1. Introduction This report begins with an introduction of collaborative supply chain systems and narrows down to procurement process to further discuss the information and systems required in the collaborative e-procurement. A cost-benefit analysis is done based on a published hypothetical company case study. On top of that, wide research is done before the report is able to identify the key success factors in the collaborative e-procurement. 2.
Findings 2. 1 Collaborative Supply Chain Supply chain (SC) collaboration is defined as any kind of joint, coordinated effort between two parties to achieve a common goal (Mclaren, 2002).
This incorporated intra company and intercompany collaboration spans all core functions of manufacturing organizations (Rayport and Jaworski, 2002, p. 400).
SC encompasses numerous processes and activities along the entire supply chain such as product design, procurement, order fulfilment, manufacturing, marketing, and distribution. To summarize, collaborative supply chain is a strong and close relationship that involves more than one organization, in which every participant in the relationship highly commits into the joint activities in the supply chain to create values and benefits for all participants.
The main underlying concept is the sharing of information, knowledge, risk, and profits among all participants along the whole supply chain (Foggin and Golicic, 2000).
The success of a collaborative SC depends on how well information can be shared among the participants. The characteristics of collaboration can be classified into three categories. They are buy-side collaboration, sell-side collaboration and collaboration with competitors. Table 1 further explains them. Buy-side collaboration Sell-side collaboration Collaboration with competitors Joint effort between the company and the upstream participants in the supply chain, such as n-tier suppliers, contract manufacturers and logistics companies.
The Term Paper on Supply Chain Management 12
Supply chain management Supply chain management (SCM) is the process of organizing, operating, and controlling supply chains. The concept of supply chain management began in the early sixties; however, it has changed greatly since that time. The first stage in the development of supply chain management was called physical distribution management. (Handfield 47) This process integrated the ...
Collaboration effort between the company and other parties that involve in downstream supply chain, such as distributors, retailers, value-added resellers and customers. Collaboration among competing companies is realized through the concept of consortia marketplace. Table 1: Three categories of collaboration Information needs to be shared to achieve a successful collaboration in production. It is important to have a good information forecast system supported with advanced information technology for the ordering and fulfilment process and a transparent inventory system which supports dynamic inventory replenishment. It is important to note that implementation of collaborative supply chain is not only a technological challenge, but a process and management challenge.
According to Foggin and Golicic (2000), the following issues need to be resolved before an actual profitable collaborative SC can take place: – Doing things the old way – Conventional accounting practices – Tax laws – Limited view of the supply chain – Annual negotiation process – Extensive time and human resource investment – Inadequate communication – Inconsistency of behavioral attitudes and operational execution among partners – Betrayal According to Foggin and Golicic (2000), collaboration can create values for the company if some barriers can be solved. The barriers and benefits are listed in Table 2: Barriers Benefits – Different organizations! goals and objectives among the partners – Inconsistency in internal performance metrics – Lack of trust – Lack of incentives to take a whole process view – Difficulties and costs incurred during system integration – Adversarial attitudes towards suppliers – Reduced inventory – Improved customer service – More efficient use of human resources – Better delivery through reduced cycle times – Faster delivery of new products to market – Stronger focus on core competencies – Enhanced public image – Greater trust and interdependence – Increased sharing of information, ideas, and technology – Stronger emphasis on supply chain whole – Improved shareholder value – Competitive advantage over other supply chains Table 2: Barriers and benefits of collaborative supply chain 2. 2 Traditional Procurement Typically procurement encompasses all activities involved in obtaining material and services to managing their inflow into an organisation toward the end user (Gebauer and Segev, 1998).
The Essay on Procurement and Supply Chain Management
Executive Summary Boeing Australia Limited (BAL) is relatively new company and a global extension of the US firm, the Boeing Company. The BAL developed capabilities in the areas of space and communication, site management and the upgrade and maintenance of military aircraft and equipment. As BAL grew, it had developed various systems to support the procurement operations at four key divisions and ...
Diagram 1 shows the procurement process: Diagram 1: Procurement process There are four transactions in traditional procurement (based on one time purchase, not including contract purchasing, etc): 1. Submission of purchase request to purchasing department with listing on materials, quantity, and request date based on manufacturing plan, inventory plan or other needs.
