There are a large number of E-procurement tools that could be distinguished in the marketplace (de Boer et al. , 2001). Some of them are already well developed and highly accepted in the marketplace; nonetheless, there are numerous E-procurement tools that are immature and require further development (Wang, 2006). For the purpose for this paper, we aim to focus on the E-procurement tools that are widely accepted in the government and private sectors.
The four most common E-procurement tools being used consist of E-Sourcing, E-Tendering, E-Reverse Auction and E-Collaboration (Boer et. al. , 2001). The description of the four E-procurement tools would be provided, following by comprehensive explanations and visual diagrams to demonstrate how the four E-procurement tools work in an organization. E-Sourcing E-Sourcing is the process that most buying companies use to search for a list of new or potential suppliers by using the Internet in general, or more specifically in a Business-to-Business marketplace (de Boer et. l. , 2001). In most situation, the B2B marketplace is an Internet-based software which developed and controlled by third parties, that are usually the supply and demand chain solution providers, to assist the purchasing company to search for suitable suppliers on the Internet. Diagram 1. 1. provides a snapshot of the E-Sourcing process. Supplier A Diagram 1. 1. E-Sourcing Process Purchasing Company Supplier D Internet-based B2B Marketplace Supplier B Supplier E Supplier C Supply Chain Software Provider According to Agentrics (http://www. agentrics. om), one of the largest supply chain software provider globally, E-Sourcing process typically consists of three steps. To implement E-Sourcing function, the purchasing company first has to collaborate with a supply chain software provider, that has the Internet-based B2B marketplace developed and readily to be used. The second step is that the new potential suppliers can either be formally invited by the purchasing company to participate in using the E-Sourcing function or the suppliers can sign up onto the E-Sourcing function by themselves as this could be a proactive method of exposing the firm to new potential customers (http://www. gentrics. com/web/agentrics/supplier_registry). The third and last step in E-Sourcing process is when the purchasing company is searching for a specific type of products and goods, the registered suppliers that meet the product criteria and specification will receive notification of the business opportunities through the Internet-based B2B marketplace. E-Tendering E-Tendering is the process of using the Internet technology to send Request for Information (RFI) and Request for Price (RFP) to suppliers and receiving responses (Knudsen, 2003).
Diagram 1. 2. depicts the process of E-Tendering between purchasing company and suppliers. Diagram 1. 2. E-Tendering Process Send RFI and RFP Send RFI and RFP Purchasing Company Internet Based B2B Marketplace Suppliers Price Quotes and Information Price Quotes and Information Supply Chain Software Provider Request for Information (RFI) is a method used to collect general information about suppliers (Maersk, 2011). The collected information can further be used to shortlist suppliers.
Request for Pricing (RFP), on the other hand, is used to collect pricing quotes from suppliers (Maersk, 2011). Generally, the quotations proposed by suppliers are confidential and do not make known to the public until the bidding process is completed when a winner is selected (Agentrics, 2011). On the other hand, E-Tendering allows purchasing company to conduct analysis and make comparison on the price quoted by different suppliers. When the purchasing company is making comparison, it does not necessarily mean that the supplier with the lowest bid will be the winner.
Other selection criteria such as product and service quality, reputation and past experience will also be taken into consideration (Wang, 2006). According to our research, E-Tendering is prevalent in the marketplace especially in the government sector. For instance, the state government of New South Wales (www. tenders. nsw. gov. au) and Queensland (www. tenders. qld. gov. au) make use of E-Tendering portal to provide suppliers with business opportunities. E-Reverse Auction
Compared to E-Tendering, E-Reverse Auction is another form of E-procurement tool that allows the purchasing company to use internet technology to purchase products and services that either have the lowest price or a combination of low price and other important conditions such as the quality of the products and services (Knudsen, 2003). Diagram 1. 3. provides a snapshot of the comparison between different forms of auctioning. Figure 1. 3. Comparison between traditional auction and reverse auction E-Reverse auction is the opposite of traditional auction.
