With the advent of internet and with the proliferation of electronics devices, various e-business modules have spring up. One of such e-business modules is e-procurement. Rayport and Jaworski (2002) define e-procurement as an “online network of suppliers and service providers used by B2B for e-commerce purposes”. It also involves catalogue management, products requisition, control and approval, products delivery and exception handling, and processing of payment.
Description of e-procurement
E-procurement is a process whereby qualified and registered users of a web site can either look for sellers or buyers of goods and services. The modus of operation can be that buyers and sellers are able to fix a specific cost for the goods and services they offer or they can invites users to bid for the goods and services. Thomson and Singh (2001) suggested that e-procurement involves the sourcing of buyers and sellers, online bidding, a digital catalogue of products and services, ordering, goods dispatch notices, payments, logistics and supply chain management.
Baily (2008) identified seven main types of e-procurement as follow:
• Web-based ERP – this involves the use of internet application to create and approve purchasing requisition, placing purchase order and receiving goods and services.
• e-informing – the use of internet technologies to gather and distribute purchasing information both externally and internally.
• e-MRO – (Maintenance, Repairs and Operations) this is similar to web-based ERP and is used to order goods and services that are non-product based.
• e-tendering – the use of internet technology to request information on prices from suppliers.
• e-sourcing – using internet technology to identify new supplier for a specific product and purchasing requirement.
• e-marketsites – buyers can access various suppliers products and services, select a preferred suppliers’ products and service, adding to shopping cart, receipt of purchase order and issuance of electronic invoices which integrated to supply chain and
• e-reverse auction – is the use of internet technology to purchase goods and services from known and unknown sources.
A good example of implementation of e-procurement is that developed by BHP Billiton. The model enables e-procurement of their operational inputs and manufacturing inputs. It includes supply chain/value chain logistics for effective cost and timely delivery and acquisition for fulfillment orders (Mihini and Doug, 2002).
Critique of e-procurement
E-procurement a form of e-marketing brings together a large pool of buyers and sellers through automated transactions. It expands the choices available to buyers while giving seller new opportunity to meet new customers, thereby reducing cost of transaction. E-procurement reduces the cost incurred by organizations on daily business transactions. It is more efficient than the normal labour-intensive procurement method based on phone and fax. It also reduces invoicing and ordering errors (Mihini and Doug, 2002). As shown in the appendix, e-procurement reduces the cost of transaction incurred by companies significantly.
In a recent survey by Forresters, companies in the process of adopting e-procurement reported four types of problems. Firstly, the integration of back-end system is a bear and secondly, that user expectation/change management can be difficult, and thirdly, that suppliers don’t always want to get onboard and finally, that content management is cumbersome (Umiat, 2004). BT research also reveals that about 80% of organizations that deployed e-procurement infrastructure have failed to invest in the purchasing and distribution systems that is needed for easy delivery of the products. Instead of focusing on using the new websites technology to streamline their supply chain, management of companies has focused on websites that promises more but far too often deliver little (Dale, 2001).
For SME, adopting e-procurement can pose great challenges as the costs involved in deployment of ICT infrastructures are enormous. Also the management capabilities and skills necessary for adoption of e-procurement might be lacking and the costs involved in acquiring such requisite skills might be exorbitant for many firms. This said, firms that fail to adapt a new ways of doing business will lost out to competitors as they will fail to take advantage of emerging opportunities for growth (Anon, 2004).
E-procurement business module enhances B2B relationship by organization as it brings together a pool of buyers and sellers of goods and services in an automated process. It reduces the cost involved in daily business transaction, but might be too expensive for SME intending to engage in such business opportunities.