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E-Procurement And Supply Chain Performance

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Question:

Discuss about the E-Procurement And Supply Chain Performance.

 

Answer:

E-procurement change the type of skills and knowledge required of SCM personnel

Supply chain management refers to all the activities used to deliver required quantity of products and services to the targeted group of people (Christopher, 2016). With increasing competition and globalized business environment, companies are facing immense pressure to enhance the effectiveness of the supply chain activities. As a result, use of information technology applications has become extremely common within the corporate environment. Traditionally, as a prime part of supply chain management, procurement activities are supported by information technology. Thereafter, innovation of manufacturing resource planning (MRP) and enterprise resource planning (ERP) have allowed companies to establish strong connection with the suppliers (Puschmann and Alt, 2005). It has allowed supply chain professionals to deliver required amount of raw materials for manufacturing activities directly. In addition, it has allowed supply chain managers to perform direct procurement activities. According to Hsin Chang, Tsai and Hsu (2013), continuous improvement of internet connectivity helped organizations to develop procurement of products and services accurately. It has helped companies to decentralize operational procurement processes as result of high level of transparency provided by e-procurement system. E-procurement provides six types of applications including e-tendering, e-sourcing, e-reverse actions, e-informing, web based enterprise resolution planning and e-MRO (Quesada et al., 2010). Availability of all these applications has changed the way companies purchase products. As per the article by Chang and Wong (2010), effective utilization of e-procurement has benefited companies with lower prices, better compliance, lower transactional costs and speedy processing and delivery.

 

E-procurement has assisted supply chain managers in developing strong long-term relationship with the suppliers. Furthermore, increased transparency has eliminated unnecessary expenses related with supply chain activities. E-procurement has also reduced the time required to perform all the supply chain activities with minimum error percentage. Such benefits have induced companies to rely heavily on the e-procurement process for performing supply chain responsibilities efficiently. However, success of e-procurement depends on various applications including ERP, EDI, XML, email and world wide web (WWW) (Puschmann and Alt, 2005). E-procurement often induces supply chain professionals to learn applications of e-procurement, IoT and Oracle. Effective use of all these technologies requires extensive knowledge of the employees, which was not required in case of performing traditional procurement activities. It underlines the fact that e-procurement has increased the demand for technological knowledge among the supply chain professionals. In the present time, multinational companies have segregated e-procurement actions into different parts including e-sourcing, e-auctioning, e-reverse action, web based ERP and e-ordering, which allowed these companies to recruit professionals with extensive knowledge about a particular action (Quesada et al., 2010). Thus, e-procurement has created various subdivisions within the supply chain department. In addition, studies have highlighted the importance of using multiple e-procurement functions for performing all the supply chain responsibilities successfully. Effective use of multiple e-procurement action has improved inter-organizational coordination, which in turn reduced the cost associated with the supply chain activities. In the present time, supply chain professionals need to maintain higher level of coordination with suppliers and internal departments for accomplishing all the objectives. E-procurement possesses the capability to deal with complex coordination, which creates positive impact on the supply chain efficiency.

E-procurement has made supply chain activities heavily reliant on internet and software applications. In the present time, companies from all sectors have multiple software options through which they can perform activities like e-sourcing or e-tendering. These software enables supply chain professionals to maintain contact with suppliers from various locations (Stephens and Valverde, 2013). Therefore, supply chain professionals do not have to get actively involved in negotiation with suppliers. In fact, availability of large data will assist supply chain professionals to complete entire sourcing process in limited timeframe. It indicates the fact that e-procurement has shifted the focus from effective negotiation to reduce the required time. E-procurement has helped supply chain professionals to perform documentation responsibilities easily. In case of traditional procurement, supply chain professionals often take long time for documenting all the details, which provides them lesser opportunity to perform other supply chain professional activities.  Furthermore, it has provided the opportunity to the supply chain professionals to keep track of the delivered products. It, in turn, assisted these professionals to accomplish all the responsibilities successfully. E-procurement has provided extensive data about suppliers, which shifted the job responsibility of supply chain professionals from sourcing suppliers to the maintenance of strong relationship with the suppliers (Andreu et al., 2010). Opportunity to communicate with employees from other departments or suppliers have encouraged supply chain professionals to invest time on relationship building. E-procurement has also induced supply chain manager to concentrate on developing long-term plans for ensuring sustainable growth for the organization. Development of effective long-term plans can certainly assist companies to achieve sustainable growth within the targeted market.

