E-Procurement and It Application in the Grant Group Essay

Introduction

E-procurement is basically computerizing the process of procurement for any business. In e-procurement, the business-to-business and the business-to-customer interactions for the procurement of supplies and raw materials for a business are conducted through online transactions and electronic data interchange, and enterprise resource planning systems. The model for the interactions conducted through the electronic data interchange for e-procurement can vary depending on the requirements of the parties and the business. They can range from bid-based transactions to the discounted offering and special rates for special clients and customers.

E-procurement is supported by an electronic application that runs on the concepts of a supply chain/ value chain system. The procurement activities can be conducted through many types of e-procurement. The main six types however include options pertaining to using a web-based ERP system. In this, the procurement acquisitions and requisitions are conducted through the ERP system. The e-MRO option is similar to the ERP option but allows the business to order the management, repair, and operating supplies which are not relevant to the product.

The e-sourcing option enables the business to identify new suppliers for different categories of purchases. The e-tendering allows for sending requests to the suppliers in the online market and receiving their proposals. The e-informing option allows the business to gather data and information from the internal as well as the external parties that are involved in the e-procurement.

The main activities/ tasks that are associated with e-procurement pertain to indent management, tender management, auctions, vendor management as well as the management of contracts and catalogs.

The Current Procurement System at Grant Group

The Grant Group is a food products provider to the likes of supermarkets and food retailing companies. The company has about 20 buying specialists who operate using traditional and conventional procurement procedures. As a result in the dynamic and competitive market, the company has low margins to operate with.

The procurement agents in the company operate on a face-to-face contract dealing basis most of the time. However, some form of technical expertise is used by the company. a fully established technology-based solution is not used as the staff at the company has varying degrees of competency in information technology and computer system skills. The data transfer currently in the company is performed invoicing manually for the market inquiries, the quotations, purchase orders as well as shipping and dispatch details. For this hard copies of the documents as well as softcopies on mails and facsimile are employed in the operations of the business.

The business of the Grant Corporation is such that the business purchases materials from a range of suppliers. Some of the suppliers have very sophisticated management systems for the supply while others are still base on redundant and old legacy systems. The role of the IT function in the company has been to improve the customer interaction-based systems while the operations of the company have not been migrated to innovative business and enterprise management systems.

Proposition

The company should reevaluate and reassess the performance of all its business functions. The supply chain and procurement segment have to be reviewed in terms of their efficiency, their performance, their costs as well as their appropriateness of contribution to the business objectives and goals. Aside from this, a single platform system will have to be launched which will provide the company with the capability to have electronic transactions through electronic data interchange. The procurement system would be linked to the systems of the suppliers for the company. This will enable the company to keep track of shipments and dispatched goods that have been sent by the suppliers to Grant Corporation.

Specific requirements that will arise due to the system pertaining to human resources, IT as well as technical training and hardware/ software requirements.

The human resource requirements pertain to hiring technically skilled people to implement, manage and repair the e-procurement system. Internet and network administrators, as well as e-procurement specialist consultants, need to be hired. Aside from this, the staff with redundant jobs will need to be either relocated or released from the company.

The technical training requirements pertain to training the supply and procurement staff/ agents at the company to use the system. Their computer and technical skills pertaining to the system need to be enhanced to make them capable to use their systems.

The hardware and software requirements that will be arising pertain to the ERP system for the management of the business operations, a supply chain management module that highlights procurements activities as well. This should enable internet-based e-procurement activities. Aside from this, a server-based Windows platform will be required to run the ERP and e-procurement systems on the desktops. The hardware requirements pertain to sourcing the Laptops, desktop computers as well as establishing a centralized server with a data repository with data warehousing capability.

Aside from this e-procurement system will have to be monitored and evaluated for repairs and performance. Benchmarks can be made against the performance of the competitors to establish performance objectives and goals.

Success Factors

The main success factors that have contributed to the successful adoption of the e-procurement systems in the industries pertaining to the effort taken by the companies and their management. It is essential for the companies divulging in the e-procurement technology to know how much they are willing and able to spend. The companies should their homework specific to their requirements and expectations from the systems technology.

The right tools for the job need to be highlighted and a feedback loop on the progress of the development and the implementation of the system needs to be set up. Other success factors include aligning the business processes and the systems with the incentives and the objectives of the business and employing the continuous improvement [philosophy for the business operations. (‘10 Key Strategies to Assure e-Sourcing Savings & Success’, 2004) “Although e-procurement has substantially streamlined the procurement and coordination processes for indirect goods, many companies operate multiple e-procurement solutions.

For integrated procurement solutions, the paper recognizes the need for an overall procurement strategy and organization, an alignment of various e-procurement solutions along the procurement process, and the need for integrated system architectures. Companies also have to realize that no standardized e-procurement solutions exist” (Puschmann, 2005)

Barriers to Change

The main barriers that arise for change specific to the adoption of new technology for the implementation of e-procurement pertain to internal barriers. Research has provided “that the internal barriers impeded e-integration more than either upstream supplier barriers or downstream customer barriers” (Frohlich, 2002)

Some of the internal barriers which may arise pertaining to the lack of ownership for the project, fear about the quality of the new system, insufficient and incorrect knowledge about the system, lack of proper technology and human resources for the implementation, roll out, and employment of the e-procurement system as well as the current/ legacy system from which the data needs to be migrated to the new system. The most important barrier however is the commitment and the attitude of the management towards the e-procumbent system implementation in the business. “There is a need for education for all SME management on the benefits and drawbacks to using e-business solutions.

