Electronic procurement Essay


One of the important current treatments in the concern universe today is the topic of “Electronic Procurement” ( EP ) . EP and eCommerce are used interchangeably by several surveies to intend the same thing, but EP is a constituent of e-commerce ( Leipold et al 2004 ) .

Chaffey ( 2002:257 ) defines Electronic Procurement System as:

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“An electronic system used to automatize all or portion of the procurance map by enabling the scanning, storage and retrieval of bills and other paperss ; direction of blessings ; routing of mandate petition ; interfaces to other finance systems ; and matching of paperss to formalize transactions” .

The EP information system can outdo be described by the nucleus elements the ITPOSMO theoretical account below.

“Source Heeks ( 2006 ) ”

This information system comprises of information ( Data processed ) , engineering ( Hardware and Software ) , people ( Suppliers, purchaser ) and processes ( Operations and Logistics, finance and accounting etc ) hence, it is referred to as a ”Social-Technical system” ( Lucey 2005 ; Heeks, 2006 ) .


Data is unrefined facts, figures, and observations with small or no value ( Bocij et al 1999 ) . A typical information content of an EP system can be classified based on beginning ; that is internal or external beginning ( Lucey 2005 ) . The Internal information includes inside informations of a requisition signifier by purchaser such as list of points to be purchased, petition day of the month, measure and monetary value. Besides for B2B informations will besides include the organisation ‘s policies, contract footings, list of bing providers ( if available ) budget allotments, history to be charged, payment records etc ( Leenders et al, 2002 ; Heeks, 2006 ) .

External beginning ; These are informations inputted by providers such as providers inside informations ( name, codification, reference, phone no, facsimile, electronic mail ) , stamps, commands, proposals, catalogues, footings of sale, manner of bringing, price reductions available, bills, points on sale, types of services offered, sale conditions, marketer ‘s contact reference, payment options etc. These informations are been processed and produced as end product utilizing IT constituents such as package, hardware etc.


Bee & A ; Bee ( 2005 ) defines package as “series of elaborate direction that controls the operation of a computing machine system” . There are 2 types of package: system package and application package. A system package can be said to be a set of instructions provided by maker to enable computing machines carry out general maps. Application package is designed for transporting out specific undertakings. The system package used in an EP system are Operating System e.g XP, Win 2003 Server, Vista, X Leaopard, Snow etc. While the application package are cyberspace enabled electronic informations interchange ( EDI ) package, endeavor resource planning system ( ERP ) applications such as SAP, Oracle, and People soft. Other web based package are web burden equilibrating package, system integrated package and fire wall package. ( Leenders et al, 2002 ) .


AA Hardware are those computing machine constituents that can be seen and touched ( ibid ) . The EP hardware is comprises of clients computing machines ( referred to as work Stationss ) proctor, system unit, cardinal board, pressman, scanner etc, client waiter architecture, web application waiter, web database waiter ( SQL ) , networking overseas telegrams, satellite connexion, cyberspace for transmittal of information, backup system for storage etc ( Bishapathi et al ( n.d ) , Bocij 1999 ; Heeks, 2006 ) . The hardware architecture is represented by the theoretical account below:

“Source: adapted from Bishapathi et Al ( n.d ) ”


Harmonizing to Laudon & A ; Laudon ( 2007:42 ) organisational procedures are “the mode in which work is organized, coordinated and focused to bring forth a valuable merchandise or service” . These procedures may change from one organisation to the other ( Leenders et al 2002 ) . EP system assists organisations to re-engineer their concern procedures by supplying a smooth information flow, which besides aids direction determination devising ( Laudon & A ; Laudon 2007 ) .

“Source: Heeks & A ; Morgan: 2009a”

Buying and Logisticss:

EP aids the electronic sourcing of possible providers ( Leenders et al 2002 ) . Sourcing involves a batch of procedures such as specification of demand, on-line hunt, choice of providers, monetary value dialogue, arrangement and electronic blessing of orders ( Baily et al 2005, Bikshapathi & A ; Raghuveer 2009 ) . In footings of monetary value finding, EP offers chance for monetary value competition by providers ( change by reversal auction ) which consequences in purchasing at best monetary values ( Leenders et al 2002 ) .The usage of cyberspace enabled EDI ( electronic informations interchange ) package helps to automatize the monitoring of stock list and coevals of orders ( ibid ) . In instances where the organisation makes order that cover a period of clip ( across-the-board order ) , the system automatically alerts the provider when stock is a nearing re-order degree ( ibid ) . This map performed by the system assists the shop director in stock list direction.


