Mumbai University > Information Technology > Sem 7 > E–Commerce & E-Business

Marks: 10 M

Year: May2012, Dec2014

Different elements of e-procurement system:

E-procurement has been able to develop its own body of language and as such regardless of its model, each has similar components that must be properly considered and managed to ensure a successful system. The different elements of e-procurement are as follows:

i. Catalogue content:- At the heart of every e-procurement process lies an electronic catalog. Similar to a traditional mail-order catalog, electronic catalogs contain detailed information on products or services available for sale. Suppliers customize the content to address the specific needs of targeted buyers. This content is manipulated and imported into a database that the e-procurement application integrates into web pages.

There are three types of catalogues that address various buyer needs:

a. Product catalogs: Contain data on tangible items such as office products, medical supplies, rolls of steel, etc.

b. Service catalogs: Offer professional service “intangibles” such as office maintenance services, temporary personnel services, etc.

c. Commodity-specific catalogs: Offer specific product families or groups such as chemicals, paper, or other raw materials.

ii. E-procurement Processes:- In addition to creating an electronic catalog, existing procurement processes need to be “electrified” end-to-end to support the entire e-procurement process. This includes requisition and order management, real-time tracking and receiving, online order fulfilment, automatic billing, invoicing and payment, as well as workflow management, commerce transactions, and reporting and analysis tools.

iii. User Maintenance:- Closely related to the two preceding process management components, user maintenance includes defining the individuals authorized to use the e-procurement system, how these users will be enrolled, and how to provide them access to the trading community. This component serves as the foundation for managing the complex buyer-supplier relationships that will occur within the marketplace.

E-procurement user maintenance must address two primary tasks: Establish user profiles, access rules, catalog filters, and workflow Allow for unique pricing and contractual relationships between a buyer and supplier

iv. *Establishing Buyer/Seller Relationships;:- * This component has two phases: managing supplier relationships and managing pricing.Buyers and sellers may be linked based on their previous buying relationship or based on the buyer’s unique needs. Buyers may make purchases based on negotiated contracts or choose the specific commodities they need from customized catalogs. Price lists too may be customized for a buyer or buying group. For example, prices may be established by adding filters that dynamically calculate a price as a mark-up or discount of the list price. Or groups of buyers may be categorized into classes with filters applied for each group.

v. Billing Management:- E-procurement revenues are generally based on transaction fees. A billing management system will calculate usage charges and generate and distribute statements or invoices to buyer-seller members of the e-procurement network. Suppliers may also use the billing system to calculate ordering charges or to distribute operating costs for specific orders. These functions must directly interface with back office invoicing systems to automatically generate bills.

vi. Price Establishment:- Effective pricing enables buyers to negotiate the best possible deals and sellers to liquidate excess inventory. Two major pricing options are used: Dynamic Pricing and Fixed Pricing. Dynamic pricing: Allows buyers and sellers in an Internet market to trade goods and services at prices determined by market forces instead of by a predetermined price list or catalog. An example of dynamic pricing includes business services such as auctions, reverse auctions, and exchanges: Fixed pricing: Based on a predetermined price list or catalog prices negotiated between a buyer and seller

vii. Data Transmission:- Transmitting data over the Internet involves two facets: messaging agents and security. Data and messaging tools enable the Internet-based exchange of transactional data between different buyers and suppliers in the e-procurement marketplace. To do this, transactions are sent via the Internet as “messages” and then integrated into a supplier’s or buyer’s back-office system, enabling financial postings that coincide with the receipt, payment, and invoicing processes. Data messaging tools are also used to cancel transactions and log failures when messages can’t be delivered within a predefined time period or following a specified number of attempts. The most important aspect of the messaging tool is that it enables real-time communication between buyers and sellers.

viii. System Management:- Maintaining an e-procurement system involves configuring and monitoring performance usage, average response time, transaction sources, and traffic patterns. To maximize the benefits and strategic opportunities e-procurement systems offer, this information should be used to analyze growth patterns, session times, and ultimately to fine-tune the system’s performance to fit specific market communities or technical environments.

Cost Savings:

i. Here calculating cost is not straight forward, but it is clearly an important part of the cost justification of introducing an e-procurement system.

ii. To calculate the cost savings, we perform the following operations:

      Savings= No. of requisitions * (Original cost – New Cost)

iii. The cost savings achieved through e-procurement have a significant impact on profitability.

iv. The largest savings and impact on profitability will be for manufacturing companies in which e-procurement is a major cost element.

v. Service industries have lower potential for savings.