A traditional auction usually involves a seller offering one or more items for sale in the marketplace, and there will be multiple potential buyers compete for the purchase of the item(s) being offered (de Boer et al. , 2001). The price is driven up until a stage that no buyers are willing to offer a higher price (de Boer et al. , 2001). EBay and Amazon. com could be well-known examples of traditional auction on the Internet. In contrary, reverse auction is a process which there are multiple sellers are competing for the business of one single buyer.
At such, the price is driven down until there are no sellers willing to bid any lower (Merson, 2000). According to Merson (2000), the process of E-Reverse auction is relatively simple. At first, the suppliers or vendors have to pre-register with the auction firm in order to participate in the online auction. The online auction is generally conducted on a secure website. The bidders will then be notified with the date and time when the bidding period is open and the amount of time available to submit bids.
The auction process is often traded in real time basis and ends in one or two hours, depending on the buyer’s requirements (de Boer et. al. , 2003). Suppliers (or the bidders) can submit the best prices that they could offer remotely from their offices. The bidders are allowed to monitor the status of their bid closely (i. e. whether any bidders offer a lower price) because the auction process is shown on a real time basis on the website. At the end of the pre-established bidding time, a winner will be selected based on the lowest price offered or/and other criteria such good quality (Merson, 2000).
An online auction service fee would be charged either to the purchasing company or the winning supplier (Merson, 2000). E-Collaboration Johnson and Whang (2002) define E-Collaboration as “business-to-business interactions facilitated by the use of Internet-based technology. These could include activities such as information sharing and integration, decision sharing , process sharing,, and resource sharing. ” The objective of E-Collaboration is to allow supply chain partners to work closely together by integrating their operations and reduce total life-cycle cost (Wang, 2006).
With the implementation of E-Collaboration, accurate and updated information and data about the product versions, inventory level, and sales forecasts will be readily accessible to the suppliers on the purchasing company’s websites or extranet on a timely basis (Knudsen, 2003). Therefore, it is possible for the suppliers to be in sync with the buyer and reduce the likelihood of supply chain errors (Wang, 2006). E-Collaboration focus on delivering a win-win situation for both the buyers and suppliers. Diagram 1. 4. depicts the process of E-Collaboration. Diagram 1. 4. E-Collaboration Johnson and Whang (2002)
Many leading software and hardware organizations such as IBM, Wal-Mart and Dell have been actively promoting E-Collaboration tool into their organizations (Wang, 2006). In Dell case, the company has developed a shared knowledge management systems (which is a form of E-Collaboration) with its suppliers such as Intel in order to facilitate the process to gather and disseminate purchasing related information in a two-way interaction. Therefore, Intel is able to monitor the inventory level of its computer chips in Dell’s warehouse on a real time basis and could deliver the right amount of computer chips to Dell in the right time.
With such collaboration, Dell could maintain low inventory and therefore reduce overall cost. Reference List Knudsen, D. 2003, ‘Aligning corporate strategy, procurement strategy and e-procurement tools’, International Journal of Physical Distribution and Logistics Management, vol. 33, pp. 720-734. de Boer, L. , Harink, J. and Heijboer, G. 2001, ‘A model for assessing the impact of electronic procurement forms’, paper presented at the 11th IPSERA Conference, Enschede. Merson, I. R. , 2000, ‘Reverse Auctions: An overview – the wave of the future or just one more addition to the toolkit? , Acquisition Solutions, Inc. Wang, Y. , 2006, ‘E-collaboration – a literature review’, Cardiff Business School, Cardiff University, CF10 3EU, UK. Agentrics, (2011) (URL: http://www. agentrics. com/web/agentrics/home) [Accessed: 26/05/2011]. Mersk, (2011) (URL: http://www. maersk. com/Procurement/ProcurementForSuppliers/e-Sourcing/Pages/e-Sourcing. aspx) [Accessed: 26/05/2011]. Johnson, M. E. and Whang, S. 2002, ‘E-business and supply chain management: an overview and framework’, Journal of Production and Operations Management, vol. 11(4), pp 413-422.