Chapter Four
Concepts of E-procurement
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What is e- procurement?
Procurement’ generally has a broader meaning.
‘Procurement’ refers to all activities involved with obtaining
items from a supplier; this includes purchasing, but also inbound
logistics such as transportation, goods-in and warehousing before
the item is used.
E-procurement is the electronic integration and management
of all procurement activities including purchase request,
authorization, ordering, delivery and payment between a
purchaser and a supplier.
Is the business-to-business purchase and sale of supplies, work,
and services through the Internet.
E-procurement should be directed at improving performance for
each of the ‘five rights of purchasing.
Key procurement activity within the organization
E-procurement have many attempts to automate the process of
procurement for the buyer using electronic procurement systems
(EPS)
EPS - An electronic system used to automate all or part of the
procurement function by enabling the scanning, storage and
retrieval of invoices and other documents; management of
approvals; routing of authorization requests; interfaces to other
finance systems; and matching of documents to validate
transactions.
Overview of e-procurement: Understanding the procurement process
Why E-Procurement?
Efficiency (fast and effective communication);
More competition (cross-border competition!);
More transparency, more fairness (everything happens on-line);
Savings on process costs and time; and
Value for money
Objectives of e-Procurement
To enhance transparency, monitoring and control in procurement
process;
To bring in economies of scale through aggregation of demand;
To reduce cost of doing business for both government and
suppliers; and
To establish level playing field and “fair” competitive platform
for the; suppliers
E-procurement Tools
There are several tools and application which fall under e-procurement
EDI system, procurement messages are exchange between
computers of two separate organizations. Message is exchange in
batch and can be easily transmitted and stored.
ERP is business management software usually a suite of
integrated applications that a company can use to collect, store,
manage and interpret data from many business activities.
Internet based tools and resources help in the process of
procurement are email, internet based EDI, XML based data
exchange via the internet.
E-sourcing tool is used to identify potential suppliers during the
selection phase.
E-tendering tool used to support the selection stage and acts as a
communication platform between the procuring organization and
suppliers.
E-auctioning tools operate under two separate mechanisms,
upward price mechanism for selling organization and downward
price mechanism for the buying organization.
E-ordering tool is used procurement of office supplies and
services
Types of E-procurement
The practical considerations with introducing e-procurement, need
to briefly consider the different types of items that are obtained by
procurement (what is bought?) and types of ordering (how is it
bought?).
what is bought by businesses?
There are two broad categories of procurement relate to
Manufacturing of products (production-related procurement) and
operating or nonproduction-related procurement that supports the
operations of the whole business and includes office supplies,
furniture, information systems.
how items are bought? businesses tend to buy by one of two
methods:
• Systematic sourcing – negotiated contracts with regular suppliers,
typically in long-term relationships.
• Spot sourcing – fulfillment of an immediate need.
E-procurement system
A good e-procurement system helps a firm organize its interactions
with its most crucial suppliers. And help to control costs and
assure maximum supplier performance.
E-procurement systems can be implemented fairly easily by starting
with nonessential purchases.
Before implementing an e-procurement system, businesses should:
Develop a business case, and Conduct a business process analysis
Analyze spending patterns
Consult suppliers
Determine criteria for choosing an e-procurement solution
Successful e-procurement requires a number of underlying systems
that provide:
Digital signatures and identity authentication
Certificates and attestations
Catalogs of products and services
Record archival
Public E-procurement: The concept of public procurement
Public Procurement can be defined as the procurement of goods,
works and services by all Govt.
Public procurement is only an extension of the personal
procurement by two key words i.e. transparency and fairness.
Public Procurement is to procure work, material, services of the
specified quality within the specified time at the most competitive
prices in a fair, just and transparent manner.
Transparency in public procurement
WHAT is being procured?
WHO is eligible to bid?
HOW to bid?
WHAT are the evaluation criteria?
WHO has got the award?
At WHAT cost?
WHAT is the quality of work/ product/service
Efficiency in public procurement
Clear Specifications
Ease of Registration / Bidding
Speedy Evaluation
Efficient payment system
Cost Effectiveness of Procurement
Cost Savings in procurement spend
Accountability of public functionaries
Benefit of E-procurement
Cost Reduction
Increase efficiency
Increase transparency
Challenges to E-Procurement Implementation
Supplier enablement
Individual user adoption
Budget and policy support
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