Lecture 7: Supply Chain Management & E-procurement

B1 Strategic and tactical tools for e-business Michelle C. Antero Department of ITM Copenhagen Business School

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Session 7 - Readings n Chaffey, D. (2009). E-business and E-commerce management, Chapter 6: Supply Chain Management, pp. 330-379. n Chaffey, D. (2009). E-business and E-commerce management, Chapter 7: E-procurement, pp. 380-411.

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Learning Outcomes n Identify the main elements of supply chain management and their relationship to the value chain and value networks n Assess the potential of information systems to support supply chain management and the value chain. n Identify the benefits and risks of e-procurement n Analyse procurement methods to evaluate cost savings n Assess different options for integration of organizations information systems with e-procurement suppliers.

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Learning Outcomes n Identify the main elements of supply chain management and their relationship to the value chain and value networks n Assess the potential of information systems to support supply chain management and the value chain. n Identify the benefits and risks of e-procurement n Analyse procurement methods to evaluate cost savings n Assess different options for integration of organizations information systems with e-procurement suppliers.

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Management issues n Which technologies should we deploy for supply chain management and how should they be prioritized? n Which elements of the supply chain should be managed within and beyond the organization and how can technology be used to facilitate this? n What are the practical issues with online supply chain management?
eBusiness Supply Chain Management & E-Procurement 16 March 2010
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SCM some definitions n Supply chain management (SCM) The coordination of all supply activities of an organization from its suppliers and partners to its customers n Upstream supply chain Transactions between an organization and its suppliers and intermediaries, equivalent to buy-side ecommerce n Downstream supply chain Transactions between an organization and its customers and intermediaries, equivalent to sell-side ecommerce

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Members of the supply chain: (a) simplified view, (b) including intermediaries (Figure 6.2)

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A typical supply chain for a B2B company (Figure 6.5 )

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(a)Benefits of supply chain management, Note: respondents could select all benefits that apply Figure 6.1 Source: PMP (2008)

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(b) realization of benefits. Note respondents could select all benefits that apply (Figure 6.1 Continued) Source: PMP (2008)

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Push and pull approaches to supply chain management (Figure 6.7)

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Push and pull approaches to supply chain management (Figure 6.7 - Continued)

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Options for restructuring the supply chain

The characteristics of vertical integration, vertical disintegration and virtual integration (Figure 6.10)
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Benefits of e-SCM n Increased efficiency of individual processes n Reduced complexity of the suppy chain (disintermediation) n Improved data integration between elements of the supply chain n Reduced costs through ease of dynamic outsourcing n Enabling innovation and customer responsiveness
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Examples of e-SCM tools n n n n n Email Web-based ordering EDI of invoices and payment Web-based order tracking RFID (Radio Frequency Identification)

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Examples of e-SCM tools

eBusiness Supply Chain Management & E-Procurement

Popularity of different e-business applications in Europe 12 October 2011 according to company size Figure 6.12 2011 ITM, CBS |
Source: European Commission (2008)

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Figure 6.8

Two alternative models of the value chain: (a) traditional value chain model, (b) revised value chain model
Source: Figure 6.4(b) adapted from Deise et al. (2000)

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E-procurement

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Management issues n What benefits and risks are associated with e-procurement? n Which method(s) of e-procurement should we adopt? n What organizational and technical issues are involved in introducing e-procurement?

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How important is procurement? We estimate that for every dollar a company earns in revenue, 50 cents to 55 cents is spent on indirect goods and services things like office supplies and computer equipment. That half dollar represents an opportunity: By driving costs out of the purchasing process, companies can increase profits without having to sell more goods. Hildebrand (2002)

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Key procurement activities within an organization (Figure 7.1)

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The 5 rights of e-procurement n at the right price n delivered at the right time n are of the right quality n of the right quantity n from the right source. Baily et al., 1994
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Benefits of e-procurement n Reduced purchasing cycle time and cost n Enhanced budgetary control n Elimination of administrative errors n Increased buyers productivity n Lowering prices through product standardization and consolidation of buys n Improve information management n Improve payment process
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Barriers to adoption of e-procurement n Competition issues n Possible negative perception from suppliers n Negotiated procurement benefits may be share with other exchange users who may be competitors n Creation of catalogues can be a long and costly process n Culture profile within organizations
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Elements of an e-procurement system

eBusiness Supply Chain Management & E-Procurement 12 October 2011 Use of different information systems for different aspects of the fulfilment cycle (Figure 7.4 ) 2011 ITM, CBS | 25

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The three main e-procurement model alternatives for buyers (Figure 7.7 )
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eBusiness Supply Chain Management & E-Procurement 12 October 2011

Ford supplier portal provided by Covisint (Figure 7.11)

Source: Covisint.com

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eBusiness Supply Chain Management & E-Procurement 12 October 2011

Supplier route to government portal (www.supply2.gov.uk) Figure 7.12

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Types of Procuring n Systematic sourcing

n Negotiated contract with regular suppliers

n Spot sourcing
n Commoditized item which is less important to know credibility

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Risks and Impacts of E-procurement n Organizational risks n Failure to achieve real cost reductions n Technology Risks

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Exercise Questions

n Solve the following examination questions in Chaffey p. 377 # 2, # 4 , #6 , # 7 n Do sub question 1 in activity 7.1 in Chaffey p. 385 (10 min.)
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n Solve the following examination questions in Chaffey p. 409: #1, # 4 #7, #8

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