Part III: eprocurement

Transcription

1 Part III: eprocurement

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3 Learning Targets Which are important product categories and procurement processes? How can we structure market relationships? What are the pros and cons of sell side solutions? What are the assets and drawbacks of buy side solutions? What are advantages and disadvantages of marketplaces? How does a catalogue integration look like? What are the main issues of procurement service providing? 3

4 Procurement and Purchasing Procurement and purchasing are not the same. All the operational and administrative activities (trading, transactions, ) are part of the purchasing function. Procurement is more comprehensive than purchasing. The tasks are not only operational but also strategical: - Search for suppliers, - Maintenance of supplier relations and - Conclusion of basic agreements 4

5 Categories of Products A company buys a multitude of different goods and services. It is important to distinguish between important and unimportant goods and services. The procurement process for each good and service depends on its category: - Goods and services - Direct products and indirect products Direct products enter the final product (e.g. raw materials) Indirect products are also know as MRO-Goods (Maintenance, Repair, Operating) and do not enter the final product (e.g. auxiliary material) - Operating supplies 5

6 The Strategical Procurement Process Strategical Specifications Selection of suppliers and products Contract Information / Initiation Agreement 6

7 The Operational Procurement Process Operational Purchase order Control After sales servicing Transaction Control 7

8 Traditional Purchasing vs. Supply Chain Management Traditional Purchasing Poor appreciation Just an expense factor Focus on operative and administrative activities Poor appreciation Just an expense factor Ad hoc relationships to market partners Focus on operative and administrative activities Permanent price negotiations Local purchasing Little focus on the customer Inefficiency Centralized processing Undifferentiated processes Lack of skills Little technological support Focus on value added Market-orientation Process orientation Supply chain management Important factor for success Critical factor for costs control Focus on strategic activities Relationship management Explicit coordination Global sourcing Focus on the customer Procurement reengineering Decentralization Process reengineering Higher skills Electronic processes After [Karsch, Hamm/Brenner]

9 Market Relationship: Sell Side Solutions More and more companies have an internet presence and an online product catalogue with price lists. These catalogues are maintained by the company itself or by their internet service provider. Purchaser Purchaser Supplier 9

10 Assets and Drawbacks: Sell Side Solutions Assets - Configuration of complex products is feasible - No costs for a Buy Side system - No operational costs necessary to maintain actual product lists and price lists - Short delivery time due to the direct entry of the purchasing order into the information system of the supplier - Query of current availability and prices Drawbacks - One supplier per article or no support to compare products automatically - Limited support of the procurement process for the customer - The purchaser has to access an other website and an other information system for each supplier - Limited integration of the procurement process with the transaction systems of the customer 10

11 Market Relationship: Sell Side Solutions The purchasing companies often maintain catalogues with reliable and exclusive suppliers. Normally the company has basic agreements (frame-contracts) with these suppliers. Usually the electronic catalogue can be accessed by the employees via the Intranet. It exists standard software for this solution. Purchaser Purchaser Supplier 11

12 Assets and Drawbacks: Buy Side Solutions Assets - The internal procurement process is well supported - The process cycle time can be reduced reduces inventory - The process can be guided - Centralized administration of negotiated products, which become available for everyone immediately - Elimination of Maverick-shopping - The person requesting the product can operate the system autonomous - One system only, consistent operator guidance Drawbacks - Complex products or products which are to configure are normally not supported - Bidding is not supported - Investment costs for the purchasers information system - Operative costs for content management - Not all suppliers have an electronic product catalogue - Suppliers provide product data of a bad quality - The interchange format of the data must be defined anyway 12

13 Market Relationship: Electronic Marketplace Electronic Marketplaces are platforms on the Internet which contain the catalogues of different suppliers (multi supplier catalogues). These systems can handle purchase orders and other transactions. Purchaser Electronic Marketplace Supplier Some say that this solution is more a virtual trading corporation than a real electronic marketplace. In fact there is not a perfect competition on the marketplace because these systems never contain all the suppliers and purchasers. Purchaser Supplier 13

