E-Procurement in a Brazilian Service Company-Accomplishments and Pitfalls.

Transcription

1 E-Procurement in a Brazilian Service Company-Accomplishments and Pitfalls. GLAUCIA APARECIDA PRATES gprates@hotmail.com ROSALINDA CHEDIAN PIMENTEL chedian@netsite.com.br MARCO TULIO OSPINA PATINO btospina@terra.com.br DANIELA CÁRNIO COSTA MARASEA University of Ribeirão Preto, São Paulo. Brazil. danicarnio@uol.com.br Information technology has been a key enabler in purchasing evolution into a more strategic business function, by reducing the time taken to complete mundane tasks and allowing purchasing agents to focus on more value-added activities. The Internet and electronic commerce especially have much to offer in the way of increasing the efficiencies and competitive advantage of purchasing.. Many companies are developing plans to integrate some form of Internet-based electronic commerce into their supply chain management practices that will enable them to develop and maintain a competitive advantage. These advantages are typically in the form of reduced costs, increased efficiencies, a greater degree of accuracy, and speedier processing and delivery. Most E-procurement activities of companies are currently centered on non-production mostly maintenance, repair, and operating supplies (MRO) goods. MRO goods spending accounts for as much as 60 percent of total expenditures for some companies. The Aberdeen group identifies transaction cost savings of up to $70 and reduction of cycle times to two days from seven days when MRO goods are procured via the Internet., identifies both operational and strategic. 1. B2B. Overview 1.1.B2B Growth Forecasts According to (Sostrom, 2001)the B2B can support the business in several fields as follows: Use of the Internet to Identify New Supply Sources Use of the Internet for Purchasing Both Direct and Indirect Materials Use of the Internet to Reduce Paperwork and Purchasing Cycle Times 2. E-Procurement Technologies 2.1. E-Procurement:

2 Buyer software enables users to automate transactions and focus on the buying organization s activities, such as order placement, catalog management, payment, reporting, and so on. Most of these systems currently handle MRO products. Users typically source from preferred suppliers listed on their catalogs, within limits enforced by purchasing management. In according to Abridged Report (2001) the are 10 Keys to e-procurement Success, as are described as below. 1. technology is not a strategy. It is only a support. 2. Know what you spend. prior to launching any e-procurement initiative, companies must understand how much they spend, on which products, and with which suppliers. 3. Have a plan: deployment as well as clearly defined goals and milestones. 4. Begin by benchmarking : companies attempting to deploy e-procurement without it their own procurement process are at risk of automating inefficient and costly process. 5. Drive e-procurement from the top : Successfully deployment these technologies requires top-level executives to become chief advocates for e-procurement. 6. Get support from the trenches : Must have included programs for training. 7. Designate a champion: This champion is often measured and receives incentive based on the overall adoption and success of the e-procurement deployment. 8. Supplier participation requires a carrot and a risk. 9. Start with the low-hanging fruit 10. Measure, measure, measure. To demonstrate the value of e-procurement to all constituents, it helps to identify areas for improvement or process realignment e-procurement as a Collaborative Tool. Much has been made of the potential for the Internet to serve as a collaborative tool between organizations and their suppliers. By doing so, procuring organizations could move beyond order issuance and suppliers could go beyond simply order fulfillment into areas such as product design, supply chain and logistical management, and demand aggregation ( Rajkumar, 2001 ). Bellow are some of those tools E-Catalog The E-catalog is the most widely used of the purchasing technologies. Users must not only know which suppliers can provide the needed goods or services, but also be familiar with a wide variety of catalog formats and data access mechanisms Auctions E-procurement technologies come with the ability to hold auctions. Both forward and reverse auctions are feasible. In a forward auction, sellers post the goods or services they want to sell, and buyers then bid for the services or goods. Excess capital equipment or inventory is typically sold via forward auctions.