Inter-organizational information systems that are required to link supply chain partners can be a serious barrier to online solutions. There is a significant dependency among supply chain partners in decisions on adopting online links. Flexibility, agility, and ability of SMEs can help them to use partial e-business solutions for low volumes of business, but this approach can be very ineffective when transaction volumes are large.” (Archer et al, 2008)

Expected Business Benefits from e-Procurement Introduction

The benefits that can be expected by the company pertaining to a highly efficient system for procurement, a faster and more efficient value chain for the company, continuous improvement based structure if operations, access to more suppliers on the internet, increased utilization of spot and special discounts offered by suppliers online. The company will also be able to connect to the key suppliers through the online medium, which will save money and costs for the company in terms of transaction and communication costs. Moreover, paperless buying would be introduced in the company along with an online/ electronic framework for requesting invoices, quotations, analyzing the quotations, and presenting the need to ship or dispatch the data as it would be shared through the internet medium between the parties involved.

Advantages of Introducing e-Procurement

The advantages of the e-procurement system include the fact that the Grant Company is able to get access to the right suppliers at the time when supplies need to be ordered for the operations of the company. The real-time-based transactions reduce the transaction costs, time as well as complexity by providing a direct interface between the supplier and the company, enabling the company to get more work done in the shortest time possible.

Moreover, the just-in-time techniques can also be supported by the e-procurement systems. “In general, the biggest advantage of e-purchasing is the reduction of inherent inefficiencies in the purchasing process, leading to lower product costs. An additional advantage is the availability of analytical data in real-time, data that can be used to manage inventory to quickly take advantage of additional cost-saving opportunities.” (Morrison, 2001) The company is also able to reduce its postage handling and stationary costs through the paperless operations of e-procurement

E-commerce-based systems like e-procurement are also beneficial in terms of providing a medium for two-way communication, identifying the trends and the problems in the markets as well as enabling the company and its suppliers to respond much more quickly to stock-outs. The companies are also able to grow much more quickly with the increased technological resources and efficiency in their operations with the e-procurement system.

Moreover the small, as well as large scale operations of the business, are able to attain advantages from the implementation of the e-procurement system. “Right now, large companies are leading the way in e-procurement. Because of the costs involved, smaller companies are lagging behind. One way for smaller organizations to take advantage of e-procurement’s benefits is to consider using application service providers (ASPs). By running their e-procurement and finance software on an ASP’s hardware, the smaller company can get the benefits of e-procurement without the cost of actually owning and maintaining the hardware. “(Roche, 2001)

Disadvantages of Introducing e-Procurement

The main disadvantage which is generated through the implementation of an e-procurement system is that the power is shifted on to the vendors who can take advantage of the competition in the market for their own benefits. The increased reliance on operating on the paperless and online platform while establishing links with the suppliers in the market. In such a situation the suppliers have access to information about the company, which others might not have. The vendors in this situation can take advantage of the information provided to them and share them with the competitors of the company in the market for personal benefits.

Other disadvantages pertain to the technical problems which can arise due to the use of the e-procurement system. The EDI technology implementation can result in snags as well whereby the purchase orders and the invoices generated can have errors. These errors however are usually caused by humans at the time of configuring the systems. “Additionally, Information Week, explains that numerous firms “sign on for E-procurement without anticipating the long road ahead.

They dive into projects only to learn that E-procurement applications are limited in the types and scope of purchasing activity they address. Managing electronic catalogs with thousands of products, providing employees with the right mix of products and adequate information about them, and making it easy to search for items can also be tricky, requiring additional tools and threatening the efficiencies promised by moving purchasing to the Web.” (E-Procurement – PROCUREMENT METHODS, PROS, AND CONS)

Conclusion

It is recommended that the Grant Group should implement the e-procurement solution as the benefits attained by the company in terms of more reliable procurement operation, efficient and cost-effective business processes, as well as leverage it would provide the company in the market and the industry, outweigh the disadvantages and risks the company is exposed to.

References

‘E-Procurement – PROCUREMENT METHODS, PROS, AND CONS’. Web.

‘Internal Barriers to e-procurement adoption’. Web.

2004, ‘10 Key Strategies to Assure e-Sourcing Savings & Success’, Supplier Selection & Management Report, Vol. 4 Issue 11, p1-13. Web.

Archer, N., Wang, S., Kang, C., 2008, ‘Barriers to the adoption of online supply chain solutions in small and medium enterprises’, Supply Chain Management, Vol. 13 Issue 1, p73-82, 10p. Web.

Frohlich, M.T., 2002, ‘e-Integration in the Supply Chain: Barriers and Performance’, Decision Sciences, Vol. 33 Issue 4, p. 537-556, 20p, 6 charts, 3 diagrams. Web.

Morrison, M.H., 2001,‘E-PROCUREMENT’, Nursing Homes: Long Term Care Management, Vol. 50 Issue 7, p. 8, 3p. Web.

Puschmann, T., 2005, ‘Successful use of e-procurement in supply chains’, Supply Chain Management, Vol. 10 Issue 2, p. 122-133, 12p. Web.

Roche, J., 2001, ‘ARE YOU READY FOR e-Procurement?’, Strategic Finance, Vol. 83 Issue 1, p. 56-60, 4p. Web.