14 Assets and Drawbacks: Electronic Market Place Assets - Time for search is reduced - The information of the offers is up to date, detailed and available - Efficient transactions - Different offers can be compared - Possibility to procure the desired product anonymous - Depending on the brokers business system: bundling of demand an offer to get more favorable conditions Drawbacks - Insufficient integration of the ERPsystems of the procuring company - Usually the brokers cover only a little product range profound enough - A big company can get more favorable conditions by negotiating directly with the supplier instead of interposing a broker - Mercantile directories are often not up to date 14

15 SPSC N#: Catalogue Integration The Interface between purchaser and supplier in all these solutions is the product catalogue. It contains all the products, their specification and the related customers and suppliers. But: - Suppliers, intermediaries and purchaser have different requirements - Different contracting parties have negotiated different prices - Different subjects require different quality of data It is necessary to create a meta structure to merge different catalogues. A meta structure for a electronic market place is the SPSC (standard product and service code from Dun & Bradstreet ) Description: 511 paper and office supplies 5112 office supplies computer supplies and copier supplies printer supplies toner cartridges 15

16 Basic Functions of an E-Procurement Solution [Dolmetsch] Purchaser Web-browser Supplier Content (content management, catalogue maintenance) Integration of the purchaser s information system Support of the selection process and of the ordering process Administration of the system Integration of the supplier s information system 16

17 The Selection Process and the Ordering Process Accessing the supplier catalogue Identification of the purchaser, creation of an individual catalogue view Selection of the product and the supplier Creation of an order request (based on the products an the identity of the purchaser) The order is sent to the corresponding supplier. There the data gets verified an transformed into an internal format The supplier eventually checks the soundness of the purchaser. The company executes the order and delivers the desired product Criteria met (budget, quantum, )? No Yes Allowed The freight is verified by the purchaser. This process is usually supported by the E-Procurement Software Control board Administrative Information is added (method of payment, ) and the data is processed by a software supported workflow order is allowed or rejected The system generates an electronic invoice. The invoice can be booked directly into the information and accounting system (e.g. SAP R/3) Payment by bank or giro transfer, purchase card or cybercash 17

18 The Selection Process and the Ordering Process Accessing the supplier catalogue Identification of the purchaser, creation of an individual catalogue view Selection of the product and the supplier Creation of an order request (based on the products an the identity of the purchaser) Criteria met (budget, quantum, )? No Yes Allowed The order is sent to the corresponding supplier. There the data gets verified an transformed into an internal format The supplier eventually checks the soundness of the purchaser. The company executes the order and delivers the desired product The freight is verified by the purchaser. This process is usually supported by the E-Procurement Software Control board Administrative Information is added (method of payment, ) and the data is processed by a software supported workflow -> order is allowed or rejected The system generates an electronic invoice. The invoice can be booked directly into the information and accounting system (e.g. SAP R/3) Payment by bank or giro transfer, purchase card or cybercash 18

19 Example: The Ariba ORMS The Ariba ORMS (Operating Resource Management System) from Ariba Technologies Inc. is the best know Desktop Purchasing System. It runs on a company s intranet and consists of: a high-performance search engine and a workflow management system Ariba has specific procurement regulations for each company and can do the booking of the ordered products The Ariba customer pays a subscription fee for software adaptations and for hotline services The maintenance of the supplier catalogue is handled by the suppliers, the demanders or by a third party. Example for managed goods and services with E-Procurement software: Configured computers Software Books and magazines Office supply MRO-Goods Advertising Financial services Cafeteria Hotlines Copying services Messenger service Voyages Education 19

20 Application of the Internet in the Procurement Process Auctions Presentation of the buying departement Calls for bids Web EDI Controlling the purchase order status Purchasing C-Products Electronic ordering Query for trends in technology Communication with suppliers via Search for suppliers Gathering information Percentage after [Eyholzer/Hunziker 1999] 20

21 Barriers for E-Procurement Software is too expensive Software solutions are too complex Insufficent solutions Doubts about security No demand Suppliers offer no online orders Percentage after [Eyholzer/Hunziker 1999] 21