2. Sending of Request for Quotation (RFQ) by purchasing department to potential suppliers with selection of suppliers based on price, lead-time, and quality. 3. Receipt of the goods from supplier and inspection. 4. Payment for goods after matching purchase order, invoice, and receipt record.
2. 2. 1 Problems of Procurement System Traditional purchasing activities such as sending requests for proposal (RFPs) via the mail and fax are a very labour-intensive requisitioning process. High transaction costs, long purchasing ordering cycle times, and poor productivity are e radiated by virtue of the instantaneous exchange of information between buying and supplying organizations (Zsidisin, 2002).
In addition, procurement procedures are also rifled with problems like disconnected processes, lack of integrated planning and decision support, along with lack of visibility (Gupta, 2001).
In traditional procurement system, design, engineering and manufacturing departments are isolated from one another. Many problems may arise due to lack of collaborations among intra-organisations and within inter-organisation. The problems and negative effects on an organizational performance are summarized in the Table 3 (Gupta, 2001): Problems Effects Lack of integrated approach to procurement Significant increase in costs; Lack of differentiation in end products Poor customer service Disgruntled suppliers Lack of decision support to crucial procurement activities Slow in decision making Lose precious opportunities Delay in procurement activities Lack of visibility Significant reduction in supply base Low productivity Maverick buying Increase in indirect spending Inability to coordinate activities across outsourced manufacturing organizations Decreased customer service Poor inventory management Poor quality control Inability to tap into a large supplier base due to lack of structured content Difficulties in supply base expansion Difficulties in product information management Ineffective sourcing Bullwhip effect Distorted demand information Excessive inventory level Table 3: Problems and effects of traditional procurement system The negative effects on an organisation will result in the need for collaboration, information sharing and e-procurement as discussed in the following sections. 2. 4 Information Needed to be Shared The types of information needs to be shared are drawn and categorised according to each of the supply chain process component. The further elaboration of this will be discussed in the following Table 4.
The Research paper on Overview Of Information Technology Tools For Supply Chain Management
... increasingly facilitated in the new e-supply chain paradigm. Information sharing among suppliers, manufacturers, distributors and retailers are greatly ... tracking the progress of an order. e- Procurement: The term procurement is used to describe the purchase of ... Macleod, M. (1994), “What’s new in supply chain software?”, Purchasing & Supply Management, June 1994, pp. 22-5. ...
Diagram 2: Types of information needs to be shared (Wang, 2002) Table 4 shows the three common information-sharing strategies adopted in procurement: Order Information Sharing Product Design Information Sharing: Demand Pattern Shipment and Inventory Information – Order information shared within related parties in the supply chain may reduce the bullwhip effect and beer game problem. (Li, Shaw and Tan, 2000) – Proper product design information sharing can reduce the bullwhip effect for the suppliers. – Demand variability: quantitative and qualitative variability (Li, Shaw and Tan, 2000) – Demand patterns: Functional, customizable and innovative (Li, Shaw and Tan, 2000) – Sharing shipment information from the suppliers to customers can improve their production / inventory decision. – Clearer picture on the conditions of suppliers can widen production-planning horizon and lessen! ^0 gaming! +/- tendencies (Lee, Padmanabhan and Whang, 1997 (2); Wang, 2002).
The Essay on Confidentiality & Information Sharing
Much has been written about both the importance of confidentiality and information sharing, and people are often confused by what is meant. It can also be confusing trying to decided what it is ok to share and in what circumstances. Starting right It is helpful to start any professional relationship by telling people what you mean by confidentiality, and in what circumstance you might need to ...
– Access to supply chain inventory status can contribute to lowering the total inventory level in the supply chain (Wang, 2002, p. 17).
Table 4: Three information-sharing strategies in procurement 2. 4. 1 Evaluation of Information Sharing Strategies An evaluation of information sharing strategies was given by Li, Shaw and Tan (2000).
Firstly, information sharing improves supply chain performance when demand is relatively stable since information sharing can significantly reduce the bullwhip effect. Secondly, different information sharing strategies have different impacts on supply chain performance. Finally, hybrid information sharing is an ideal strategy when demand is volatile in terms of demand mix.
