Justification of e-procurement strategy

Reduced Costs

E-procurement saves you money by preventing duplicate spending, leveraging volume buying,
and saving you costs associated with paper-based systems (for example, the cost of stamps to
mail your paperwork).

Transparent Spending

Electronically conducting your procurement makes it easier to write and analyze reports on your
procurement systems, meaning you can ensure that your procurement procedures conform to
your policies.

Increased Productivity

Once you’ve learned the system, e-procurement is less time-consuming than traditional
procurement. Having your records stored electronically makes it easier to submit reusable
tenders. Meanwhile, use of templates means paperwork can be filled out more quickly.

Eliminating Paperwork

Tired of finding new space to store all that paperwork? With e-procurement, everything can be
saved and stored electronically. This not only saves you from needing more room, it also makes
the process of finding older tenders more simple.

Increased Transaction Speed

E-procurement is both time-saving and efficient. As the electronic handling of tasks supports and
simplifies the purchasing process, transaction speed is increased. Also, because of e-enabled
relationships with suppliers, procurement cycle times speed up. The e-procurement process
eliminates unnecessary activities, allowing you to focus on more valuable tasks.

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Standardized Buying

When you have various departments making procurement decisions, there can be differences in
what and how they purchase. Conducting purchasing electronically makes it easier for every
department to conform to company procurement standards.

Reduced Errors

Electronic paperwork is streamlined and thus easier to check for errors—there’s no messy
printing to get in the way either. Along with this, past orders are more easily referenced, meaning
there’s a greater chance that your company can compare orders to ensure new ones are correct.

Readiness and willingness of Gretch Unitas to e-procurement

End-User Uptake and Training

As e-Procurement includes new technologies and changes in traditional procurement approaches,

Supplier Adoption

E-Procurement implementation success is closely related to early supplier involvement. It is

Compliance with Best Practice for Business Case/Project Management

e-Procurement initiatives only deliver the planned benefits if the users and buyers make changes
to the way they work, which requires championing the project and senior management
sponsorship. Specifically important, but also challenging, is ensuring “Buy In”.

System Integration

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It is very important to determine the level of integration required between the e-Procurement
solution and existing information systems.

Security and Authentication

Because of the sensitivity of the government data and the legal nature of orders and payments,
security of data is critical in e- Procurement systems.

Re-engineering the Process

e-Procurement should be viewed as an enabling mechanism to make the process of procurement

Top Management Support

There is little doubt that senior management leadership is critical to the success of an e-
Procurement implementation

Change Management Program

Changes required to support business processes are directly related to the speed of adoption of e-
Procurement.

Benefits of e-sourcing to G-U Company

Increased transparency in purchasing process

Participating in eSourcing helps companies better understand a potential supplier’s culture by

Insight into buyer organization’s culture and structure

Suppliers can benefit by better understanding a buying organization’s mission, vision, and values
(diversity requirements, CSR, company goals) as stated in the requirements of the RFP or
eAuction. Put simply, it helps determine if you prefer to do business with the buying
organization in the future.

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Improved diligence in validating product or service differentiators

The formal RFP and reverse auction process forces buyers to spend more time upfront in
creating and communicating product specifications, contract specifications, and delivery
requirements, therefore better preparing suppliers for the formal negotiating and contracting
process.

Creation of discipline/synergies within the supplier organization

eSourcing events force discipline in the supplier’s sales process. Sales, marketing and product
management must collaborate to provide one face to the customer.

Reduced customer acquisition costs (CAC)

eSourcing can help reduce the time it takes to get in front of the customer. Rather than waiting
weeks or months to get a response from a marketing campaign, an eSourcing event is a direct
channel that can improve a sales and marketing team’s capital efficiency; (i.e. reducing the
number of months required to recover the cost of acquiring a customer).

Leveling of the playing field

For smaller companies in particular, with limited number of sales or marketing resources,
eSourcing can help level the playing field by providing one platform or framework for
demonstrating the value of goods or services.

Better competitive intelligence

Participating in eSourcing provides a means to better understand your competition and creates
competitive intelligence whether you’ve won the business or not.

Adoption of technology / innovation

eSourcing provides a means to leverage new technology for working with a potential buyer in
the future. For instance, the eSourcing platform may extend beyond an RFP or eAuction into
areas of supplier onboarding, supplier performance, contract management, etc. As a supplier,
familiarizing yourself with the tools may also help with future events of other buying entities
using similar tools/platforms.

