Tài liệu E-business 2.0: Roadmap for Success - Chapter 10 doc

Procurement not just support function; a valuable weapon – Lower procurement costs, reduce order-cycle times and ensure smooth delivery of materials B2B strategies now a top mgmt focus

Chapter Ten

Demystifying

e-Procurement: Side, Sell-Side, Net Markets, and Trading Exchanges

More than 5-10% revenues spent on

non-production goods annually

– Office equipment, supplies, software, computers

– Top 2000 U.S corporations = $500 billion annually

Purchase detail for negotiating better supplier

contracts not available

– Most POs worth less than $500

– Large percentage of that is off contract, outside preferred channels

B2B transactions comprise significant market

– Several trillion dollars

– Big Three automakers do $500 billion/yr worth

transactions related to buying and selling car components– Non-discretionary spending, required for business

– Both buyers and seller see importance of an efficient

marketplace, to streamline processes and reduce costs

Procurement not just support function; a valuable weapon

– Lower procurement costs, reduce order-cycle times and ensure

smooth delivery of materials

B2B strategies now a top mgmt focus

– Not so much a technological revolution as a business revolution

enabled by technology

– Driven by CEO or CFO, reflecting management’s awareness of key challenges facing corporate procurement functions

• Reducing order-processing cost and cycle times

• Providing enterprise-wide access to corporate procurement capabilities

• Empowering desktop requisitioning through employee service

self-• Achieving procurement s/w integration with back office systems

• Elevating procurement function to strategic importance within organization

– Dollar-for-dollar bottomline impact of e-procurement is startling

B2B strategies now a top mgmt focus

– Driven by CEO or CFO, reflecting management’s

awareness of key challenges facing corporate

procurement functions

• Reducing order-processing cost and cycle times

• Providing enterprise-wide access to corporate procurement capabilities

• Empowering desktop requisitioning through employee self-service

• Achieving procurement s/w integration with back office systems

• Elevating procurement function to strategic importance within organization

– Dollar-for-dollar bottomline impact of e-procurement is

startling

Evolution of e-Procurement Models

Industry Consortiums

Industry Consortiums

Third-Gen Trading Xchanges

Third-Gen Trading Xchanges

Second-Gen Trading Xchanges

Second-Gen Trading Xchanges

First-Gen Trading Xchanges

First-Gen Trading Xchanges

Corporate Procurement Portals

Corporate Procurement Portals

B2E Requisition Apps

B2E Requisition Apps

EDI

Pre-Internet Era: EDI Networks

Private and limited to large businesses

– Linked with major suppliers

– Require large capital outlays

Automate procurement process; support

automatic inventory replenishment; and tighten the relationship between buyers and primary

suppliers

Perform best in strategic partnerships,

specialized relationships, and rigid performance contracts

– Don’t do well in open sourcing and flexible supply chain world

B2E: Purchasing and Requisitioning Apps

Next gen procurement apps taking hold in corporations

– Purchase of goods and services the single largest cost item– For $1 earned on sale of product, $0.50-$0.60 spent on

goods and services

– Inefficient procurement practices wasting billions of dollars

Desktop requisitioning enables employees to purchase products and services online

– Hook up corporate intranet to suppliers’ Web-based

commerce sites to eliminate paper-intense and costly

purchasing process of traditional business

Consolidating purchasing process with few key

suppliers capable of providing volume discounts can

generate tremendous cost savings

– Ford

Corporate Procurement Portals

For buying both prodn and

non-prodn related goods

Procurement portals do more

than basic purchasing

– Purchasing: the buying of

materials and all activities

related to the buying process

– Procurement: includes

requisitioning, purchasing,

transportation, warehousing and

in-bound receiving processes

Early strategies reengineered,

even dismantled hierarchical

structures

Recent strategies restructure

entire order-to-delivery process

Trading Exchanges – First Gen

Communities, Store Fronts, & RFP/RFQ Facilitators

Information and content hubs

– Content communities attracting purchasing professionals

– Revenue: Advertisement, Subscription

– VerticalNet

RFP and RFQ facilitator exchanges

– Centralized online marketplace with preapproved group of suppliers

– Fixed-price, sealed bids

– Revenue: subscription fees, fees for bids to be read,

transaction fees for bids submitted and/or successfully

chosen

– WellBid in the energy sector

Trading Exchanges – Second Gen

Virtual Distributors and Auction Hubs

First gen trading hubs: “an inch deep and a mile wide” Transaction necessary for success

Revenue: from every transaction within the exchange

Virtual Distributors

– One-stop shopping for buyers and sellers

– Product information from multiple catalogs, multiple suppliers and manufacturers into a megacatalog

– Do not carry inventory or distribute products; assist buyers in arranging for 3rd party carriers to transport other goods

– Streamline sourcing of direct goods by issuing a single PO and then parsing the order to each relevant supplier

– SciQuest in life-sciences industry

Trading Exchanges – Second Gen

Auction Hubs

– Sales channel for spot buying unique items; used equipment, surplus inventory, perishable goods

– Similar to stock market

– Buyers and sellers meet anonymously to agree on prices on commodities

– Driven by either sellers (AdAuction.com) or buyers (FreeMarkets.com)

– Forward auctions allow several buyers to bid for products/services from an individual seller

– Reverse auctions allow several prequalified sellers

to bid for fulfilling an individual buyer’s need

Trading Exchanges – Third Gen

Collaboration hubs

Provide more than transaction functionality,

help with end-to-end mgmt of supply chains

Create common platform for all participants in

an industry supply chain

– Share information; conduct business transactions; collaborate on strategic and operational planning

