L2.3 Explain how electronic systems can be used at different stages of the CIPS Procurement Cycle

Question 1

*E-procurement consists of
1. E-sourcing
2. E-purchasing
{from eElearning quiz, e-requisitioning -> e-sourcing -> e-ordering -> e-purchasing}

Definition and function of e-requisitions

Answer 1

E-requisitioning
= sending a requisition via electronic methods

> > contains same info as in manual process (ie. details of item/service required); only difference is that this document will be raised and sent to proc. dept electronically
+ requires large financial outlay to source/design an electronic system but has long-term benefits -> saves time and reducing overall costs, shifts focus of employees to core activities through standardised template (fast and efficient)
+ reduced risk of document getting lost
+ full traceability of who raised the requisition, who it has been sent to and when (clear audit trail) -> higher level of control than in manual systems
- lack of relationship building between a customer and a buyer, as they may never speak to or see each other
- risk of being affected by a power failure/technological problems

Question 2

Definition and function of e-catalogues
+ 5 advantages and 3 disadvantages

Answer 2

= online catalogues
- used by buyers to research products and…
- …by suppliers to show available ranges
- e-catalogues found on websites on intranet, or extranet

Advantages
1. Information is always available
2. Information is always up to date
3. In-depth details are readily available
eg. detailed diagrams, videos of products
4. E-catalogues can be viewed at all times {same as #1?}
» saves procurement professionals time b/c don’t need to wait for paper copy to be delivered
5. Environmentally friendly

Disadvantages
1. If technology fails access is denied
2. Lack of relationship building
3. May be difficult for buyer to navigate

Question 3

Definition and function of e-tendering

Answer 3

= an electronic approach to tendering using emails or portals

• eg. includes e-RFQs and e-ITTs
• SAVE proc. depts TIME and MONEY, as they enable buyers to send and receive MULTIPLE BIDS with ease
• ENVIRONMENTALLY FRIENDLY
• some portals allow buyers to manage supplier bids through ONE SINGLE PORTAL, allowing EASIER evaluation and comparison of bids, rather than having to compare multiple bids across diff. platforms

Question 4

Definition and function of e-auctions
+ define Reverse auctions

Answer 4

E-auctions
= auctions where the bidding takes place on the INTERNET {eg. eBay}
- seller uploads the items/services they want to sell on a website & interested buyers submit their bids electronically and bids go up until e-auction ends or nobody increases the bids
^fair and transparent process as everyone has same amount of time to bid, can see bid progress, and is aware when the auction ends
- LACK OF RELATIONSHIP BUILDING

Reverse auction
= an auction where the bidding DECREASES OVER TIME to ensure the buyer gets the lowest price
- role of buyer and supplier is SWAPPED; the SELLER is BIDDING to sell their services rather than buyer bidding to buy their requirement
- e-auctions are often reverse auctions but don’t have to be

Question 5

Definition and function of online supplier evaluation systems
+ 5 supplier evaluation criteria

Answer 5

This can include sending out electronic QUESTIONNAIRES to potential suppliers and compiling the results on a doc which produces FEEDBACK to show the MOST SUITABLE SUPPLIERS

Supplier evaluation criteria
1. Price, quality and delivery
2. Financial stability
3. Long-term relationship potential
4. Total quality performance and philosophy
5. E-commerce capability

Question 6

The application of electronic systems at each PRE-contract award stage (stages 1-8) of the CIPS Procurement Cycle
1. E-requisitions
2. E-catalogues (x2 stages)
3. E-sourcing, can also contain Online supplier evaluation systems (x4 stages)

*e-sourcing also useful at post-contract award stages

Answer 6

E-requisitions
- could be used by buyers to help them Define business needs and develop a specification (Stage 1)

E-catalogues
1. useful at the Market analysis and make or buy (Stage 2), as they enable buyers to see the accessibility and AVAILABILITY of products/services in the market
- enable buyers to see whether the need is readily available as standard, or whether bespoke, made-to-order options need to be considered
2. also useful at the Pre-procurement market testing (Stage 4), as buyers have visibility of POTENTIAL SUPPLIERS of a product/service & gauge who may be worth approaching for further discussions

E-sourcing
1. Developing the e-specification at Develop documentation and detailed specification (Stage 5)
- sent via email to potential suppliers
2. Sending e-ITTs/e-RFQs at Issue tender documents (Stage 7)
3. E-negotiation at Bid and tender evaluation and validation (Stage 8)
- can be an exchange of emails between buyer and supplier, OR reverse auctions and e-auctions
- can be time-bound, unlike many forms of e-procurement
» face-to-face negotiations can be a faster process and more personal
4. Online supplier evaluation system in the Supplier selection to participate in tender (Stage 6)
eg. SEDEX database used by buyers and suppliers for supply chain visibility and transparency on ethical and sustainability supply chain practices

Question 7

The application of electronic systems at each POST-contract award stage (stages 9-13) of the CIPS Procurement Cycle
1. E-sourcing
2. E-ordering + 2 methods
3. Warehousing and logistics systems

Answer 7

E-sourcing
- in Contract award and implementation (Stage 9)
- use e-sourcing systems to prepare and send an E-CONTRACT
- easier and quicker, eg. using DocuSign than traditional posting methods which can take a few days

