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Tools of an
E-Procurement System
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There is a wide
range of e-procurement models in use. Let us gain an
understanding of the major types of e-procurement
transactions and tools here.
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for this purpose
e-procurement model can be divided into a numbers of
different types.
Some of these
are as under :
E-Catalogues
Internet Trading Exchange or
e-marketplaces
Reverse Auctions
RFX Model (RFP, RFQ,RFI, e-Tendering)
Self Service Procurement
Purchase Cards
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E-Catalogues
In normal case of business scenario, supplier visits
end users and buyers and provide their product
information through Product catalogues. These
catalogues normally contain product
specifications, rates, validity of rates, discounts,
minimum order quantity etc. In the context
of e-procurement, these catalogues are available in
electronic formats.
There are three ways to maintain the catalogues.
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Buyer Hosted Catalogues:
Supplier provides the
catalogues to buyer in electronic format or the
supplier accesses the system of buyer and uploads
the catalogue.
Supplier Hosted Catalogue:
In this case supplier
hosts catalogue on his website. Buyers visit the
website of suppliers and browse the catalogues.
Third Party Hosted:
In this case suppliers maintain
their catalogues by accessing third party web
site and buyers access the third party system to
browse the catalogues.
Suppliers keep informed the buyers
about the host's address just as they
keep them informed about their own
sites. |
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Internet Trading Exchange or e-marketplaces
This is the single point entry for meeting place for
buyers and suppliers. Here buyers and post
there requirements and suppliers can quote against
the requirements posted by the buyers.
Features of a e-marketplace can vary from plain
transactional trading to enabling suppliers and
buyers to collaborate in the areas of supply chain
planning, product designing & development,
knowledge sharing. |
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The business model for such kind hubs is to charge
money from buyers and suppliers based on
transactions, volumes etc.
There are two types of E-Market places:
Vertical e-Marketplace &
Horizontal e-Marketplace
Vertical e-Marketplace:
These market places are very specific to a
particular industry such as automotive, textile etc.
Such kind of e-marketplaces is supported by one or
more major players of the industry. These type
of marketplaces cater the requirement of direct and
specialized MRO purchases.
Horizontal e-market Place:
Horizontal trading exchanges focus on general
requirements which are common across the
industries, such as ORM supplies, general MROs etc.
These marketplaces focus on indirect purchase
of the industry. The example in this space is Ariba
Network
e-Reverse Auctions:
Reverse auctions can be conducted either through an
e-marketplace or directly by a buying
organization. There are mainly three types of
auctions.
English Reverse Auctions
Japanese Reverse Auction
Dutch Reverse Auction
English Reverse Auctions:
In this type of reverse auction buyer opens the
auction with the price of the item and seeks
lower bid. Bidders outbid each other by placing
lower bids. The auction ends when no body is able
to quote lesser than the lowest quote. It is time
bound bidding.
The buyer may reserve the price above which he is
not willing to pay. In case of winner of the
bid is not able to supply the full quantity the
buyer can go for second lowed bidder to fulfill
the quantity. Sometimes buyer may impose the
condition of supplying full quantity in the auction.
Japanese Reverse Auction
In this auction the buyer sets the opening price for
the bidders and bidder must declare whether
they are “in” the auction for supply of material at
the price set buy the buyer. The buyer keeps
on reducing the price by an incremental value within
a specified time period and bidders declare
whether they are still “in”. The auction ends when
there is only one bidder is lift “in”.
Dutch Reverse Auction
In Dutch reverse auction, buyer sets an opening
minimum price and keeps on increasing by some
fixed incremental value. Auction ends immediately
when anyone of the bidders is ready to supply
the material at that price.
This type of auction is popular in Airline Industry.
When the capacity of the aircraft is full
and any new passenger comes who require the ticket
immediately due to emergency travel, the
airline staff starts this auction process in the
aircraft and the passenger in the aircraft are
the bidders. Buyer starts auction with some price
and keeps on increasing this prices after fixed
time, the moment any passenger raises his hand is
the winner.
RFx Model (RFP, RFQ, RFI, e-Tendering):
RFQ has long been a traditional way common tool of
procurement. If RFQ is prepared manually it is
very time consuming process. Now a days RFQs are
prepared electronically in ERPs, trading
exchanges and e-marketplaces. Use of ERPs and
trading exchanges makes possible quick creation and
transmission to suppliers.
Now a days there is new focus on Request for
Proposal (RFP) and Request for information (RFI). So
this area now a days called e-Sourcing or RFx Model. |
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Meaning of these terms:
Request for Quotation RFQ) is a request for supplier
to quote for a particular product or
service. The buyer sets the requirements and
specifications in the document. The supplier has to
quote in the prescribed format specified by the
buyer. Issuing a RFQ means that buyer may
probably (not the guaranty) make a commitment with
one of the respondents.
Request for Proposal (RFP) is a request by a buyer
for supplier for submitting the proposal. RFP
asks suppliers to propose how they would meet the
buyer’s product or service need. This approach
is largely used when the supplier is having greater
expertise than buyer.
Request for Information (RFI) implies that there is
no commitment from either side. Buyer asks
for the information from supplier and evaluate
whether they might go for particular service or
job with a particular supplier.
Self Service Procurement: Self service procurement
passes on the procurement jobs to end users.
Materials procured under self service are normally
non strategic, under contract and with fixed
pre negotiated prices. Self service procurement
frees the buyer from transaction procurement and
helps him to focus on strategic procurement.
In self service procurement end user searches the
catalogue (Catalogues are pre approved by
buyer) and creates the shopping cart or purchase
requisitions. These shopping carts/purchase
requisitions are forwarded to supervisor of the end
user automatically for approval based on work
flow. Shopping carts/PR gets converted into an
approved electronic PO automatically after the
approval of Shopping Cart/PR. PO is also delivered
to supplier automatically i.e. no intervention
and no role of procurement staff in placing the
orders! |
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