3 In a reverse auction, buyers post a request for quotes for items they want to buy, and allow sellers to bid. In general, when purchasing agents want to buy direct material through auction techniques, they use a reverse auction. The agents prepare by doing basic sourcing and narrowing down their sources to four or five suppliers. Use of Online Reverse Auctions Today, reverse auctions are being employed in new ways in the electronic supply chain for e-procurement. Formally, a reverse auction can be defined as a supply-aggregating event that lowers the price of goods for a buyer (Mattick and Brousseau, 2001, p. 133). Through the pre-qualification process, all issues are generally settled between the procuring organization and potential suppliers before the time of the auction, with the only remaining issue to be settled being the price (Marinelloand Daher, 2001). In most, but not necessarily all reverse auctions, the buying organization is not bound under the terms of the auction to necessarily choose the lowest bidder (Kalin, 2001). Characteristics of Reverse Auctions The auction process generally is open only for a short period of time ranging from thirty minutes to an hour. By supplier s bidding down the price at which they would be willing to provide the specified goods or services in the particular event, the event takes on the form of a ski slope. The bidding can continue past the scheduled end time of the auction, if interested suppliers continue to drive the pricing down. What are the benefits and risks of using reverse auctions? According to Marinello and Daher (2001), the chief benefits of reverse auctions are: Increased numbers of potential suppliers Reduced procurement cycle time Lowered purchase prices Marketplaces Organizations find that it is costly to maintain E-catalogs inside their organization, and any transactional costs that may be saved are wiped out. Marketplaces (also known as net markets) have emerged to meet this need. These organizations specialize in aggregating the data of different suppliers and provide overlaying filters so that customized views of prices, terms, and so on are obtained for each purchasing organization. However, even these specialized companies have problems of their own. There are so many of these marketplaces each with its own format needs that suppliers have trouble meeting individual marketplace requirements. Also, different companies call the same item by different names, so that comparisons are not easily made. This is complicated by the fact that different industries might use the same term with different meanings. Finally, these problems are compounded for direct materials, which might need blueprints and other detailed technical descriptions to go with the system. A number of intermediary firms are arising to meet these needs. Marketplaces may be independent trading exchanges, vertical markets, or portals. Primarily these marketplaces allow collaboration and data sharing within or across industries. The nature of services can go beyond cataloging to transaction management. Sites such as Ariba.net, VerticalNet, and so on fall under this category. Marketplaces were started by neutral firms that control the supply chain and industry consortiums. For example, General Motors uses Commerce One software and created its own catalog. GM has two Web sites: MarketSite is intended for its own internal use, and

4 Supply Power provides a range of parts, products, and services for GM s suppliers. GM also posts the excess steel that it buys, passing on its savings to its suppliers. In contrast, Boeing provides an intermediary site for customers to buy replacement parts that are directly shipped by its suppliers. Feldman describes a few requirements for marketplaces. Marketplaces manage the participants information and business process (both buy side and sell side), as well as the transaction. It is also necessary that marketplaces support security, liquidity, transparency, efficiency, and anonymity. 3. Critical Success Factors 1. Define an E-Procurement Strategy. 2. The company must identify its core competencies and how procurement processes can support the core competencies. 3. The technology strategy must be developed around supporting these core competencies. 4. The technology group must also identify directions in which the technology is heading, such as back-end integration, and move the company to the technology forefront in support of the procurement processes. 5. Procurement affects every facet of the organization; therefore key stakeholders from every affected department must be brought into the new system s planning process. 6. Management must confer with these various groups, taking their inputs into consideration, as it carefully assesses those problems the company wants to address and the system s goals. It is also essential to bring key stakeholders on board early in the process, involving them from the very beginning. 7. Focus on Segments 8. Identify Useful Measures 9. Organizations should identify useful measures ann terms such as cost per transaction for MRO items cycle time from requisition to fulfillment. They should use measures that can e measured and are useful in predicting the success or failure of the system. 10. Manage Expectations 11. Organizations should manage the expectations f the users and stakeholders by telling them he truth. 4. Cost/Benefits visible costs (that take up as much as five to ten times the cost f software) that are not included (for example, he cost of consultants, integration, catalogs and search engines, transaction costs, and user training). Similarly, the benefits are not easy to measure. Benefits come from three areas: compliance, leverage, and process efficiency. Integration with Back-End Systems The system will have to integrate with backend office systems such as ERP and database Systems. Impact on Suppliers

5 The organization should assess the impact of the system on suppliers and their technological readiness to implement the system at their end, and should provide the services necessary for the system to succeed. 5. References : Brack, K. E-Procurement: The Next Frontier, Industrial Distribution, January 2000, 89(1) pp Feldman, S. Electronic Marketplaces, IEEE Internet, July August 2000, pp Gil Gutiérrez, Alfonso Duran. Information technology in logistics: a Spanish perspective. Logistics information Management. V.10 (2 ), 1997, pp Lambert, D.M., Stock, J.R., Strategic Physical Distribution Management, Richard D. Irwin, Homewood, IL, Rajkumar. T.M. E-Procurement: Business And Technical Issues. Information Management Systems, 2001