2. 5 E-Procurement E-procurement is the use of the Internet solution to facilitate corporate purchasing over the Internet (Chan, 2002).
This can be further defined as using of Internet technologies and applications, such as electronic data interchange (EDI), electronic mail (e-mail), and electronic marketplace (e-marketplace), in the purchasing process (De Boer, Harink, and Heijboer, 2001).
There are numerous technologies and systems proposed by consultants for e-procurement.
2. 5. 1 E-procurement Technology Doculabs (2002) has collected eight e-procurement products like Ariba, Clarus, Commerce One, iPlanet, i 2 Technologies, MRO Software, Peregrine Systems, and PurchasePro (refer to Appendix IV).
He has also reviewed key capabilities of each e-procurement technologies listed in Table 5. Vendor/Product Positioning Ariba Buyer 7. 0 and Enterprise Sourcing 3.
0 web > Sourcing, procuring and spending management applications. Managing purchaser and supplier relationships. Clarus eProcurement 6. 1 web > Integrated sourcing, procurement, and settlement applications. Manage indirect purchasing and periodic sourcing of direct materials. Commerce One Enterprise Buyer 2.
0 web > Enterprise sourcing, procurement, and marketplace applications. Manage purchasing across multiple channels. i 2 Technologies i 2 5. 2 web > Integrated applications for procurement of direct materials, strategic MRO, and indirect materials.
The Term Paper on Environmental Management System ems In Construction
Environmental Management System (EMS) in Construction Table of Contents Abstract3 Introduction4 Environmental Management Systems5 Developing an Environmental Management System7 Commitment and Policy: General7 Top Management Commitment and Leadership7 Planning7 Activity and Environmental Impact Matrix8 Significance of the Impact8 Internal Performance Criteria8 Environmental Objectives and Targets8 ...
Help large businesses to incorporate purchasing into supply-chain management. IPlanet Buyer Xpert 4. 1 web > Help large and medium-sized businesses in purchasing. Provide sell-side commerce, billing, and platform technologies. MRO Software Maximo 5. 0 web > Integrated system for sourcing, asset management, and repair and maintenance scheduling.
Managing capital assets (including plant, machinery and equipment).
Peregrine Systems Get-It 2. 01 web > Managing the asset life cycle and the requisitioning of indirect MRO goods (particularly IT and capital assets) Purchase Pro e-Procurement, e-Market Maker, and e-Source web > Applications for sourcing and procurement. Applied for marketplace-based procurement, ASP-hosted procurement, and packaged software. Table 5: E-procurement products and positioning (Doculabs, 2002) 2. 6 Critical Success Factors for Collaborative E-procurement Table 6 depicts the critical success factors for E-procurement: Heywood (2002) (Refer to Appendix I) Duschinsky (2000) (Refer to Appendix II) Gale Group (2000) (Refer to Appendix III) Akkermans and Helden, (2002) 1.
Collaboration from suppliers 2. Transforming company behavior with new policies and procedures 3. Starting small with a prototype 4. Knowing that building usable catalogues is not as easy as it sounds 5. Integrating new software with existing back office and data warehouse systems 6. Transmitting electronic documents between organizations by eliminating administration overheads 7.
Automating spending area that are known to be under control 1. Create new process 2. Budget the plan 3. Improve on the most critical problem first 4. Create awareness and consent from end-users 5.
Sufficient time allocation to the system implementation 6. Cautious on merging standards in content and transaction management. 7. Be wise in team investment 8.
Care to obtain relevant advice e. g. in-house IT expertise. 9. Avoid becoming ‘hardwired’ into specific solutions. 10.
Treat e-procurement as a strategic issue. 1. Do something. Do it soon. 2. Start with strategic sourcing.
3. Respect your legacy. 4. Segment the supply base, and then apply e-sourcing tools appropriately. 5.
The Essay on Strategies for Procurement of No Cost
At the beginning of the 21st century, the biggest banks in the industrial world have become complex financial organizations that offer a wide variety of services to international markets and control billions of dollars in cash and assets. Supported by the latest technology, banks are working to identify new business niches, to develop customized services, to implement innovative strategies and to ...
