SUPPLY CHAIN MANAGEMENT INFORMATION SYSTEMS

Procurement is the acquisition of goods, services or works from an external source. It is

favorable that the goods, services or works are appropriate and that they are procured at the best
possible cost to meet the needs of the acquirer in terms of quality and quantity, time, and
location.[1] Corporations and public bodies often define processes intended to promote fair and
open competition for their business while minimizing exposure to fraud and collusion

E-PROCUREMENT: In simplest terms, electronic procurement defines the automation of an

organization’s procurement processes using web-based applications. E-procurement enables
widely dispersed buyers and suppliers to come together, interact, and execute purchase
transactions directly over the Internet.

E-PROCUREMENT: The use of the internet or a company’s intranet to procure goods and
services used in the conduct of business. An e-procurement system can streamline all aspects of
the purchasing process while applying tighter controls over spending and product preferences.

E-procurement (electronic procurement, sometimes also known as supplier exchange) is the

business-to-business or business-to-consumer or business-to-government purchase and sale of
supplies, work, and services through the Internet as well as other information and networking
systems, such as electronic data interchange and enterprise resource planning. The e-procurement
value chain consists of indent management, e-Tendering, e-Auctioning, vendor management,
catalogue management, Purchase Order Integration, Order Status, Ship Notice, e-invoicing, e-
payment, and contract management

E-procurement applications consolidate the paper-based catalogs of multiple vendors by

digitizing product information into a single, one-stop shopping source for direct and indirect
goods and services.

Evolution of E-Procurement

Started by partnering, then to strategic sourcing and finally to e-procurement

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 1. EDI (Electronic Data Interchange) is the computer-to-computer exchange of business
documents in a standard electronic format between business partners.

By moving from a paper-based exchange of business document to one that is electronic,

businesses enjoy major benefits such as reduced cost, increased processing speed, reduced errors
and improved relationships with business partners. It improved business partners’ relationship.

Computer-to-computer– EDI replaces postal mail, fax and email. While email is also an
electronic approach, the documents exchanged via email must still be handled by people rather
than computers. Having people involved slows down the processing of the documents and also
introduces errors. Instead, EDI documents can flow straight through to the appropriate
application on the receiver’s computer (e.g., the Order Management System) and processing can
begin immediately. A typical manual process looks like this, with lots of paper and people
involvement. Documents exchanged via EDI are purchase orders, invoices and advance ship
notices. But there are many, many others such as bill of lading, customs documents, inventory
documents, shipping status documents and payment documents.

It performs best in strategic partnerships, specialized relationships and rigid contracts

2. B2E(Business to Employee) Purchasing and Requisitioning App

An electronic commerce uses an intra-business network which allows companies to provide

products and/or services to their employees. Typically, companies use B2E networks to automate
employee-related corporate processes. B2E portals have to be compelling to the people who use
them. Companies are competing for eyeballs of their employees with eBay, yahoo and thousands
of other web sites. There is a huge percentage of traffic to consumer web sites comes from
people who are connecting to the net at the office.

Examples of B2E applications include:

 Online insurance policy management

 Corporate announcement dissemination
 Online supply requests
 Special employee offers
 Employee benefits reporting

Next gen app taking hold in corporations. Desktop requisitioning enables employees to
purchase products and services online.

3. Corporate Procurement Portals main website that allows access to all the information
and software applications held by an organization and provides links to information from
outside it For buying both product and non-product related goods. Procurement portals do
more than just purchasing. Early strategies dismantled hierarchical structures. Recent
strategies restructure the entire order-to-delivery process.

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 4. TRADING EXCHANGES- First Generation: Communities, storefronts, and RFP/RQP
facilities.

Storefronts refers to is an e-commerce solution for merchants who want to host a website that
advertises their products or services and for which consumer transactions are generated online

Website that offers goods and/or services for, and which the customers or 'window shoppers' can
visit at any time and from anywhere. Revenue is earned through adverts or subscription.

RFP -Request for Proposal

sometimes based on a prior RFI; a business requirements-based request for specific solutions to
the sourcing problem.

RFI – Request for Information

An open enquiry that spans the market seeking broad data and understanding.

