Lecture 9, part 1.: E- sourcing

Transcription

1 Lecture 9, part 1.: E- sourcing Dr. Suvituulia Taponen The rise of electronic applications in purchasing Forms of e-applications in purchasing Implementation issues Some new trends

2 The rise of electronic applications in purchasing 2

3 Carter et al. 2007

4 Carter et al. 2007

5 Expected benefits of e-procurement Increased visibility Making multiple systems communicate Supplier information packages Contract management 5

6 McKinsey, 2010

7 Drivers for e-tool optimization Improved costs Managing complexity Internal and external requirements Risk mitigation User benefits 7

8 Common success areas Supplier analysis Spend analysis Contract management/approvals E-ordering and invoicing E-auctions 8

9 9

10 Forms of e- applications in purchasing

11 Purchasing cards quite simple technology Too much of buyers time spend in making small purchases (less than 1500 ) 80% transactions, 20% purchases, 80% buyer time Cards rationalize purchasing process avoiding long approval process saves time and money Work like personal credit cards supplier gets payment from company providing the card, which sends an invoice monthly to company using the service (dates, purchasing places, card numbers, -amount, codes) Naturally some differences to regular cards purchases can be limited to suppliers with certain codes total and one time purchases can be limited purchasing data available electronically straight after transaction 11

12 Transfer of data between companies - electronic data interchange - Used to transfer standard documents between two organizations orders, invoices, shipment lists and other payment instructions EDI brings efficiency no papers, no errors, data input only once, speed Requires arrangements beforehand e.g. data transfer lines and creation of standards (enable exchange of data between computers of different organizations) Problems include costs, unflexibility, programming language and closed network form 12

13 New forms of buying - different -to- business models - Most suitable business model depends on industry structure and product characteristics Sellers e-auction S S S Distribution portal S DP E-marketplace S S s s X s s S S S S S S Purchasing portal S S S S PP S S uyers e-auction S S Auctions Reverse auctions 13

14 enefits of e in procurement? Price Reductions Cycle Time Decreases Improved Category Quality Improved Decision Making Source: Deloitte Consulting Auctions Uniform price comparisons across suppliers Increased competition through better reach Automated process Repeatability / Reusability Improved tracking and management Expanded potential supply base Easy aggregation and assessment of potential suppliers etter supplier / category match Standardized and visible sourcing process Consolidated data management and analysis Pre-built analytics Streamlined and standardized communication channels 14

15 Incorporating e into purchasing e-sourcing finding potential suppliers using internet or a 2 marketplace e-informing supplier information, e.g. quality certifications, financial status (no transactions) e-mro creating & approving requisitions, placing orders on indirect items e-tendering sending and receiving RFIs, RFQs etc. via internet technology e-reverse auctions buyer invites suppliers to compete for supply, driving down the price e-collaboration sharing blueprints, sales forecasts etc., virtual meetings, bulletin boards etc. 15

16 Reverse Auctions a closer look A reverse auction (e-auction, era) is a tool used in -to- procurement The role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward In an ordinary auction (or also known as forward auction), buyers compete to obtain a good or service In a reverse auction, sellers compete to obtain business. Source: Wikipedia 16

17 Examples of service providers asware: The whole purchase to pay process ravosolution: Also contract management Visma: Also contract management Mercell: EU-Supply: Whole procurement process Vortal: PSM Lecture 7 18

18 Implementation issues

19 Visibility is the key: spend analysis Spend analysis prerequisite for any development initiatives surprisingly few know how money is actually spend! Supplier base and purchasing control analyzed too Unstandardized information often a problem information scattered and classification varied Spend analysis better enabled by e-procurement as well as the first step in implementing different tools 20

20 Technology most efficient way to increase visibility 21

21 Pfizer's 12 tips for reverse auction success #1: Select and prepare the right people #2: Take ownership #3: Get the right tool for the job #4: Have a backup #5: Sell it internally #6: Explain the rules and process #7: Prepare the supply base #8: Invite only the right ones #9: Get RSVPs #10: Watch the action, check the system #11: Talk it up #12: Track the data William Atkinson. Purchasing. Vol. 137, 22 Iss. 12; pg. 56