Start with the easy, but do not neglect the hard. 6. Do not underestimate the sweeping internal changes that e-procurement demands. 7. Focus on delivering sustainable benefits. 8.
Understand your power as a “market maker.” 9. Treat critical suppliers with kid gloves. 10. Benchmark the competition. 1. Top management support 2.
Project team competence 3. Interdepartmental co-operation 4. Clear goals and objectives 5. Project management 6. Interdepartmental communication 7. Management of expectations 8.
Project champion 9. Vendor support 10. Careful package selection. Table 6: Critical success factors compilation 2. 7 Quantifying Cost-Benefit Analysis Cost-benefit analysis (CBA) can be defined as a policy assessment method that quantifies in monetary terms the value of all policy consequences to all members of society (Boardman, Greenberg, Vining, Weimer, 2001, p. 2).
In this section, the challenges of quantifying e-procurement CBA, and a model to quantify e-procurement CBA is discussed. 2. 7. 1 Challenges of Quantifying E-Procurement CBA Quantifying e-procurement CBA is a challenge because of the difficulties of arriving at estimates. According to Magrassi (2000), the factors affecting estimation of the financial returns in e-procurement are: – One-time events – Change management – Maverick buying – Head count requirements – Project cost overruns – Not all companies can be channel masters – Immaturity of technology Apart from the above, the diversity of procurement industry and uniqueness of industry and company practices provide added challenges to quantifying CBA. 2.
7. 2 A Model to Quantify E-Procurement CBA Quantifying e-procurement CBA involves the following steps: – Estimate e-procurement cost savings – Estimate e-procurement expenditures – Prepare risk analysis Hope-Ross (2001) has proposed a model to quantify e-procurement! s cost savings and expenditures. The cost savings are based on the three key cost savings for e-procurement proposed by PricewaterhouseCoopers (2000): – Compliance: There is the difference between the average level of discount for on-contract and off-contract goods multiplied by estimate of compliance. – Leverage: This is a measure of the true volumes of spending against the contracts and this information is used to negotiate improved discount. There is about 50 percent of the compliance savings. – Process efficiency: This is most difficult to measure because it depends on re-engineering the procurement process.
This can represent about 10 percent of compliance savings. The e-procurement expenditures are estimated based on: – Software license and maintenance – Systems integration setup and maintenance – Additional internal administration staff – Catalogue setup and maintenance – Investment and maintenance in sourcing application. The annual return on investment (ROI) is the difference between the annualised total cost savings and the annualised total expenditure. Annual projections can be done over a period of time to calculate the cumulative ROI to determine the number of years when the cumulative ROI turns positive. Diagram 7 depicts the detailed estimates for cost savings, expenditures and returns. For risk analysis, Hope-Rose, Doyon, and Luebbers, (2001) proposed the study of the following factors: – Number of people to be retrained – Number of organizations affected – Number of applications to be integrated and changed – Number of data sources to be changed – Number of preferred suppliers to be accommodated by e-procurement 3.
Discussions 3. 1 E-procurement Information Needed The important information sharing in e-procurement collaboration is categorised into the following table: Information Category Information Type Information Flow direction Benefit Example Order information Actual sales data, such as POS data; planned order information; order status tracking Lower to upper tiers Reduce bullwhip effect; upstream can forecast future demand based on shared information, reduce safety stock Apple-Fritz ” as Supplier Hub (Kopczak, 1997) Micro Age-UPS Tracking (Addi cott, 1997) Forecast information Retails/ distributors! forecast of end-customer need; or forecast methods Lower to upper tiers Reduce bullwhip effect, the upstream can predict market demand more accurately, and less stock-out as safety stock can be achieved. Seven Eleven Japan (Whang and Saito, 1997) Shipment/Inventory Level Shipment schedule/ in-transit inventory/ production capacity Upper to lower tiers Partially eliminate shortage gaming, and help lower tier to make materials purchasing schedule Inventory level Lower to upper tiers The upstream can synchronize production and delivery plan, reduce changes in manufacturing plan and arrange manufacturing more efficiently Product design information Downstream: end-customers! preferences /upstream: product property Both Upstream can introduce the! ^0 best design! +/- of products according to end-customers! preferences; downstream can master production techniques earlier, and design more efficient routing’s accordingly Table 7: E-procurement information needs 3. 2 E-procurement Technology Discussion for e-procurement technology: Collaborative e-procurement solutions aim to enabling collaborative relationships between design, procurement and supply chains. The e-procurement trend is moving towards providing total solution that caters both strategic sourcing and procurement. In the market there are many different e-procurement products offered by different vendors.