Trading Exchanges – Third Gen

Provide value-added services

– Increase site “stickiness”; generate multiple revenue

streams; increase competitive barriers to entry

– Bidcom is a single online workplace for large contractors to collaborate with architects, store blueprints, expedite permit process and purchase building materials

– Integrated commerce technology

• Automate transaction processing, incorporate static pricing and/or dynamic pricing

Industry Consortiums: Joint-Venture

Procurement Hubs

Larger firms responding to competitive threat posed by new startups

– Forming either buyers or suppliers consortium

– Traditional industry leaders have two advantages over startups: instant commercial activity and

liquidity

Buyer consortium

– Groups of large companies combining buying

power to drive down prices

– Covisint

Industry Consortiums: Joint-Venture

Procurement Hubs

Supplier consortium

– Forming in industries with few high concentration market players

– Difference compared to buyer consortium:

sponsors get to promote and differentiate

suppliers’ products

– Not new: Sabre

Major issues: governance, technology and

antitrust

Evolution of Procurement Processes

Reengineering procurement process key to

deployment of e-procurement solution

E-procurement models all attempting to solve similar business process problems

Reducing Channel Fragmentation

Hands-Free Procurement: Managed by

Exception

E-Procurement: Integrating Ordering,

Fulfillment and Payment

Backward Integration

Ordering: Self-Service Requisitioning

Little help available from

purchasing dept and POs

can take weeks to fulfill

Self-service order work flow

Fulfillment: Order Mgmt and Supplier

Integration

Procurement system provides seamless

transition from requisition to PO, with no

E-procurement Analysis and Admn Apps

Buy-side functionality alone not

Application of spending analysis

and planning across the

spectrum of procurement

activities a core competency of a

successful procurement strategy

Marketplace Enablers

Ariba: Marketplace Enabler

– First vendor of ORMS

– Realized opportunity for automating nonprodn

procurements processes

• 30% spending towards nonprodn purchase, managed via a maze of paper-based process – Gathered customer feedback before building first product

– Transformed into a technology platform provider

• For building and powering Internet trading exchanges

Marketplace Enablers

Freemarkets: Auction Enabler

– Runs buyer-centric auction exchange

– Focused on procurement for industrial parts, raw materials, and commodities

• $4-5 trillion market– Major opportunity

• Direct materials often custom-made with no std price

• Current procurement process inefficient

• Current asset-disposal methods plagued by imperfect product and pricing info

– Offers service to create customer market for direct matls its client purchases

• Industrial auctions

• Surplus asset auctions

Roadmap for e-Procurement Managers

Chief procurement officers looking to deliver

maximum business impact at lowest possible cost

Procurement objectives

– Leverage enterprise wide buying power

– Quick results at low risk

Step 1: Clarify Your Goals

• What is your company’s specific

e-procurement goal?

• Is the goal a comprehensive and consolidated business solution?

– Integrated e-procurement mgmt necessary

• What are you trying to improve?

Step 1: Clarify Your Goals

Select

&

Search

Order Approval &

Placement

Integrated e-Procurement Management Applications

Schedule

Step 2: Construct a Process Audit

Understand current procurement process and factors

affecting, impeding and interacting with it

First phase: Model workflows in current procurement

• Paper pushing– Spot buying

• One-time deals

Step 2: Construct a Process Audit

Second phase: What kind of buying are you

Step 3: Create a Business Case for

e-Procurement

Return on assets business case forces you to

systematically analyze your business

Analysis forces to understand context

– Without understanding environment cannot fix it

– Can articulate hidden assumptions

Widely used technique in creating business case

Step 3: Create a Business Case for

e-Procurement

Decreasing expenses can be accomplished by

identifying inefficiencies in the procurement chain

– Inventory carrying costs

– Reducing captive capital makes quick profits

– Cost improvements not just cutbacks; enhancements

through better coordination and communication; “premium freight” can be avoided for instance

Improving asset utilization can be accomplished by

reducing working capital

– Eliminating warehouses to maximize stock availability and to minimize inventory holdings

– Eliminating excess inventory to reduce leakage or hidden inventory

Step 4: Developing Supplier Integration

Matrix

Without supplier commitment, e-procurement difficult

– But with ever-increasing velocity of change, few organizations want to commit to long term relationships

Needed: Supplier Integration Matrix (SIM)

– Helps determine the best type of relationships to have with

individual vendors

– An organization applying only one relationship structure to all vendors shortchanging itself

SIM classifies suppliers into

– Strategic collaborative, long term, ex MRO suppliers

– Strategic cooperative, ex computer suppliers

– Nonstrategic limited, short term, ex temp agency services

– Nonstrategic commodity, short term, ex office and book

suppliers

SIM should be reviewed periodically

Step 5: Select an e-Procurement App

Wade through vendor hype

– Will it support my procurement process?

– Does it leverage my other application

investments?

– Will it work seamlessly with other apps?

– Is it extendable?

Step 6: Remember Integration is Everything

Doomed to fail strategy

– Gathering requirements,

then disappearing for 6

months, then launching the

portal

Ideal goal

– Continuously iterate towards

the target – the integration

sweet spot

– Focus on all areas of ORM

Iterate development and

deployment

– Do not take exclusive

buy-side or sell-buy-side viewpoint

Integration with back office

systems a significant issue

Sweet-spot

Step 7: Educate, Educate, Educate

How much of a change does your market

require on the part of suppliers and buyers?

– The lesser the better

Opposition to e-procurement can cause major problems

– Schedule slippage, higher costs, poor morale

Senior management must listen, communicate, sell and even fire to deal with this problem

– “Soft” implementation roadblocks most reason why projects don’t succeed

– Do not underestimate the effort and costs of

deployment

E-Business

Strategies, Inc.

www.ebstrategy.com

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