22 Supplier visibility rules in E-auctions case Google Arnseth 2013 ISM Supplier visibility (Disclosure) When to use it and why Traffic lights Rank only est bid only idders can see own bid and traffic light (e.g. green= leading bid) idders can see only their bid and rank, they cannot see leading bid idders can see only their bid and leading bid Works better if supply market is sensitive to price disclosure and transparency Typically more bid activity than price-visible e-auctions Most suitable when pre-bid values have large spread (so that higher bid suppliers are not scared away) Typically more bid activity than price-visible auctions Can be used with a lower number of bidders Most effective in auctions driven by price/market share For a category that is commoditized and competitive Can be used with a lower number of bidders Leading bid and rank All bids shown (open bid event) idders can see leading bid and their rank idders can see every bid of every supplier, but not other suppliers names Is typically used in events with a higher number of line items and three or more suppliers Is often used as a mechanism to establish a preferred supplier base for actual line-item awards Useful in competitive marketplace with 4 or more suppliers Attracts suppliers seeking market intelligence / new business uilds up excitement and transparency, but can alienate strategic suppliers idders may use the format to signal to others (which could encourage collusion) 23

23 Factors affecting e-procurement adoption Perceived advantage Reward Communication Risk reduction Adoption of EP tools Demonstration Involvement Enforcement Training Reunis et al

24 Factors affecting e-procurement adoption Perceived advantage seeing peers/supervisor successfully working on the EP tool Communication both direct and indirect communication about the tool Demonstration seeing a tool work increases buy-in & confidence of ability to use Enforcement hierarchical pressure to create compulsory usage Training contributes to ease of use, addresses cognitive barriers Involvement inclusion into the decision process, e.g. workshops, pilots Risk reduction promise of support, facilitation, reducing personal consequences Reward bonus, symbols, awards, recognition etc. Reunis et al

25 E-procurement success factors Supplier and contract management rationalize and consolidate suppliers and contracts create spend visibility on unit and individual level involve preferred suppliers in planning End-user behavior and e-procurement process analyze end-user purchasing behavior centralize control, computerized rules Information and e-procurement infrastructure use a balanced catalog selection strategy put effort into selecting software Angeles and Nath,

26 E-procurement challenges Lack of system integration & standardization immaturity of software, project cost overruns, no standard formats, no base infrastructure Immaturity of e-procurement-based market services and end user resistance Immature consulting, suppliers, pricing models etc., end users reluctant to learn new procedures Maverick buying and difficulty in integrating e-commerce with other systems hard to connect e-procurement data with other purchase data, difficulties in getting compliance Angeles and Nath,

27 Setting priorities in implementation Think globally Executive initiatives Current status Areas of impact Considering user priorities Supplier onboarding 28

28 Some recent trends

29 Cloud-ased vs. In-house E- Procurement Services Research indicates that the e-procurement market as a whole will enjoy growth through The need for small and medium size organizations to adopt an e-procurement solution will grow as their larger vendors and customers turn to electronic systems. Global corporations are expected to have the resources to develop their own custom platforms. Further, customized platforms can afford an even greater level of security than commercial platforms, assuming they are properly designed. 30

30 Government Adoption of E- Procurement Platforms Governments spend an estimated 9.5 trillion dollars annually Finding ways to spend those funds in the most efficient and most prudent manner is of key interest to government officials. Improved efficiency, reduced errors, increased transparency, and reduced operating cost, e-procurement particularly attractive for government entities. Increased tax compliance, increased trust in government, and greater growth in the public sector as a result of other advantages. EU directive obliges all contracting authorities to adopt e- procurement tools Implementation period is ongoing

31 Research on e-negotiations E-negotiations: e-tendering, e-auctions, etc. Absence of verbal or social cues can lead to misunderstandings Difficulty of communicating complex arguments Anonymity prevents building trust Use of threats, exiting and deceit more common 32

32 Research on e-negotiations E-negotiations have a higher probability of failure than face-toface negotiations ut lower results likely in f-t-f negotiations E-negotiators more likely to use competitive tactics and less open communication E-negotiations better for quick deals, when many alternatives available, when chances of success low? Can result in low prices but harm buyer-seller relationships 33 Swinnen and Faes, 2012

33 Research on social media use in procurement web-based applications that allow for the development and exchange of user-generated information and provide a forum for users to interact with each other Peer-to-peer engagement functionality Supplier collaboration functionality Market intelligence functionality est in class purchasers are 22 % more likely to enable access using mobile-devices 34

34 Supplier reactions? Hotels pushed to offer low price many will receive preferred status all will not receive equal amounts of business Price competition among hotels most likely will decrease in the future Will malic acid producers increase their prices once they have received the contract? Will purchasers still participate in innovation and development if prices are pushed down in auctions? 35