Doculabs (2002) has critically discussed and evaluate on the eight e-procurement products (refer to Table 5 above).
Refer to the above Table 5 findings, typically the procurement system vendors can be separated into three approaches: supplier-relationship management, sourcing, forecasting and planning. 3. 2. 1. Managing supplier! s relationships Some e-procurement system vendors have the capability to manage supplier! s relationships.
Feature Example Supplier relationship management Transaction and decision support capabilities Ariba, Commerce One Processing transaction billing and settlement Iplanet, Clarus Building trading network and hosting e-procurement application Purchase Pro Asset management Maintenance scheduling, track in-house availability Peregrine, MRO Product operation Resource scheduling and replenishment, planning, inventory and service management, and demand forecasting I 2 Technology 3. 2. 2. Sourcing Procurement system should support sourcing: the ability to locate suppliers, evaluate their offerings and make comparisons.
The products comparison list is shown as follow: Example Sourcing RFQs, Information sharing, bidding RFQs and negotiation Ariba, Commerce One, Purchase Pro Trading partner information MRO, Peregrine RFQs and auction, direct materials purchasing Clarus Identify potential suppliers Integrated with market marker iPlanet Connectors to ERP or other applications Ariba, MRO 3. 2. 3. Collaborative Forecasting and Planning Ariba is clearly the leader in this category. It is empowered with the capabilities to make reference on contract terms within the purchasing process, monitor contract effectiveness and thresholds, and administer exception-handling processes. 3.
3 Critical Success Factors for E-Procurement Referring to the critical success factors at Table 6, the first three columns are specifically designed for e-procurement, whereas, the last column CSF is based on management of information systems (MIS) implementation. This discussion of CSF is based on the organisational change framework. The study of the business process change (BPR) is the natural first stage of process automation within an organisation (Albano, Pino and Borges, 2001).
Basically, BPR can be defined as a total re planning and redesign of manpower, internal and external organizational structures, systems and process in order to achieve some objectives, which are usually not easy to achieve on current conditions of an organisation (Albano, Pino and Borges, 2001).
Therefore, Tenner and DeToto! s (1997) process of organisational change framework is used, as shown in Diagram 3. Diagram 3: Process of organisational change (Tenner and DeToto, 1997) Based on the above diagram, Heywood (2002), Duschinsky (2000) and Gale Group (2000) (Refer to Table 6) focus more on the third step of the BPR- the choice and implementation process rather than first, second and fourth steps.
The possible argument for this section is because the first and second parts of the BPR are already covered in the information and technology selection discussion of this report. Therefore, the discussion on CSF will focus on the choice and implementation as the former is used to improve the boundaries of process improvement, and whose effect is richer if viewed within the context of their own importance in each stage of the implementation process (Somers and Nelson, 2002).
Generally, Heywood (2002), Duschinsky (2000) and Gale Group! s (2000) ideas are collected to show and discuss the proposed CSF in e-procurement collaboration. Majority steps proposed by them are almost similar except on a few points. Duschinsky (2000) and Gale Group! s (2000) CSF is more precise as they take budget into consideration, this is the point that Heywood (2002) has neglected. In addition, Duschinsky (2000) and Gale Group (2000) also highlighted the change is for strategic purposes to benchmark organisation competitors in order to create competitive advantage.
This is not mentioned in Heywood (2002) CSF. On the other hand, the Akkermans and Helden! s (2002) CSF is introduced for discussion because e-procurement is an IS implementation. These ten CSF proposed by them are important because they are found to be helpful and appropriate in explaining both the initial failure and the eventual success of the IS implementation (Akkermans and Helden, 2002).
The purpose of adding Akkermans and Helden (2002) on top of the other e-procurement CSF is to complement on each other! s weaknesses. 3.
