Matching indirect procurement process with different B2B e-procurement systems
Introduction
Corporate procurement can be broadly divided into the procurement of direct goods (i.e. direct procurement) and that of indirect goods (i.e. indirect procurements). Direct goods are the materials that are used in the production of manufactured goods. Indirect goods are the supplies a company uses in day-to-day operations, but not in the manufacturing of goods. These include office supplies and equipment, MRO (maintenance, repair and operation), computers, software and other IT equipment, marketing kits and services, travel reservations and other services, as well as capital goods.
Traditional emphasis of the procurement function has been on direct procurement [6], [9], [17], [26], [55], [57]. Considered of strategic relevance, many efforts have been made to streamline the inflow of direct goods onto the manufacturing floor and to increase the efficiency of structured procurement processes. Direct procurement can be scheduled in a timely manner to meet demand, provided sufficient information about demand is available, and sources of materials are secure and reliable. Besides establishing routine buying procedures, IT (information technology) has long been utilized in this context. In particular at large organizations, EDI (electronic data interchange) applications have provided the basis for JIT (just-in-time) arrangements and automated replenishment systems. Buying operations are typically triggered through demand forecasting, and stipulated in BOM (bill of materials), and manifested in MRP (material requirements planning) or ERP (enterprise resource planning). The production and distribution of direct goods in collaboration with suppliers and business partners is termed SCM (supply chain management). Many computer applications have been developed for supply chain and production management.
Compared to direct procurement, indirect procurement had received far less attention on an organizational level and the use of IT, resulting in little process standardization and a majority of paper-based activities. Historically, indirect goods have been procured manually via phone, fax, and traditional mail. Only with the advent of affordable, often Internet-based applications, did companies become aware of the time and cost saving opportunities in this area, with the result of numerous reengineering and e-procurement projects [5], [17], [20], [22].
In simplest terms, e-procurement is commonly defined as an organization’s procurement using the Internet technologies. In contrast to direct procurement systems, e-procurement systems concentrate on indirect procurement. E-procurement systems are well suited to support and automate indirect procurement in new and many ways, which can yield significant efficiencies, time and cost savings at all levels across an enterprise, resulting in self-service transactions for end-user purchasing and empowerment, and reduced maverick buying.
There is a tremendous amount of literature on e-procurement systems or business models. Among them, the literature addressing e-procurement systems along with procurement processes have focused on the indirect procurement at high-level granularities only (e.g. [2], [4], [7], [8], [15], [16], [19], [23], [24], [25], [27], [35], [37], [39], [43], [44], [46], [47], [48], [49], [50], [54], [60]) or at a low-level granularity only (e.g. [3], [9], [17], [30], [31], [36], [41], [42]), either within a single e-procurement system/business model or without matching between procurement processes and different e-procurement systems.
However, a single information system cannot meet all the business requirements, and not all e-procurement systems or business models for indirect procurement are equally suitable for supporting different business processes. That is, one size does not fit all. Therefore, a buying company needs to adopt various e-procurement systems or business models in a hybrid and seamless manner. But one of the difficulties is to find, deploy, and utilize the right solutions to the right places. In this paper, we provide the matching between indirect procurement process and different e-procurement systems, at the high-level and low-level activities, in order to identify and articulate the areas where various e-procurement systems can be utilized in a hybrid and seamless manner.
Section snippets
Procurement processes
While there is generally consensus on what a business transaction is all about and whom it involves, the approaches to delineate their sequence show some variety. As with any definition, the task largely depends on the research objective and perspective that is taken. In the literature, procurement transaction processes have been generally defined along two different ways.
Many academic researchers provided similar process models at higher-level granularities as shown in Fig. 1 (e.g. [2], [3],
E-procurement systems or business models for indirect goods
In a narrow sense, e-procurement systems can be defined as the web-based systems building at the buying organizations, i.e. buyer-centric (buy-side, buyer-managed, buyer-focused, buyer-specific, or buyer-oriented) e-procurement systems such as intranet (internal, desktop, or end-user’s) e-procurement systems and buy-centric private e-marketplaces managed by a single buyer. However, e-procurement is commonly defined as an organization’s indirect procurement using the Internet as mentioned
Matching indirect procurement process with e-procurement systems
In this section, we present the matching between procurement processes and various e-procurement systems in Table 1 for identifying and articulating the areas where various e-procurement systems can be utilized in a hybrid manner, which is followed by their descriptions. In Table 1, we not only make a distinction between contracted buying and off-contracted buying processes, but also decompose the high-level procurement processes or match their distinct phases consistently with the lower-level
Conclusion
E-commerce is not something that can be instantly plugged into existing workplace, and implementing e-procurement is not a simple matter. The new solution will require changes, updates, replacements, and adaptations throughout the infrastructure. But changes go beyond the IT environment to impact the entire enterprise. Successful e-procurement is often more attributable to the fundamental procurement aspects than to the electronic aspects. Plans for new ways of doing business, particularly when
Joong-In Kim, PhD, is an associate professor of Management Information Systems at Hongik University, South Korea. He received PhD in industrial engineering at Arizona State University, USA, in 1995, and BS and MS in industrial engineering at Hanyang University, South Korea. He worked as a senior researcher at ETRI (Electronics and Telecommunications Research Institute), South Korea. His research interests include e-business, electronic commerce, supply chain management, and information systems
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Joong-In Kim, PhD, is an associate professor of Management Information Systems at Hongik University, South Korea. He received PhD in industrial engineering at Arizona State University, USA, in 1995, and BS and MS in industrial engineering at Hanyang University, South Korea. He worked as a senior researcher at ETRI (Electronics and Telecommunications Research Institute), South Korea. His research interests include e-business, electronic commerce, supply chain management, and information systems modeling and development.
Dan L. Shunk, PhD, is the Avnet chair of Supply Network Integration and a full professor of Industrial Engineering at Arizona State University, USA. During 2002–2003 he is on a fulbright scholarship to the University College Cork in Ireland. He was the former director of the CIM Systems Research Center at ASU. He is currently pursuing research into global new product development, model-based enterprises and global supply network integration. He studied at Purdue University where he received his BS, MS and PhD in industrial engineering in 1976. He was co-founder of the US Air Force ICAM Program where he launched such industry standards as IDEF and IGES, former manager of Industrial Engineering at Rockwell, former manager of Manufacturing Systems at International Harvester, and former vice president and general manager of the multi-million dollar Integrated Systems Division of GCA Corporation. He is a senior member of SME and IIE. He won the 1996 SME International Award for Education, the 1999 and 1991 Industrial Engineering Faculty of the Year award, the 1989 SME Region VII Educator of the Year award, served as the CASA/SME chair in 1987, chaired AutoFact in 1985, and won the 1982 SME Outstanding Young Engineer award. He has served on the Manufacturing Studies Board of the NRC and has chaired two National Research Council panels. Recently he participated in the creation of the Next Generation Manufacturing Project. He is the US Delegate to the global Intelligent Manufacturing Systems Project.