RFQ – Request for Quotation

An opportunity for potential suppliers to competitively cost the final chosen solution(s).

RFT – Request for Tender

An opportunity for potential suppliers to submit an offer to supply goods or services against a
detailed tender

Request for Information (RFI)

As the name suggests, procurement uses RFI’s to gather information to help decide what step to
take next before embarking on negotiations. RFI’s are therefore seldom the final stage, but
instead are often used in conjunction with the other 3 requests detailed in this article.

An RFI is a solicitation sent to a broad base of potential suppliers for the purpose of
conditioning, gathering information, preparing for an RFP or RFQ, developing strategy, or
building a database which will all be useful in later supplier negotiations about:

 The suppliers, including: facilities, finances, attitudes, and motivations

 The state of the supply market
 Supply market dynamics
 Trends and factors driving change
 Alternative pricing strategies
 Supplier competition
 Breadth and width of product/service offerings, by supplier
 Supplier strategic focus, business, and product plans

Procurement may use RFIs to include a detailed list of products/services for which pricing is
requested. The pricing should be used for comparative purposes for later negotiation, not as the
basis of negotiators buying decisions. Through analysis of RFI responses, strategic options,
lower cost alternatives, and cost reduction opportunities may be identified.

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Request for Quotation (RFQ)

RFQ’s are best suited to products and services that are as standardized and as commoditized as
possible. Why? Procurement want to make the suppliers’ quotes comparable before negotiations
begin.

An RFQ is a solicitation sent to potential suppliers containing in exacting detail a list or

description of all relevant parameters of the intended purchase, such as:

 Personnel skills, training level or competencies

 Part descriptions/specifications or numbers
 Quantities/Volumes
 Description or drawings
 Quality levels
 Delivery requirements
 Term of contract
 Terms and conditions
 Other value added requirements or terms
 Draft contract

Price per item or per unit of service is the bottom-line with RFQ's, with other dimensions of the
negotiation deal impacting the analysis process as determined by the buyer. Supplier decisions
are typically made by the procurement department following a comparison and analysis of the
RFQ responses for negotiation benchmarking advantage.

RFQs are typically used as supporting documentation for sealed bids (either single-round or
multi-round) and may be a logical pre-cursor to an electronic reverse auction.

Request for Tender (RFT)

An RFT is a procurement open invitation for suppliers to respond to a defined need as opposed to
a request being sent to potential suppliers. The RFT usually requests information required from a
RFI. This will usually cover not only product and service offerings, but will also include
information about the suitability of the business.

It is not unusual for a buyer to put out unclear or vague business requirements for an RFT. This
lack of clarity on behalf of the procurement department can make it challenging for the supplier
to propose a solution. This is not the best use of a RFT. RFT’s should only be used when the
buyer is clear on their requirements, and is also clear on the range of possible solutions that
might fit the buyer's needs, giving the buyer a negotiation advantage.

A RFT is often not a very time or cost efficient method for procurement to source supply due to
its lack of defined business requirements and open invitation for suppliers to respond. Without
proper procurement training however, too many buyers issue RFQ's that are in reality RFT's.

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Request for Proposal (RFP)

An RFP is procurement's solicitation sent to potential suppliers with whom a creative

relationship or partnership is being considered. Typically, the RFP leaves all or part of the
precise structure and format of the response to the discretion of the suppliers. In fact, the
creativity and innovation that suppliers choose to build into their proposals may be used to
distinguish one from another. Later negotiations tend to take more time and be more wide
reaching in their impact on the buyer's business.

Effective RFPs typically reflect the strategy and short/long-term business objectives, providing
detailed insight upon which suppliers will be able to offer a perspective. If there are specific
problems to be addressed in the RFP response, those are described along with whatever root
cause assessment is available.

With good procurement training your RFP and RFT should seek specific data, offerings and
quotations, and also seek specific questions about the following to assist your later negotiations:

 The specific items on which the suppliers are proposing

 Business requirements
 Performance measures
 Information
 Ideas
 Instructions on how to reply
 Due date
 Technical and other training
 How will we evaluate how feedback will work
 Describe the process for selection
 Request for cost breakdown (sometimes)
 Communication: cover letter (sets the stage), calls in advance
 Who to contact with questions
 Addressee - chosen carefully

5. Second Gen

Virtual distributors and auction hubs. Revenue is from every transaction. Within the
exchange.

