Page 132 - Introduction to Electronic Commerce and Social Commerce

112 4 Business-to-Business E-Commerce

3. What are the major purposes of forward auctions, and
how are they conducted? • Sign agreements or contracts using e-contract man-
4. Comment on the number of bidders and bids using an agement (e.g., from Ariba, Inc. ariba.com; a SAP
online auction as compared to using an offline auction. company); arrange financing, escrow insurance,
etc.
• Create specific purchasing order(s) using a com-
4.4 ONE-FROM-MANY: E-PROCUREMENT puterized system.
AT BUY-SIDE E-MARKETPLACES • Arrange packing, shipments, and deliveries using
electronic tracking, RFID, etc.
The term procurement refers to the purchase of goods and • Arrange invoicing, payments, expense manage-
services by organizations. Procurement is usually done by ment, and purchasing budgetary control using soft-
purchasing agents, also known as corporate buyers. ware packages (e.g., from ariba.com).
The buyer’s purchasing department sometimes has to
enter the order information manually into its own corporate
information system. Furthermore, manually searching web- An example of the traditional procurement process that is
stores and e-malls to find and compare suppliers and prod- often inefficient is shown in Figure 4.5. For high-value items,
ucts can be slow and costly. As a solution, large buyers can purchasing personnel need to spend considerable time and
open their own marketplaces called buy-side e- marketplaces, effort on procurement activities. However, the purchasers
and invite sellers to browse and offer to fulfill demand. may not have time to do a quality job since they are busy
with the many items of small value such as MROs.
Other inefficiencies, ranging from delays in deliveries to
Inefficiencies in Traditional Procurement the high cost of rush orders, also may occur in conventional
Management procurement. This situation is called maverick buying,
which occurs when a buyer makes unplanned purchases of
Procurement management refers to the process of plan- items needed quickly, resulting in buying at non-pre-
ning, organizing, and coordinating of all the activities per- negotiated, and usually higher, prices.
taining to the purchasing of the goods and services needed To correct the situation(s) that may result from traditional
by an organization. It involves the B2B purchase and sale of procurement, companies must reengineer their procurement
supplies and services, as well as the flow of required infor- systems, implement new purchasing models, and, in particu-
mation. Approximately 80% of an organization’s purchased lar, introduce e-procurement. Let us elaborate on the generic
items, mostly MROs, constitute 20–25% of the total pur- procurement methods first.
chase value. In this case, much of the buyers’ time is spent on
clerical activities, such as entering data and correcting errors
in paperwork. Procurement Methods
The procurement process may be lengthy and complex
due to the many activities performed. The following are the Companies use different methods to procure goods and ser-
major activities that may be included in a single purchase: vices depending on factors such as what and where they buy,
the quantities needed, and how much money is involved.
Each method has its own process benefits and limitations. To
minimize the inefficiencies described earlier, companies
• Search for items using search engines, catalogs, vir- automate activities in the process. This is the major objective
tual fairs and showrooms, and sellers’ sales presen- of e-procurement. Examples of companies utilizing efficient
tations. methods are Walmart (walmart.com), Dell (dell.com), and
• Learn details of items and buying terms using com- Starbucks (starbucks.com) to name a few. The major pro-
parison engines and quality reports, and research curement methods include the following:
industry report and vendors’ information.
• Negotiate or join group purchasing using software
support (if available). • Buy directly from the catalogs of manufacturers,
• Determine when and how much to order each time. wholesalers, or retailers, and possibly by negotia-
Authorize corporate buyers. tion (Sections 4.2 and 4.3).
• Join business-oriented social networks such as • Buy at private or public auction sites in which the
linkedin.com. buying organization is one of many (Section 4.5).