The system aids the planning for natural stuffs to avoid production constrictions. Sourcing for services such as fix and care of machines can be carried by the EP system. Operationss director can utilize the information produced for twenty-four hours to twenty-four hours planning of production. A instance survey by Laudon & A ; Laudon ( 2002 ) states how Kia motor industries use the system to command figure of faulty merchandises after production. Besides, tactical directors use the information to assistance planning of production resources, while strategic directors may utilize it to help determinations such as acquisition of new production engineering and equipment ( ibid ) .

Accounting and Finance:

AA the accounting undertaking supported by the EP system are invoicing, look intoing of budget bounds against orders, blessing of bills, payment, aggregation of refunds, claiming of price reductions, verification of supplies or care work done, review of goods, and direction of creditors, etc Baily et Al ( 2005 ) Information flow from the system assist strategic directors in budget prediction, ratio analysis and other long term fiscal determinations ( Laudon and Laudon 1999 ) . Middle directors use it for budget monitoring and control. It besides supports the twenty-four hours to twenty-four hours payments of hard currency and recognition providers, reception of payment and other accounting maps ( ibid ) .


The possible benefits of the EP system can be explained utilizing the CIPSO facet of the CIPSODA diagram below:

“ Beginning: Heeks ( 2009b ) ”

This diagram explains the information flow and usage in the system. CIPSODA merely means Data is Captured ( C ) and Inputted into the system ( I ) .It is so processed ( P ) , Stored ( S ) , retrieved and produced as end product ( O ) for determination devising ( D ) , whereby Action ( A ) is taken so as to ensue ( R ) .

Cost and possible benefits can be determined through the information treating facet of the diagram ( CIPSO ) . The cost involve are cost of obtaining informations, cost of hardware, package, cost of installing, developing etc.

The three Key possible benefits that can be derived from the EP system are as explained below:

Perceived Cost nest eggs ( Capture and Input ) :

A major benefit of the EP system is the cost decrease it offers to purchasers. A batch of money is saved, from sourcing, capturing and inputting informations from providers. This makes it possible for information to be shared, nevertheless extinguishing the cost of postage, communicating, transit and advertizement ( Laudon & A ; Laudon 1999 ) . A batch of paper work is reduced ; thereby cutting down administrative and forces cost ( Chaffey 2002 ) . A instance survey of the Brazilian authorities reveals cost nest eggs on procurance procedure amounting to US $ 1.5m within the first two old ages of implementing EP system ( Amaida 2002 ) . Besides, Microsoft and Cisco where able to cut down cost from $ 60- $ 5, and $ 130- $ 25 severally ( Ageshin 2001 ) .

However, other administrative costs reduced are ; telling cost, cost of keeping stock list ( Rent, Insurance ) , forces cost, every bit good as entire cost of production. Communication between marketer and purchaser is really efficient. All these may interpret into cheaper goods and services offered to clients. The clip spent on come ining this information by staff is greatly reduced as good. A centralised eProcurement system can assist accomplish economic systems of graduated table ( ibid ) .

Reduced buying rhythm clip ( Process ) :

Information processing is quicker and more efficient. Ordering, blessings, buying and payments are done faster because information is processed instantly. For illustration in a survey by Ageshin ( 2001 ) “General Motors” a US car company could present a customized order by clients within 5-15days.The Brazilian authorities was besides able to cut down buying circle clip from 2 months to 15 working yearss ( Amaida, 2008 ) . Administrative mistakes are besides eliminated every bit good, doing information from the system accurate ( Morrison, 2009 ) . Undertaking of bring forthing information is greatly reduced thereby clip is saved. A batch of information related undertaking can be undertaken within the shortest clip ( Heeks, 2006 ) .