4 Cost Benefit Analysis Arriving at estimates for CBA is a challenge. Magrassi (2000) has given the factors that affect the estimates. Owing to the complexity of arriving at estimates, there is no doubt that some of these factors are overlooked. Understanding the industries and being meticulous are also other contributing factors. Estimates are often inflated by companies, which have a vested interest in e-procurement. Magrassi (2000) cited a report at the end of 1999 by a merchant bank that projected an average of 13 per cent and a median of 11 per cent cost savings for 17 e-procurement companies.
A closer study on the bank! s methodology by Magrassi (2000) indicated that the bank! s projection was based on those from third parties who have vested interest to promote e-procurement. The CBA model proposed by Hope-Ross (2001) is easy to understand, yet complete and usable. For cost savings: – The average annual spending on goods and services is estimated using a percentage of the annual revenue. – The value of managed spending due to e-procurement is estimated using the average annual spending, a percentage of spending addressed by item coverage due to e-procurement, and a percentage of employees using the e-procurement system. – The compliance savings, leverage savings and process savings can be estimated as a percentage of the managed spending due to e-procurement.
– The three key cost savings are added to give the total cost savings. The e-procurement expenditure estimates are self-explanatory. With the total cost savings and total expenditures, the ROI can be easily computed. We assert that the model can be made mathematically more generic as proposed in the analysis section below. 4. Analysis This analysis starts from explaining the three-dimension diagram below.
It includes players in the supply chain and some vital information supported by the relevance proposed technologies in the e-procurement collaboration. 4. 1 Challenges in Information Sharing Information sharing in a supply chain faces several challenges, such as aligning incentives, sensitivity of information and confidentiality of information. 4. 1. 1 Aligning Incentives The first challenge may be the aligning incentives of different partners.
Sharing of information in the supply chain does not imply that it can bring in revenues as there is a possibility that the partners are abusing information; and reaping all benefits from information sharing. It is necessary to build up trust in the supply chain, even though it is difficult to gain trust from the internal players. 4. 1. 2 Sensitivity of Information Another concern associated with information sharing is the sensitivity of information. Most parties are not willing to share sensitive data.
For example, cost data and bill of materials. Without sharing these data, the efficiency of the whole supply chain may be reduced to some extent. 4. 1. 3 Confidentiality of Information The confidentiality of information shared is the third challenge. Undoubtedly, information sharing among the supply chains may lead to a possibility of being acquired by competitors.
For example, a supplier supplies a critical component to two manufacturers competing in the final product market, the supplier will find it difficult to link information to the other two parties. The situation may be out of control if the supplier has a closer relation with one of the two manufacturers, or they are from the same company (Lee and Whang, 1998).
4. 2 Technology To select the right e-procurement solutions, an organization shall first review their business processes and identify their requirements (Ernst & Young, 2001).
After that, the organization can determine the best technological approach. There are some common criteria that should be taken into consideration for appropriate technology selections.
Based on the four technology sections in Diagram 4 and discussion, a case study is adopted to show the relationships between the key issues and needs of the organisation affecting the organisation e-procurement vendor selections. The Diagram 5 below summarises the technology selection steps based on the four main categories: Functionalities, Implementation, System Features and Customer Service. The flow of the Diagram 5 is explained by using BMW Group as the case study. Due to the length of the report, only the important parts are selected for discussion. Every organization has its approach and solution, so as for BMW Group. Although there is a wide range of functionalities provided in the existing e-procurement technologies, the formality of proper technology and consultant selection in adopting the e-procurement system remain unchanged.
Functionalities Sourcing Strategic sourcing of supplier section is critical. Therefore, after adopting Ariba service (Ariba, 2001), BMW Group e-procurement system has improved and it is able to source for its suppliers directly via Internet to transmit and manage orders, and connect to a variety of commerce services. Implementation Integration with existing systems Many organizations have their own on-going systems, such as ERP system. It is vital for any system solution to be seamlessly integrated to the existing systems. For example, BMW Group selected a solution from Ariba, which integrates easily and seamlessly into the existing multiple ERP systems (Ariba, 2001).
Customer Service Training Company perceiving training programme and on-going systems support, as important requirements to support the e-procurement system implementation will like to consider Ariba solution.
