E-Business

E-Procurement : Chapter 6

Organizations need to purchase two types of products - production related and non-production related goods. Production goods are purchased by the organization to process them, add some value and sell them. Non-production goods, also known as operating resource products are meant for organization’s own consumption. These goods are categorized into general and administrative, capital equipment, travel services and entertainment, and MRO items. Of all the types of operating resource products, MROs are most critical to the organization’s production operations and plant maintenance. Companies in industries such as power generation, aviation and automobile manufacturing incur high levels of MRO expenditures on the plant floor.

The success of sell-side e-procurement solution depends on the supplier's technological infrastructure, ability to integrate with different technological platforms and ability to cut costs and improve products. In recent times, several suppliers of a single product have been coming together to form vertical portals. Vertical portals are commonly seen in industries such as steel, paper, and chemicals where fragmented markets and price variations make it difficult for buyers to make a purchasing decision.

The procedure for obtaining an effective e-procurement system involves the following steps: establishing and quantifying procurement chain goals, evaluating the existing procurement process, constructing systematic methods for measuring the results of the e-procurement solution, developing a supplier relationship strategy, selecting an appropriate e-procurement application, integrating it with the existing system, and educating employees.

The best practices in e-procurement include: using a procurement card system and an electronic funds transfer system, clarifying the employees' role in the procurement process, using a strategic approach to implementation and participating in collaborative e-procurement. Collaborative e-procurement is being adopted by many companies to realize high levels of process efficiencies.

Chapter 6 : Overview