Easy entree to centrally stored informations ( Storage and end product ) :

The cardinal storage of informations enables easy sharing of information to providers and the buying organisation. Information is readily available to stakeholders at limitless times. The cardinal storage of information makes it easy for an audit trail to be carried out. For authorities procurance, transparence is really of import ( Amaida 2008 ) . This system makes easy the public presentation of audit trail, in which records can be traced with easiness ( who ordered what, what was ordered, when it was ordered, how much was spent, from whom it was bought from etc ) . These are the issues faced by the traditional procurance system.


Lack of Infrastructure:

Developing states are normally characterized by low degree substructures ; such as electricity, good roads and communicating channels. As a consequence installing of cyberspace and ICT installations cost a luck and really few endeavors can afford the initial cost of installing. Availability of internet installation is important for implementing a good EP system, as system integrating between concerns is really of import among concerns. Very few concern and persons in developing states can afford to procure broadband and cyberspace installations. Unlike the developed states where most big fabrication houses use ICT for their purchases and gross revenues, increases the range of their market as good.Africa as a continent has got small or none of such experiences ( UNCTAD, 2009 ) . Chege et Al ( 2001 ) stated in a survey how low cyberspace bandwidth served as a major challenge for ecommerce in the South African and Mozambique building industry.

Lack of trust in the system:

One of the major issues that serve as a major restraint in the execution of eProcurement in developing states is the fact that there is small or no trust by people in the on-line dealing system. This is as a consequence of the high degree of corruptness in the underdeveloped universe. In order to construct a successful electronic society regulations and ordinances have to be in topographic point and a new step to regulate electronic markets ( Mahan & A ; Melody 2005 ) . This will increase in the degree of trust among eProcurement spouses ( ibid ) . Unlike developed states, there are small or no national statute laws to protect the system. Greenhill ( 2009 ) stated that “A figure of states have yet to set in topographic point a legal model that addresses inquiries such as legal electronic contracts and digital signatures, the privateness and security of informations transmittal, and facilitation of electronic transaction” . For illustration in South Africa and Mozambique, a survey reveals that one of the greatest challenges for e-adoption was the fact that there were no policies and legal model to steer the system ( Morris 2006 ) . As a consequence most concerns and persons feel insecure to run the online procurance, or run on-line markets.

High Degree of Computer illiteracy ( Digital Divide ) :

This is a major job in the usage of the EP application, most particularly in Africa. Harmonizing to Odera et Al ( 1993 ) “Africa seems to be a lost continent of the information engineering. A great figure of its population is non computing machine literate. This is non limited to the uneducated alone, but even among the educated, there seem to be a engineering phobic disorder, where people are use to the traditional ways of making things. Even though most organisations seem to include some IT developing into their preparation program, but there is some signifier of engineering phobic disorders, most particularly among aged people and direction staff. Technology is being associated with immature people.


On-line Presentation:

URL hypertext transfer protocol: //www.inqizit.co.uk/Flash/FBP_Live.html

A typical presentation of how the eProcurement system works.It shows how orders are made, and the choice procedure in eTendering..

Online instance survey:

Brazilian Government

URL hypertext transfer protocol: //www.egov4dev.org/success/case/brazeproc.shtml

A instance survey of the Brazilian authorities utilizing the eProcurement system to accomplish efficiency within their public ministries..

On-line Report: Rumanian authorities URL: hypertext transfer protocol: //www.beepknowledgesystem.org/search/ShowCase.asp? CaseTitleID=442 & A ; CaseID=1245

A study of the Rumanian authorities Eprocurement system, how it helps accomplish efficiency in their e-auctioning.

On line study

Uniform resource locator: hypertext transfer protocol: //www.ingaa.org/cms/31/7306/43/676/268.aspx

A study of a typical eProcurement system

Seller: Basware

Uniform resource locator: hypertext transfer protocol: //www.mikrofax.com/news/AnyERP-adapter-helps-integrate-procurement- /430021574/18001583.html

Description: One of the top Suppliers of eProcurement package that helps incorporate the whole procurance procedure of a concern.

Seller: Alibaba.com.http: //www.alibaba.com/productfree/107705375/Procurement_Online_Vendor_Manageme nt_with_Reverse_Auction_Solution_Software_Development_Services.html

A Vendor of e-auctioning package.


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