Chapter 7: IT and Purchasing

1. Electronic Procurement System.

An e-procurement system is an applications software package that allows requisitioning,
authorizing, ordering, receiving, invoicing and paying for goods and services over the
internet.
Is the term used to describe the use of electronic methods, typically over the Internet to
conduct transactions between awarding authorities and suppliers.
The process of e-procurement covers every stage of purchasing, from the initial
identification of a requirement, through the tendering process, to the payment and
potentially the contract management
Regardless of the type of e-procurement system a company chooses, the company can
expect to receive similar benefits including saving money on purchases, improving the
timeliness of the purchasing process, and eliminating waste.
In addition to these benefits, companies can also improve the efficiency of their supply
chain.
Additionally, using e-procurement to enhance supply chain relationships can make it
easier for accounting departments to track and keep a record of payments and invoices.
E-procurement systems don't automatically boost supply chain efficiency, however. The
company must select a system that has the capabilities necessary to achieve those
benefits first.
Performance metrics for e-procurement system include:
a. The percent of organizational spent under procurement control
b. Requisition-to-order costs
c. Requisition-to-order cycles
d. Percent of off contract spend
e. From the internal user/customer perspective- a successful e-procurement system
make faster ordering, faster fulfillment and broader range of choices.

2. Electronic or Online Catalogs
An e-catalog is a digitized versions of a suppliers catalog.
Allows buyers to use a Web browser to view detailed buying and specifying information
about the suppliers products and/or services.
Product catalogs include:-
Product specification data: describes about the products features
Transaction data: includes price, shipping, billing address, quantity discounts; which
customized to each buyer.
In a catalog network, a host company collects the catalogs and customizes the
transaction data for each buyer. buyer can either pull the catalogs onto the company
server or access them from the host company. Or the supplier may allow the buyer to
punch out or access a supplier hosted catalog.
This technology permits buyer-controlled catalogs that combine information such as
price and specifications, from one or multiple suppliers. Therefore supplier(s) are
responsible in updating and maintaining the catalogs.
In-house catalogs allow the user to customize content in terms of supply options and
price.

3. Electronic Data Interchange
Allows computer-to-computer exchange of business documents between 2 organizations
using agreed standard to structure the message data.
Documents exchaged via EDI include PO, shipping schedules & notifications, and
invoices.
Provides secure transmission and fast turnaround of large amounts of data, greater
accuracy internally & with trading partnets, lower inventory, reduce administrative
costs,etc.
Four (4) types of EDI:-
a. A Value-Added Network (EDI VAN)
A private network for secure information exchange between companies.
Each trading partner has an account with an EDI VAN that serves as an electronic
mailbox used to send and receive documents.
Benefits: convinience, alert service to notify transmission of receipt,etc.

b. Internet EDI or AS2 (Applicability Statement 2)
2 computers, a client and a server, communicate with each other securely and
reliabily via internet.
An envelope is created by AS2 and uses encryption and digital certificates to
send the envelope securely.

c. Web EDI
Allows documents exchange through an easy-to-use Web interface.
Data are convert into EDI standard compliant format and transmitted to a trading
partner.
Prepopulated froms with built-in business rules are used.
Receiving, editing and sending electronic documents are simple and efficient.
The only requirement is Internet connection.

d. Outsourced EDI Services
Enable B2B expansion, ongoing management, prompt integration of new trading
partners, robust infrastructure to support transaction, translator services using
current e-commerce EDI standards and reporting.

4. E-Marketplaces
Electronic marketplaces are virtual shopping malls.
B2B e-marketplaces are network services on which member companies buy and sell their
goods and exchange information.
Offer broad scope of supply chain activity such as forecasting and replenishment, price
discovery and clearing, and provide a range of software solutions and consultation
service.

E-market places may be vertical or horizontal:
a. Vertical E-Marketplace:
Focus on one specific industry
e.g.: Global Healthcare Exchage (GHX) is owned by 20 organizations consist
of manufacturers, distributors, hospitals and group supply organizations.


b. Horizontal E-Marketplace:
Offer a product or service across the industries.
e.g.: Quadrem is a transaction delivery network that connects more than
60,000 suppliers, and 1,500 buyers and handles more than $20 billion in
order throughput annually.

5. Online Reverse Auction
a. Open Offer Auctions: suppliers select items, see the most competititve offers from other
suppliers, and enter as many offers as they want up untill a specified closing time.

b. Private Offer Auctions: the buyer offers target price and quantity. Suppliers enter
offer(s) an select item(s) by a specific time. Later buyer will evaluates and post a status
either; accepted, closed, Bafo or open.

c. Posted Price Auctions: the buyer post the acceptable price; the first supplier to meet it
will get the contract.

d. Reverse Auction: an online, real-time, dynamic, and declining price auction for goods or
services between one buying organization and a group of prequalified suppliers.
Suppliers compete by bidding against each other online using specialized software.
Supliers see the status of their bids in real time.
The supplier with the lowest bid or lowest total cost bid is usually awarded the
business.

6. Radio Frequency Identification (RFID)
RFID tags contain a chip and antenna that emit a signal, using energy from a radio
frequency reader, which contains information about the container or its individual
contents.
RFID tags vary widely in memory , frequency, power source, and cost.
e.g.: employee identification badges and highway toll payment devices.
Benefits: elimination of manual counting and bar coding of incoming and outgoing
material, automatic tracking of inventory levels, faster, easier, and more accurate
inventory identification and picking, and reduced spoilage through improved stock
rotation.