Virtual distributors

One stop shopping for buyers and sellers, product sourcing from multiple catalogues,
suppliers and manufacturers, do not carry inventory or distribute products but assist
buyers in arranging for third party carriers to transport the goods. They streamline
sourcing of direct goods by issuing single PO and then parsing order to relevant
suppliers.

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 Auction Hubs

Similar to stock market. Buyers and sellers meet anonymously to agree on price of
commodities, sales channel to spot buying unique items, used equipment, surplus
inventory and perishable goods.

Forward auctions take the form of a single seller offering an item for sale, with buyers
competing to secure the item by bidding the price upward. Forward auctions are far-better
understood by the public at large than reverse auctions as to how they operate, due
primarily to the fact that they are widely used at the consumer level

In a reverse auction, a single buyer makes potential sellers aware of their intent to buy a
specified good or service. During the course of the actual reverse auction event, the
sellers bid against one another to secure the buyer’s business, driving the price to be paid
for the item downward. Thus, the winning bidder is the seller who offers the lowest price.

6. Third Gen

The central point of control for an e-market. A single c-hub, representing one e-market
owner, can host multiple collaboration spaces (c-spaces) in which trading partners use c-
enablers to exchange data with the c-hub

They help in end-to-end management of supply chain. They provide value added services
like.

Service and support by returning processing and warrant coverage.

Integrated commerce technology- automates transaction processing, incorporate static or

dynamic pricing.

Brokering services-logistic and financial services.

7. Industry Consortiums: Joint Venture Procurement Hub

Larger firms responding to competitive threat posed by new startups by either forming
buyers or supplier’s consortium.

Buyer consortium: groups of large companies combining buying power to drive down
prices. Convisit.

Supplier consortium: forming in industries with few high concentration market players.
i.e. sponsors get to promote and differentiate suppliers products.

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KEY ENABLERS FOR CONDUCTING E-PROCUREMENT

E-Signature: data in electronic form which are attached to or logically associated with other
electronic data and which serve as a method of authentication with regard to this data.

E-Identity: dynamic collection of all attributes, in electronic format, related to a specific entity
(citizen, enterprise, or object) which serve to ascertain a specific identity.

E-Attestations (Virtual Company Dossier): set of certificates and attestations, in electronic

format, to be provided by a supplier to prove compliance with the selection and exclusion criteria
of a procurement procedure.

E-Catalogues: electronic supplier catalogue prospect uses used to prepare and submit offers or
parts of them.

E-Archiving: use of electronic means for long-term preservation of documents in digitalized

format, ensuring that they can be easily retrieved without conversions.

Drivers to e-procurement

 Process cost savings - (Tender / Purchase Process)

 Service / Material / Product Cost Savings
 Transaction Administration Cost Savings
 Reduced Administration Costs
 Increasing Profit Margins
 Strategic Cost Savings
 Enhanced Inventory Management
 Decrease in Costs through reduced staffing levels
 Shortened Overall Procurement Cycle Times
 Shortened Communication Cycle
 Reduction in time through greater transparency
 Reduction in Evaluation Time
 Reduction in Time through improved internal workflow
 Reduction in purchasing order fulfillment time - Contract Completion
 Reduction in time through increased
 Increased Quality through increased competition
 Increased Quality through Benchmarking
 Increased Quality through increased visibility in the supply chain
 Increased Quality through increased efficiency
 Increased Quality through Improved Communication Gaining Competitive Advantage

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Chapter 2
PROCUREMENT SYSTEMS
Procurement is the acquisition of goods, services or works from an external source. It is
favorable that the goods, services or works are appropriate and that they are procured at the best
possible cost to meet the needs of the acquirer in terms of quality and quantity, time, and
location. Corporations and public bodies often define processes intended to promote fair and
open competition for their business while minimizing exposure to fraud and collusion.
Good procurement is getting goods and services at the best possible price, in right quantity,
quality, at right place from right source.
IT involves three steps namely plan, source and manage.
Procurement life cycle in modern businesses usually consists of seven steps:

1. Identification of Need: This is an internal step for a company that involves

understanding of the company needs by establishing a short term strategy (three to five
years) followed by defining the technical direction and requirements.
2. Supplier Identification: Once the company has answered important questions like:
Make-buy, multiple vs. single suppliers, then it needs to identify who can provide the
required product/service (P/S). There are many sources to search for supplier and trade
shows.
3. Supplier Communication: When one or more suitable suppliers have been identified,
requests for quotation, requests for proposals, requests for information or requests for
tender may be advertised, or direct contact may be made with the suppliers. References
for product/service quality are consulted, and any requirements for follow-up services
including installation, maintenance, and warranty are investigated. Samples of the P/S
being considered may be examined or trials undertaken.
4. Negotiation: Negotiations are undertaken, and price, availability, and customization
possibilities are established. Delivery schedules are negotiated, and a contract to acquired
5. Supplier Liaison: During this phase, the company evaluates the performance of the P/S
and any accompanying service support, as they are consumed. Supplier scorecard is a
popular tool for this purpose. When the P/S has been consumed or disposed of, the
contract expires, or the product or service is to be re-ordered, company experience with
the P/S is reviewed. If the P/S is to be re-ordered, the company determines whether to
consider other suppliers or to continue with the same supplier.
6. Logistics Management: Supplier preparation, expediting, shipment, delivery, and
payment for the P/S are completed, based on contract terms. Installation and training may
also be included.
7. Additional Step - Tender Notification: Some institutions choose to use a notification
service in order to raise the competition for the chosen opportunity. These systems can
either be direct from their e-tendering software, or as a re-packaged notification from an
external notification company.

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EVOLUTION OF PROCUREMENT PROCESS

Creation era: The term "supply chain management" was first coined by Keith Oliver in 1982.
However, the concept of a supply chain in management was of great importance long before, in
the early 20th century, especially with the creation of the assembly line. The characteristics of
this era of supply chain management include the need for large-scale changes, re-engineering,
downsizing driven by cost reduction programs, and widespread attention to Japanese
management practices. However, the term became widely adopted after the publication of the
seminal book Introduction to Supply Chain Management in 1999 by Robert B. Hadfield and
Ernest L. Nichols, Jr.,which published over 25,000 copies and was translated into Japanese,
Korean, Chinese, and Russian.

Integration era: This era of supply chain management studies was highlighted with the
development of electronic data interchange (EDI) systems in the 1960s, and developed through
the 1990s by the introduction of enterprise resource planning (ERP) systems. This era has
continued to develop into the 21st century with the expansion of Internet-based collaborative
systems. This era of supply chain evolution is characterized by both increasing value added and
cost reductions through integration.

A supply chain can be classified as a stage 1, 2 or 3 network. In a stage 1–type supply chain,
systems such as production, storage, distribution, and material control are not linked and are
independent of each other. In a stage 2 supply chain, these are integrated under one plan and is
ERP enabled. A stage 3 supply chain is one that achieves vertical integration with upstream
suppliers and downstream customers. An example of this kind of supply chain is Tesco.

Globalization era :The third movement of supply chain management development, the
globalization era, can be characterized by the attention given to global systems of supplier
relationships and the expansion of supply chains beyond national boundaries and into other
continents. Although the use of global sources in organizations’ supply chains can be traced back
several decades (e.g., in the oil industry), it was not until the late 1980s that a considerable
number of organizations started to integrate global sources into their core business. This era is
characterized by the globalization of supply chain management in organizations with the goal of
increasing their competitive advantage, adding value, and reducing costs through global
sourcing.

Specialization era (phase I): outsourced manufacturing and distribution

In the 1990s, companies began to focus on "core competencies" and specialization. They
abandoned vertical integration, sold off non-core operations, and outsourced those functions to
other companies. This changed management requirements, by extending the supply chain beyond
the company walls and distributing management across specialized supply chain partnerships.