This is because Ariba is able to guide both their inexperienced and experienced end-users through the order processes. One success story is from BMW Group that adopted Ariba solution and managed to reduce procurement processing time by up to 70%, resulting in greatly reduced costs (Ariba, 2001).
From the above case study, it has successfully showed that BMW Group manages to select the right vendor-Ariba for their e-procurement implementation. However, the critical success factors of the implementation still need further research in order to have a better proposal on CSF. 4. 3 Critical Success Factors The diagram bellow is the newly proposed CSF in collaboration with the process of organisational change framework.
It shows a complete CSF framework at each of the stages. This shows a more comprehensive CSF plan in its framework (refer to Diagram 6).
This diagram integrates CSF with the business process framework as e-procurement requires a careful planning from initial stage. The change through CSF will secure a higher rate of success. Comprehensive suggestions and processes are shown in Diagram 6. Diagram 6: Critical Success Factor for e-procurement Last but not least, the e-procurement measurement is also proposed to add value for the above proposed CSF.
This is a good measurement for the e-procurement process as highlighted in the conceptual needs. E-procurement process can be evaluated by four measurements: Availability Time Accuracy Flexibility – Information about purchase order, in-transit inventory, purchasing history, etc must be available at any time for query and analysis. – Three types of lead time: pre- purchase, purchase and post-purchase – Delivering the right materials in the right time to the right place with right quantity and good quality – The information system must be able to summarize and aggregate data according to customers, users! specific requirements (Bowersox and Closs, 1998) Table 5: Four e-procurement measures 4. 4 Proposed Cost-Benefit Analysis Based on Hope-Ross! s (Apr 2001) CBA model, the following are the proposed improvements (refer to Diagram 7): – Explicit formula for the calculation of each item in terms of costs and expenditure, as given in the table. With these formulae, it is easy to arrive at a user-friendly spreadsheet for e-procurement CBA. This spreadsheet can be used to calculate e-procurement CBA quickly.
The spreadsheet is also useful in! ^0 what-if! +/- analysis of e-procurement CBA as it can help to calculate the returns instantaneously when changes to the parameters are made. – Additional rows for cost savings and expenditures as a refinement to cater for the diversity in procurement processes and uniqueness of industries and company practices Through the proposed e-procurement, CBA model can be easily implemented as an! ^0 e-procurement CBA calculator! +/-, but it has to be used with caution. It is important to understand the assumptions made in the model, before it can be used effectively to provide accurate estimates and analyses. Models to quantify e-procurement CBA are still evolving, Hope-Ross and Reilly (2001) predicted that it is going to take a few more years to stabilize.
Diagram 7: Cost-Benefits Analysis 5. Conclusion Companies have long been aware of the values of collaboration in supply chains. The number of companies successfully implementing this collaboration is an interesting issue to look at. Issues discussed in the previous sections are fairly subjective and case-based. The focus of this study is on collaboration system, traditional procurement and e-procurement system.
The purpose of this paper is also to acknowledge failure issues and learn from the success stories. Hence, this research concludes with a proposal of new set of critical success factors (CSF) and cost-benefit analysis (CBA) that are specifically tailored to e-procurement collaboration. 6. Recommendation With the CSF factors in mind for the e-procurement collaboration implementation, the CBA model used to quantify e-procurement is also important. According to Hope-Ross and Reilly (2001), the model to quantify e-procurement is still evolving, they predict that it still needs to take a few more years to stabilise. The following diagram was proposed by Hope-Ross and Reilly (2001).
According to the above diagram, in order for the e-procurement to be profitable, it requires a ramp-in period to achieve sufficient transaction volumes to gain a cost saving to offset the initial capital investment. For this reason, Magrassi (2000) believed that a typical time to break even is 24 months or longer. Hence, based on the hypothetical company used in this research, it will take five years to get a positive return on investment. As a result, it is recommended for companies investing in e-procurement to take this cycle into consideration. 1. Akkermans H, Helden K V (2002), ! ^0 Vicious and virtuous cycles in ERP implementation: a case study of interrelations between critical success factors! +/-, European Journal of Information Systems, Vol.
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