E-Procurement Tools
Training Module
Developed By:
Benjamin Maughan
Operations 361
November 05
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Purpose
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Define E-Procurement
Explain its role as an E-Business Tool
Identify E-Procurement in Your
Organization
Create E-Procurement Flow Chart
Summarize Learning Points
Identify Next Step
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Overview
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Exercises
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Process Flow Diagram
Process Flow E-Procurement Analysis
Streamlined Process Flow using EProcurement
Cost Analysis
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Overview
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E-Procurement
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Using internet or intranet based
information systems software to
coordinate the buying, shipping, inventory
management, supplier selection, and
approval process of vital business
acquisitions within the organizations core
competency.
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Define E-Procurement
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E-Procurement
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Purchasing Process - Preliminary Actions
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Need/Specification Identification
Supplier Selection
Terms Negotiation
Regulations
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Define E-Procurement
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E-Procurement
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Purchasing Process - Buying Process
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Purchase Order Delivery Process
Purchase Order Receipt Process
Order Fill Timing
Order Accuracy
Order Receipt
Order Inspection
Order Payment Process
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Define E-Procurement
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E-Procurement
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Purchasing Process - Concluding Actions
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Order Record Storage & Organization
Order Reviews
Benchmarking
Comparative Analysis
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Define E-Procurement
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E-Procurement
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Purchasing Process
Needs Identification
Purchase Order Prep
Specifications
Follow-up
Supplier Evaluation
Receipt/Inspection
Supplier Selection
Payment
Records Management
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Define E-Procurement
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E-Procurement
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Software Tool
Encompasses:
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Preliminary Actions
Coordinates inventory management systems with
purchasing systems.
 Coordinates new business ventures with
purchasing systems.
 Creates List of Needed Items (Inputs)
 Archives that List
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E-Procurement’s Role
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E-Procurement
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Encompasses:
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Preliminary Actions
Maintains Record of Suppliers
 Maintains Record of Supplier Profiles
 Maintains Record of Supplier Capabilities
 Maintains Record of Negotiated Prices
 Maintains Record of Negotiated Terms
 Maintains Record of Contracted Limitations
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E-Procurement’s Role
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E-Procurement
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Encompasses:
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Buying Actions
Sends Purchase Order Delivery directly to Supplier
 Maintains Real-time Order Status
 Records Order Delivery timing
 Records Order Accuracy
 Records Order Inspection Data
 Submits Payment Request
 Coordinates Payment Approval Process
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E-Procurement’s Role
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E-Procurement
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Encompasses:
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Concluding Actions:
Sends Electronic Receipts to suppliers, archives,
managers
 Maintains on-demand records for order reviews
 Allows reports and analyses for benchmarking
 Facilitates comparative and costs analyses
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E-Procurement’s Role
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E-Procurement
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Benefits
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Streamlines procurement process
Increases communication
Increases procurement speed
Eliminates non-value added personnel
Reduces DEAD time
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E-Procurement’s Role
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E-Procurement
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Benefits
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Provides records
Produces reports
Facilitates improvements
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E-Procurement’s Role
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E-Procurement
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Detriments
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Limits flexibility for extensive notations
Poor performance for exception items
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E-Procurement’s Role
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E-Procurement
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In your organization:
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Understanding Process Flow
Beginning Points
 End Points
 Inputs/Outputs
 Gray Boxes
 Black Holes
 Miracles
 Transformation Activities
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E-Procurement in Your Organization
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E-Procurement
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In your organization:
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Mapping Symbols
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Start Point/Finish Point Symbol
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Process Activity/Step Symbol
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Decision Point Symbol
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Input/Output Symbol
E-Procurement in Your Organization
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E-Procurement
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In your organization:
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More Mapping Symbols
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Document Created Symbol
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Delay Symbol
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Inspection Symbol
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Move Activity Symbol
E-Procurement in Your Organization
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E-Procurement
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Identify Buying Steps as Flow Symbols
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Engineer requests four computers using ERP.
(A procurement software program)
What symbol is this request?
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E-Procurement in Your Organization
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E-Procurement
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Identifying Buying Steps as Flow Symbols
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Manager approves request for four
computers.
What two symbols would result for this action?
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E-Procurement in Your Organization
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E-Procurement
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Identifying Buying Steps as Flow Symbols
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With manager approval Procurement sends
purchase order to Computer Provider Inc.
What symbol would result from this action?
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E-Procurement in Your Organization
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E-Procurement
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Identifying Buying Steps as Flow Symbols
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Purchase Order sits in suppliers bottleneck
instead of going straight to suppliers pack and
ship department.