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This transition also refocused the fundamental perspectives of each organization. Original
equipment manufacturers (OEMs) became brand owners that required visibility deep into their
supply base. They had to control the entire supply chain from above, instead of from within.
Contract manufacturers had to manage bills of material with different part-numbering schemes
from multiple OEMs and support customer requests for work-in-process visibility and vendor-
managed inventory (VMI).

The specialization model creates manufacturing and distribution networks composed of several
individual supply chains specific to producers, suppliers, and customers that work together to
design, manufacture, distribute, market, sell, and service a product. This set of partners may
change according to a given market, region, or channel, resulting in a proliferation of trading
partner environments, each with its own unique characteristics and demands.

Specialization era (phase II): supply chain management as a service

Specialization within the supply chain began in the 1980s with the inception of transportation
brokerages, warehouse management, and non-asset-based carriers, and has matured beyond
transportation and logistics into aspects of supply planning, collaboration, execution, and
performance management.

Market forces sometimes demand rapid changes from suppliers, logistics providers, locations, or
customers in their role as components of supply chain networks. This variability has significant
effects on supply chain infrastructure, from the foundation layers of establishing and managing
electronic communication between trading partners, to more complex requirements such as the
configuration of processes and work flows that are essential to the management of the network
itself.

Supply chain specialization enables companies to improve their overall competencies in the same
way that outsourced manufacturing and distribution has done; it allows them to focus on their
core competencies and assemble networks of specific, best-in-class partners to contribute to the
overall value chain itself, thereby increasing overall performance and efficiency. The ability to
quickly obtain and deploy this domain-specific supply chain expertise without developing and
maintaining an entirely unique and complex competency in house is a leading reason why supply
chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has
taken root primarily in transportation and collaboration categories. This has progressed from the
application service provider (ASP) model from roughly 1998 through 2003, to the on-demand
model from approximately 2003 through 2006, to the software as a service (SaaS) model
currently in focus today.

Supply chain management 2.0 (SCM 2.0)

Building on globalization and specialization, the term "SCM 2.0" has been coined to describe
both changes within supply chains themselves as well as the evolution of processes, methods,
and tools to manage them in this new "era". The growing popularity of collaborative platforms is

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highlighted by the rise of TradeCard’s supply chain collaboration platform, which connects
multiple buyers and suppliers with financial institutions, enabling them to conduct automated
supply-chain finance transactions.[18]

Web 2.0 is a trend in the use of the World Wide Web that is meant to increase creativity,
information sharing, and collaboration among users. At its core, the common attribute of Web 2.0
is to help navigate the vast information available on the Web in order to find what is being
bought. It is the notion of a usable pathway. SCM 2.0 replicates this notion in supply chain
operations. It is the pathway to SCM results, a combination of processes, methodologies, tools,
and delivery options to guide companies to their results quickly as the complexity and speed of
the supply chain increase due to global competition; rapid price fluctuations; changing oil prices;
short product life cycles; expanded specialization; near-, far-, and off-shoring; and talent scarcity.

SCM 2.0 leverages solutions designed to rapidly deliver results with the agility to quickly
manage future change for continuous flexibility, value, and success. This is delivered through
competency networks composed of best-of-breed supply chain expertise to understand which
elements, both operationally and organizationally, deliver results, as well as through intimate
understanding of how to manage these elements to achieve the desired results. The solutions are
delivered in a variety of options, such as no-touch via business process outsourcing, mid-touch
via managed services and software as a service (SaaS), or high-touch in the traditional software
deployment model.

Request, source order receive and pay are the basic steps used in traditional procurement.

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Differences between manual procurement and e-procurement

Limitation of manual process

• Delay in issue of tender schedules to Vendors

• Disadvantage for geographically spread bidders to participate

• Physical request / threats to bidders

• Risk of Tender Boxes at Multiple locations

• Delays in finalization of tenders

• Human interface at every stage leading to loss of objectivity

• Lack of Transparency

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CHAPTER THREE

PROCESS IN E-PROCUREMENT

The following sub-phases of the electronic public procurement process could be identified:

1. E-Sourcing: preparatory activities conducted by the contracting authority/entity to collect

and reuse information for the preparation of a call; potential bidders may be contacted, if
admitted by the legal rules, by electronic means to provide quotations or manifest
interest.
2. E-Noticing: advertisement of calls for tenders through the publication of appropriate
contract notices in electronic format in the relevant Official Journal (national/EU);
electronic access to tender documents and specifications as well as additional related
documents are provided in a non-discriminatory way.
3. E-Access: electronic access to tender documents and specifications as well support to
economic operators for the preparation of an offer, e.g. clarifications, questions and
answers.
4. E-Submission: submission of offers in electronic format to the contracting
authority/entity, which is able to receive, accept and process it in compliance with the
legal requirements.
5. E-Tendering: is the union of the eAccess and eSubmission phases.
6. E-Awarding: opening and evaluation of the electronic tenders received, and award of the
contract to the best offer in terms of the lowest price or economically most advantageous
bid.
7. E-Contract: conclusion, enactment and monitoring of a contract / agreement through
electronic means between the contracting authority/entity and the winning tenderer.
8. E-Orders: preparation and issuing of an electronic order by the contracting
authority/entity and its acceptance by the contractor.
9. E-Order Status: preparation and delivery of status information against the e-Order.

10. E-Invoicing: preparation and delivery of an invoice in electronic format. E-Invoicing is

currently defined in multiple ways. A simple search finds 3 simple variations: “an invoice
issued, received and processed electronically”, “an invoice sent by electronic means to
the recipient”, and “an invoice received by the customer electronically”. Driving a single
strategy requires a single definition; a common language. The best definition should be
customer centric. “an invoice received by the customer electronically”[citation needed]

The same common language divides the tiers of e-Invoicing based on cash management impacts.

 Tier 3 reduces delivery time (e.g. email delivery of pdf versions of invoices)
 Tier 2 reduces delivery time and digitizes the data for easier management by customers
(e.g. electronic files (xml, edi, flat, etc.) which match the sellers sales invoice)

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  Tier 1 reduces delivery time, digitizes data and reduces reconciliation time (e.g.
electronic files (xml, edi, flat,etc.) which match the customers purchase order, or web
invoicing solutions).

11. E-Payment: electronic payment of the ordered goods services or works.

Disadvantages of e-procurement

1. Some software don’t meet the specified requirements

2. Electronic errors in PO
3. Enabling some suppliers to support e-transaction is a hustle.

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CHAPTER FOUR

SUPPLY CHAIN, as opposed to supply chain management, is a set of organizations directly

linked by one or more upstream and downstream flows of products, services, finances, or
information from a source to a customer. Therefore supply chain automation refers to
computerizing of the entire process, i.e. is the ability to orchestrate and integrate tools, people
and processes through workflow.

Supply chain management encompasses the planning and management of all activities involved
in sourcing, procurement, conversion, and logistics management. It also includes coordination
and collaboration with channel partners, which may be suppliers, intermediaries, third-party
service providers, or customers. Supply chain management integrates supply and demand
management within and across companies.

The key supply chain processes stated by Lambert (2004)[19] are:

1. Customer relationship management:

2. Customer service management process: concerns the relationship between an
organization and its customers. Customer service is the source of customer information. It
also provides the customer with real-time information on scheduling and product
availability through interfaces with the company's production and distribution operations.
Successful organizations use the following steps to build customer relationships:

 determine mutually satisfying goals for organization and customers

 establish and maintain customer rapport
 induce positive feelings in the organization and the customers

3. Demand management style

4. Order fulfillment
5. Manufacturing flow management
6. Supplier relationship management
7. Product development and commercialization
8. Returns management

Examples of supply chain management information system

Management Information System

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Disintermediation (the direct association between users and their software).Seamless access to
and interaction with remote information, application, and human resources requires a distributed
active-object architecture.
Dynamic compensability and execution. A system should execute as a set of distributed parts but
the resources required will be mostly unknown until runtime. Thus the infrastructure must enable
resource discovery and composition as needed.
Interaction: among participants might include subtle and critical patterns, but the specific
interactions might be variable and unknown until runtime. The patterns must therefore be
explicitly represented and reasoned with. Recent work describes the power of interactions.
Error tolerance and exploitation. As the deployed systems gain complexity, they should
anticipate and compensate for errors in their components and interaction protocols.

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