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Challenges of e-procurement

Risk management

Risk is always a key concern for procurement, with the primary focus on suppliers’ financial
status, followed by health and safety and industry practices. It’s no longer good enough to simply
engage with your tier-one suppliers. Emphasis needs to be paid to controlling the approach taken
with tier-two suppliers, ensuring that the necessary obligations are passed down to
subcontractors.

Reputation and brand image

It’s not difficult to recall allegations of child labour in the overseas supply chain of certain retail
brands, or issues around modern slavery both at home and abroad. The knock-on effect can be
disruption to brand and public image and ultimately an impact on profitability. The Modern
Slavery Act goes some way towards addressing this, but issues remain around compliance.

CSR

Can procurement ever be sustainable? Organisations are making tremendous progress in the
approach to direct materials, but indirect procurement is more complex. The level of auditing
required to ensure that practice are sustainable, including those of first and second tier suppliers,
is labour-intensive and time-consuming. Consider asking suppliers to complete detailed
questionnaires and take positive action with the results. Many organisations now issue written
codes of conduct, but the key challenge is acceptance and practical application in the supply
chain.

Becoming a customer of choice

Innovation is often included in an RFP, but does not necessarily specify what is really needed.
Supplier innovation is more likely if you become a customer of choice. A recent CASME survey
highlighted that a simple constraint to achieving this is late payment of invoices. Innovation is a
two-way process; don’t just write it in a contract and expect the best ideas from suppliers. The
most successful approach is to abide by agreed payment terms, and demonstrate a partnership
approach by listening and responding to suppliers’ ideas.

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Centres of Excellence

The trend towards a centralised organisation to support the procurement function is on the rise,
with an emphasis on provision of spend data and analysis, plus RFx e-sourcing support. What is
the best approach to organising the CoE’s structure, work responsibilities and operation to ensure
the business is supported? A virtual CoE may be an appropriate solution; however, a complete
software package, beyond the capabilities of Microsoft Excel, is needed for centralising and
recording the CoE’s activities.

Stakeholder engagement

At almost every one of CASME’s meetings held each year, the discussion includes
procurement’s need for achieving greater connections with stakeholders. Recent benchmarking
studies show that more CASME members are now profiling and prioritising stakeholders and
their requirements, in order to plan the right type of communication – for example, whether a
particular stakeholder needs an occasional meeting over coffee, or a formal monthly one. CRM
tools can be used to track the relationship building activities and supplier onboarding. Credibility
can be gained by using the right terminology, and by demonstrating knowledge of the category,
suppliers and market trends. By aligning procurement activity to the stakeholder’s business
objectives and selling the benefits of collaboration, the overall result can be more valuable than
cost savings alone.

E-procurement challenges specific to Gretsch-Unitas

The implementation of e-procurement tools carries certain risks. One of the primary risks is
missing opportunities to implement strategies that improve procurement management without the
need for investment in e-procurement. This is because many of the benefits ascribed to e-
procurement may be achieved simply by improving procurement practice. For example, it is
often said that e-procurement reduces “maverick buying”. However, other measures, including
the implementation of corporate buying strategies that offer value for money, do not need
electronic tools.

Another risk is over-investment in e-procurement tools that do not deliver the expected benefits.
This risk arises when there has been inadequate evaluation of the implications of the adoption or

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enhancement of e-procurement tools. The risk that users will not accept an e-procurement tool is
another common risk. This risk often arises where users have not been adequately consulted
about the adoption or enhancement of particular tools.

On the supply side, there is a risk that suppliers will not cooperate with the use of e-procurement
tools. For example, some suppliers are sufficiently powerful to insist on the use of paper-based
systems. Others may not have access to affordable internet based technology that would give
them access to the e-procurement tools of purchasers. In markets that are already competitive
with low profit margins, suppliers may choose not to participate in e-reverse auctions.

Conclusion

Normal methods of risk assessment and management should be applied during the development
of business cases for e-procurement development or enhancement.

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References:

Engström, A., Salehi-Sangari, E., and Wallström, Å. (2008). “The evolution of e-procurement
within Swedish municipalities from 2001 to 2008,” Journal of Business Management Vol. 4(13),
pp.3655-3765

Gitahi, L. (2011) “Exceptional Customer Relationship is the Key to Our Success” Nation Builder

Newsletter.

Lysons, K & Farrington, B. (2006).Purchasing and supply chain management, (7thed.) New
Jersey: Prentice Hall