What symbol would result from this action?
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E-Procurement in Your Organization
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E-Procurement
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Example - Customer Request Five Servers
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What are some of the possible process
components? Be Creative!
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E-Procurement in Your Organization
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E-Procurement
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Example - Customer Requests Five Servers
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Input: Salesperson fills out specification form 10W
Delay: 10W sits in ‘new order’ pile
Activity: 10W is faxed to assembly.
Activity: Assembly manually collects the inventory
items.
Document: Assembly creates order form 10A for ‘out of
stock’ items.
Activity: Assembly delivers 10A to supervisor for
approval
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E-Procurement in Your Organization
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E-Procurement
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Example - Customer Requests Five Servers
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Delay: 10A sits in supervisor ‘to do’ pile.
Activity: Supervisor approves request.
Activity: Supervisor gives 10A to secretary
Activity: Secretary gives 10A to assembly
Activity: Assembly faxes 10A to approved supplier
Activity: Supplier has E-Procurement Software and
ships items in 4 hours.
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E-Procurement in Your Organization
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E-Procurement
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Example - Customer Requests Five Servers
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Inspection: Assembly inspects shipment
Activity: Assembly puts items in the five servers
Inspection: Quality Assurance inspects servers
Document: Quality Assurance creates 10C - Inspection
Activity: Assembly moves servers to shipping
Activity: Shipping sends servers to Customer
Document: Shipping records shipment items and date
Even simple requests require many components
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E-Procurement in Your Organization
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E-Procurement
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Creating a List of Flow Chart Components
in your Procurement Process
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Remember to include:
Approvals
 Documents created and archived
 Delays
 Inspections
 Any other item that is part of the process
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This can be extensive - Take 15 minutes.
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E-Procurement in Your Organization
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E-Procurement
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Procurement Process Streamlining
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Non-Value Added Actions
Inspections
 Records
 Benchmarking
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Delays
Dead Time
 Wait Time
 Ship Time
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E-Procurement Flow Chart
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E-Procurement
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Procurement Process Streamlining
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Unnecessary approvals
Direct Supervisors
 Accounting Process impediments
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Unnecessary steps
Secretary Handling
 Shifting products around Factory
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E-Procurement Flow Chart
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E-Procurement
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Procurement Process Streamlining
 Identify unnecessary steps:
Input: Salesperson fills out specification form 10W
 Delay: 10W sits in ‘new order’ pile
 Activity: 10W is faxed to assembly.
 Activity: Assembly manually collects the inventory
items.
 Document: Assembly creates order form 10A for
‘out of stock’ items.
 Activity: Assembly delivers 10A to supervisor for
approval
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E-Procurement Flow Chart
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E-Procurement
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Procurement Process Streamlining
 Identify unnecessary steps:
Delay: 10A sits in supervisor ‘to do’ pile.
 Activity: Supervisor approves request.
 Activity: Supervisor gives 10A to secretary
 Activity: Secretary gives 10A to assembly
 Activity: Assembly faxes 10A to approved supplier
 Activity: Supplier has E-Procurement Software and
ships items in 4 hours.
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E-Procurement Flow Chart
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E-Procurement
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Procurement Process Streamlining
 Identify unnecessary steps:
Inspection: Assembly inspects shipment
 Activity: Assembly puts items in the five servers
 Inspection: Quality Assurance inspects servers
 Document: Quality Assurance creates 10C Inspection
 Activity: Assembly moves servers to shipping
 Activity: Shipping sends servers to Customer
 Document: Shipping records shipment items and
date
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E-Procurement Flow Chart
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E-Procurement
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Identify your procurement process
unnecessary steps:
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Be Creative!
Try to take out ALL steps that a computer can
do.
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E-Procurement Flow Chart
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E-Procurement
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Steps 1 - 6 with E-Procurement
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Input: Salesperson assists customer to customize
servers using an online POS
Delay: Fax delay time eliminated
Activity: Online POS system sends the order
specifications directly to assembly.
Activity: Identifying ‘out of stock’ eliminated
Document: Order form for ‘out of stock’ items
eliminated
Activity: Supervisor approval for ‘out of stock’ order
form eliminated
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E-Procurement Flow Chart
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E-Procurement
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Steps 7 - 12 with E-Procurement
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Delay: Supervisor approval time delay eliminated
Activity: Supervisor approval is not required because
of JIT inventory based on sales data.