 

Use of an e-procurement system increase the strategic contribution to an organization

Emergence of e-procurement has provided effective alternative opportunity to the organizations in performing all the operational responsibilities effectively. In the present time, e-procurement plays an extremely important role in reducing the traditional cost of an organization. However, Wei and Wang (2010), have mentioned that e-procurement provides greater benefits at the strategic level rather than at the operational level. E-procurement has shifted the way companies interact with their suppliers, as continuous improvement of technology maintained overall transparency at all the time. In the past few decades, e-procurement has changed the way firms purchase goods and services. According to Van Weele (2010), e-procurement can free purchasing resources from the transactional process to perform strategic sourcing activities. Strategic purchasing can have positive impact on financial performance level of an organization. Long-term partnership with the suppliers is the key to perform strategic purchasing activities. E-procurement can assist firms in maintaining strong long-term relationship with different suppliers, which can reduce the purchase cycle time considerably. Establishment of strong relationship often assists management in reducing the number of suppliers to fulfil manufacturing requirements. Thus, e-procurement has induced management of different companies to shift their intention from using large number of suppliers to few main suppliers. It has been assessed that bulk purchase of products often resulted into cost reduction, which can improve overall financial condition of an economy. Maintenance of few suppliers has induced companies to make closer relationship with their suppliers that just long-term cooperation. In many cases, companies have taken the responsibility to improve overall performances of the suppliers by providing necessary technologies, training and staffs. Thus, e-procurement can assist companies to develop cross-functional teams and can also enhance the overall purchasing power of the organization. Establishment of cross-functional team is one of the key strategic areas of an organization, as it enhances the coordination among the employees. Furthermore, cross-functional teams assist organization in accomplishing long-term objectives effectively.

 


As stated by Su (2013), strategic sourcing describes the process of planning, controlling, implementing and evaluating all the important purchasing efforts that can assist companies to accomplish all their objectives. Strategic sourcing, if utilized properly can combine core competencies of an organization with the knowledge and skills of the suppliers. As stated by Trkman and McCormack (2010), strategic sourcing is probably the most important aspect supply management that offers some of the most value added benefits to the companies. E-procurement enabled supply chain individuals to implement strategic sourcing practices effectively within the competitive market. It offers detailed information about the skills and capabilities of each supplier, which in turn allows supply chain managers to choose best suited suppliers for the fulfilment of all the operational activities. It underlines the fact that use of e-procurement has helped supply chain managers to focus on data driven decision-making procedure. Furthermore, availability of key data has allowed supply chain professionals to communicate with the stakeholders in an effective way. Clear delivery of information has eliminated any possibility of confusion, which in turn strengthened the relationship with suppliers and customers. Thus, e-procurement can assist companies in enhancing the overall communicational network considerably, which also reflects one of the key part of strategic management.

 


E-procurement provides required level of strategic IT capability to the companies so that they can use financial and capital resources effectively. According to Reuter et al., (2010), strategic capabilities are described as the complex bundle of accumulated skills and knowledge that encourages companies to coordinate their various activities to make appropriate use of all the assets. In the complex business environment, companies have to perform multiple complex responsibilities. Therefore, appropriate coordination of all the resources is key to achieve desired level of output at all the time. In the supply chain management, companies seek to maintain strong coordination with the purchasing, manufacturing, transportation and distribution team (Puschmann and Alt, 2005). E-procurement has assisted all these departments of an organization to remain aware of all the operational activities. As a result, it limits the probability of complete operational break down which can damage overall profitability of the organizations. Furthermore, continuous technology progress has allowed companies to anticipate and plan all the resourcing activities effectively. E-procurement often has been used by the companies to analyze current and future trend, which definitely help management in developing long-term plans accurately. It clearly underlines the fact that appropriate use of e-procurement system can certainly help management in performing strategic decision-making activities considerably. It can also allow organizations to maintain competitive advantage across the global competitive business environment.

 

Reference List

Andreu, L., Aldás, J., Bigné, J.E. and Mattila, A.S., 2010. An analysis of e-business adoption and its impact on relational quality in travel agency–supplier relationships. Tourism Management, 31(6), pp.777-787.

Chang, H.H. and Wong, K.H., 2010. Adoption of e-procurement and participation of e-marketplace on firm performance: Trust as a moderator. Information & Management, 47(5-6), pp.262-270.

Christopher, M., 2016. Logistics & supply chain management. London: Pearson UK.

Hsin Chang, H., Tsai, Y.C. and Hsu, C.H., 2013. E-procurement and supply chain performance. Supply Chain Management: An International Journal, 18(1), pp.34-51.

Puschmann, T. and Alt, R., 2005. Successful use of e-procurement in supply chains. Supply Chain Management: An International Journal, 10(2), pp.122-133.

Quesada, G., González, M.E., Mueller, J. and Mueller, R., 2010. Impact of e-procurement on procurement practices and performance. Benchmarking: An International Journal, 17(4), pp.516-538.

Reuter, C., Foerstl, K.A.I., Hartmann, E.V.I. and Blome, C., 2010. Sustainable global supplier management: the role of dynamic capabilities in achieving competitive advantage. Journal of Supply Chain Management, 46(2), pp.45-63.

Stephens, J. and Valverde, R., 2013. Security of e-procurement transactions in supply chain reengineering. Computer and Information Science, 6(3), pp. 1-20.

Su, J., 2013. Strategic sourcing in the textile and apparel industry. Industrial Management & Data Systems, 113(1), pp.23-38.

Trkman, P. and McCormack, K., 2010. Estimating the benefits and risks of implementing e-procurement. IEEE Transactions on Engineering Management, 57(2), pp.338-349.

Van Weele, A.J., 2010. Purchasing and supply chain management: Analysis, strategy, planning and practice. London: Cengage Learning EMEA.

Wei, H.L. and Wang, E.T., 2010. The strategic value of supply chain visibility: increasing the ability to reconfigure. European Journal of Information Systems, 19(2), pp.238-249.

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