and Giunipero (1993) suggest technical, management interpersonal & individual skills needed to conduct market research, negotiation, cost analysis, problem-solving, forecasting, oral communication, conflict resolution, analytical, coordination & multi-tasking.  Croom (2005) reveal a thin-line between administrative skills, product knowledge, computer literacy, total quality management, and government legislation, whilst suggesting an advanced procurement process skills (APP); necessary for category management, global sourcing, cost driver analysis and opportunity negotiation in E-procurement. Other foundation skills required to maintain a sustainable E-procurement include interpersonal (IS), Internal enterprise (IE), External enterprise (EE), Strategic business skills (SB).  Reference: Boutellier, R., Baumbach, M. and Bodmer, C. (1999),“Successful practices in after-sales management”, management  , Vol. 68 No. 1/2, pp. 23-7. Carr, A.S., Smeltzer, L.R., 2000. An empirical study of the relationships among purchasing skills and strategic purchasing, financial performance and supplier responsiveness. Journal of Supply Chain Management 36 (3), 40–54. Chircu, A.M., Kauffman, R.J., 1999. Strategies for internet middlemen in the intermediation/disintermediation/reintermediation cycle. Electronic Commerce 9 (1/2), 109–117 Croom, S.R., 2005. The impact of e-business on supply chain management: an empirical study of key developments. International Journal of Operations and Production Management 25 (1), 55–73. Dwyer, C.J. & Gupta, A. 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