Activity: Transfer time to secretary eliminated
Activity: Transfer time to assembly eliminated
Activity: Order to Approved Supplier will come directly
from the E-Procurement system integrated with the
POS system. Emails sent to all pertinent parties.
Activity: The supplier with E-Procurement will
continue to have their items shipped in 4 hours.
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E-Procurement Flow Chart
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E-Procurement
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Steps 13 - 19 with E-Procurement
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Inspection: E-Procurement will log inspection results.
Activity: Assembly will not change.
Inspection: Q&A will not change.
Document: An extended E-procurement tool can
produce the inspection approval records.
Activity: Assembly to Shipping move will not change
Activity: Shipping to Customer will not change
Document: An extended E-procurement tool can
record shipment items and dates.
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E-Procurement Flow Chart
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E-Procurement
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Create/Renovate your current
procurement process with E-Procurement
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Remember
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A computer program can do all repetitive, limited
thinking tasks.
E-Procurement Flow Chart
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E-Procurement
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Cost Analysis
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Cost Savings
Excess personnel eliminated
 Inventory costs eliminated
 Supervisor’s approval time requirements decreased
 Customer dissatisfaction decreased.
 Competitive advantage
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E-Procurement Flow Chart
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E-Procurement
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Cost Analysis
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Costs
Custom E-Procurement tools can be expensive
 ‘Off-the-shelf’ E-Procurement tools are cheap, but
not very robust
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E-Procurement Flow Chart
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E-Procurement
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Cost Analysis Example
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E-Procurement rough estimate costs
Customized 35 supplier profiles, 3500 product EProcurement tool with 125 available reports and
expansion capabilities: $150,000
 Requires 10 dedicated servers: $50,000
 Integration costs: $25,000
 Training costs: $25,000
 Maintenance costs: $10,000
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Total Cost: $260,000
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E-Procurement Flow Chart
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E-Procurement
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Cost Analysis Example
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E-Procurement rough estimate savings
Eliminates 3 assembly jobs: $120,000
 Eliminates related payroll expenses: $120,000
 Eliminates inventory costs: $60,000
 Eliminates order error costs: $10,000
 Reduction wait time increases sales by: $100,000
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Total E-Procurement Savings: $410,000
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E-Procurement Flow Chart
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E-Procurement
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Cost Reduction = Savings - Costs
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Cost Reduction = $410,000 - $260,000
Cost Reduction = $150,000
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E-Procurement Flow Chart
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E-Procurement
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Using your new E-Procurement Process:
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Identify your:
Eliminated personnel
 Comparable RPE
 Order error costs
 Increase in sales
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Your company should be willing to pay up
to this amount for the E-Procurement Tool
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E-Procurement Flow Chart
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E-Procurement
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Learning Points
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E-Procurement Tools are internet/intranet
based
Coordinate buying, inventory, supplier
selection, and approval process of a company
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Learning Points
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E-Procurement
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Learning Points
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Diagnosing the need for E-Procurement Tools
Step 1: Identify current procurement process
 Step 2: Identify unnecessary components
 Step 3: Recreate procurement process with an EProcurement tool in mind.
 Step 4: Create a cost analysis of savings
 Step 5: Buy or Develop an E-Procurement Tool
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Learning Points
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E-Procurement
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Next Step: Get E-Procurement Software
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Some Suggestions
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Choose a company that has experience
Choose a company with exceptional customer service
Choose a company that wants your company to succeed
Identify your needs first then listen to their suggestions
Ensure that your team lead understands basic software coding
principles
Ensure that your team lead understands process flow diagrams
Ensure that this effort is in parallel to your companies core
competency
Next Step
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E-Procurement
Questions??
Contact:
Benjamin Maughan
BMaughan@byu.edu
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Next Step
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Readings
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E-Procurement: From Strategy to Implementation. Dale Neef Business & Economics. 2001
E-Government: Towards Electronic Democracy. Michael Bohlen,
Johann Gamper, Wolfgang Polasek. March 2005
Successful Global Account Management: Key Strategies and Tools
for Managing Global Customers. Nick Speare, Kevin Wilson Business & Economics - 2001
Cyber Commerce Reframing: The End of Business Process
Reengineering? Uwe G Seebacher - Computers - 2002.
E-Business 2.0: Roadmap for Success. Ravi Kalakota, Marcia
Robinson - Business & Economics - 2000.
Introduction to E-Supply Chain Management. David Frederick Ross
- Business & Economics - 2002.
E-Business: Key Issues, Applications and Technologies. Brian
Stanford-Smith, Paul T. Kidd - Computers - 2000.
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Next Step
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