E-ordering
= using an electronic systems to place orders
- in the Contract award and implementation (Stage 9)
i) Manual input system
- buyer receives information through an e-requisition -> buyer reviews options by looking at e-catalogues to establish the best value for money -> buyer inputs details into an electronic system to create an ORDER
ii) Automated system
- commonly used in org.s that use MRP (materials requirement planning)
- when proc. professional receives a REPORT, they can UPLOAD it AUTOMATICALLY into an e-order that can then be sent
- saves TIME and reduces HUMAN ERROR as the system creates exactly what is needed
- however, all info the calculations are based on has to be INPUT and kept UP TO DATE to maintain functionality

Warehousing and logistics systems
- at Warehouse, logistics and receipt (Stage 10)
- using BARCODE SCANNING to receipt goods upon arrival at the buying org.
» receipted goods often CATEGORISED by LOCATION, so they can be found easily + easily tracked when used and replenished if required
- MRP or ERP technologies can be used at each stage and can track the internal movement and stock level of goods (more details in section 3.4)

Question 8

The application of electronic systems at each POST-contract award stage (stages 9-13) of the CIPS Procurement Cycle
4. E-payment
+ 4 advantages & 3 disadvantages
+ cryptocurrencies

Answer 8

E-payment
- {final stage of e-procurement}
- any form of transferring funds that does NOT PHYSICALLY INVOLVE any exchange of money, ie. bank transfer, debit/credit cards, e-payment portals like PayPal

Advantages
1. quick process
2. traceable
3. low risk of money going missing
4. high level of control

Disadvantages
1. possibility of online hackers
2. if technology fails, the system stops
3. no personal relationships

Cryptocurrencies
- Bitcoin is a digital currency which could benefit the proc. function because of its TRANS-BORDER POTENTIAL
- however, still a new concept that’s being explored in the industry; not tied to a major currency and its value still FLUCTUATES considerably
- Blockchain technology is one of the by-products of Bitcoin, and is being adapted to other assets, eg. SMART CONTRACTS (computer programmes that enforce conditions built into them)…
- …however, govt legislation to safeguard and govern these forms of digital transactions currently lags behind the tech, so proc. function should consider all risks carefully before adopting

Question 9

The application of electronic systems at each POST-contract award stage (stages 9-13) of the CIPS Procurement Cycle
5. Contractual performance (x2 stages)
6. Asset management and review

Answer 9

Contractual performance
1. at Contract performance and improvement (Stage 11)
- using electronic systems, eg. REPORTING TECHNOLOGIES, to monitor and review the agreed contractual KPIs & producing a visual representation using system data (graphs)
- metrics eg. on-time in-full (OTIF) delivery, quality performance based on # of defects
2. sharing KPIs with supplier as part of Supplier relationship management (Stage 12)
- suppliers would often track their own performance for agreed KPIs and will want to ensure the buyer’s performance figures MATCH their own
- buyers may also need to adapt their SRM STRATEGY depending on how the supplier is performing
ie. if contract is providing critical goods/services and the supplier is not meeting the agreed KPIs, the buyer may need to adopt a more closely managed relationship style with the supplier to ensure contract needs are met

Asset management and review
1. SPEND ANALYTICS SYSTEMS are useful tools in Asset mgmt (Stage 13)
- to analyse WHOLE-LIFE COSTS and REVIEW EXPECTED COSTS AGAINST ACTUAL COSTS…
- …to make decisions about replacing the asset / outsourcing the service / disposal and replacement
- also used to assess the CONTRACT PROFITABILITY and whether a RENEWAL is justified
2. Enterprise Asset Management (EAM) software
- to manage the LIFE-CYCLE of PHYSICAL ASSETS
ie. FORECAST how long an asset will last and how much value it will add to the org. + maintenance monitoring

Question 10

Electronic systems in the procurement process
+ 3 main disadvantages
+ 6 advantages (4 transaction benefits & 2 organisation benefits)

*advantages far outweigh disadvantages and electronic systems are preferable to non-electronic
*regardless, supplier RELATIONSHIPS should not be compromised as tech replaces manual processes

Case study: E-procurement in Uganda funded by the World Bank
- helps save Uganda’s public procurement costs, promote efficiency and eliminate discriminate across the proc. system -> hoping to attract investment
- CORRUPTION LEVELS will decrease, increasing public confidence
- automation can reduce BUREAUCRACY
- timely arrival of items ordered

Answer 10

Disadvantages
1. Large initial spend
2. Implementation challenges around staff and suppliers {resistance to change}
3. Challenges around standardising company processes and information into a new system

Advantages
Transaction benefits
1. Increased EFFICIENCY through speed and accuracy of transactions and elimination of admin errors
2. Increased speed in transactions allowing org.s to be MORE RESPONSIVE to CUSTOMER DEMANDS
3. REDUCED COST in producing purchase orders and supplier admin
4. Shared benefit with SUPPLIER through increased TRANSPARENCY of transactions

Organisation benefits
5. An increase in efficiency and SPEND VISIBILITY
6. Ensuring organisation-wide COMPLIANCE with company proc. standards