eprocurement NRAMIS Study Group April 17, 2002 James Farhat CEO Technology Point International jfarh

1
e-procurementNRA-MIS Study GroupApril 17,
2002James FarhatCEOTechnology Point
Internationaljfarhat_at_tech-point.com
2
Agenda

• History of B2B
• What is eProcurement?
• Impact of eProcurement
• Solutions
• eProcurement Traps
• Conclusion

3
A Quick History of Business to Business (B2B)
eCommerce. . .
B2B Commerce enabling commerce through many to
many commerce
BUYER BUYER BUYER
SUPPLIER SUPPLIER SUPPLIER
Brochure-ware publicize online, sell
offline Basic E-Commerce one to one selling from
web site
B2B
BUYER BUYER BUYER
Supplier
EDI Networks closed, expensive, non-scalable
MARKET EFFICIENCY
Buyer
Time
Time
1996 1997 1998 1999

SOURCE Morgan Stanley Internet Research9
4
What is eProcurement?

• eProcurement leverages electronic networks to
  knit together buyer and seller processes,
  providing a real-time platform for conducting
  business.

5
eProcurement Characteristics

• Cataloging - specifications of items
• Discovery - lists of sources and vendors
• Scrutiny - review of offerings
• Negotiation - interaction between buyers and
  sellers
• Transaction - formalize the sale
• Fulfillment - delivery of items
• Settlement - instructions for payment
• Adoption - deployment

6
Impact of eProcurement

• Overall impact in the US
• Organizational impact

7
Achievements and Projections for eProcurement in
US (Giga Research)

• eProcurement in US will move from 31 (2000) to
  37 by 2004 (3.3T to 5.2T)
• EDI/VANs 2.4T to 1.4T
• ETNs 420B to 1.3T
• Extranets 200B to 500B
• Web-based EDI 200B to 353B
• eMarketplaces 50B to 1.3T
• EDI/Web 19B to 334B

8
Organizational ImpactBenefits

• Reduced costs of goods and services eProcurement
  solutions make it easier for purchasers to buy
  on contract increasing buying leverage with key
  suppliers.
• Higher productivity eProcurement solutions make
  it possible for business consumers to do their
  own buying directly from suppliers. As a result,
  purchasing professionals now have more time to
  spend on higher-value activities.
• Better information for procurement management
  Purchase data collected from an integrated,
  internal system can be examined to identify and
  adjust sourcing policies and process flows as
  need to keep the company moving
• Better planning True integration of
  inter-company business processes enables
  collaborative planning with suppliers, which can
  reduce working capital requirements and lower
  required inventory levels.

9
Organizational ImpactNew Capabilities for
Procurement Process

• True integration of customer and supplier
  processes
• Cooperative supply chain management and planning
• Real-time access to supplier knowledge
• Workflow coordination among trading partners
• Integration of logistics providers into
  procurement
• Surplus material/recycling
• Global trading networks

10
Impact of eProcurement on the Overall Supply
Chain. . .

• Ordering
• Reduced order costs, richer ordering experience,
  real time substitutions, pricing based upon
  availability, quality and accurate configuration
• Inventory
• Fewer inventory shortages, shorter replenishment
  times, reduced shipment time, earlier notice of
  demand (demand planning/forecasting)
• Returns
• Reduced paper processes, faster turn around,
  improved customer service
• Billing
• Reduced billing/payment cycles, reduced errors,
  improved cash flow, more complex pricing
  capability
• Customer Service
• Better history of customer behavior

11
Organizational ImpactNegotiate for your share of
the suppliers savings

• Supplier benefits tremendously
• Increased sales volume
• Automated order management
• Faster time to pay
• Lower inventory
• Lower service costs
• Quantify/Qualify to help with negotiation
• Negotiation point to be leveraged

12
Solutions

• Key requirements
• Technologies and standards primer

13
eProcurement SolutionKey requirements for an
effective solution

• Ease of use, consistent user interface
• Functionality and flexibility
• Intranet-based deployment to all clients
• Approval and business modeling capabilities
• Document-based workflow capabilities
• Online, real-time access to key procurement
  information
• ERP integration
• Supplier integration
• Unique buying organization support

14
Methods of exchange

• EDI - application to application
• Auto ID (bar codes) - item to application
• Email - person to person
• Extranets - person to person and application to
  application
• XML computer to computer and computer to person

15
Why talk about EDI?

• XML is billed as the solution for the SME (Small
  to Medium Sized Enterprise)
• Because, it is
• people friendly
• magic
• free

16
Because..

• XML is a language and will be built into
  off-the-shelf software
• Dont repeat same mistake as EDI
• changes were too big and too often
• industries and specific companies asked for
  exceptions because of legacy needs

17
However..

• Use the ubiquitous, less expensive, public
  network - the web
• Need interoperable compression or we will choke
  throughput and our own systems
• Need interoperable security and certificate
  authorities
• Still a direct connect
• must have ability to re-queue data
• must have customer and technical support
• must have reliable ISPs

18
Except..

• Create cross-industry international standards
• Standards creation doesnt happen overnight
• Must get international and cross industry
  consensus (countries and companies)
• Standards are not developed in a vacuum
• constantly revised and will be in major flux for
  several years

19
And then

• Same file can be formatted for computers and
  people
• Theres no magic
• just like EDI mapping, programmer still has to
  write the style sheet/s so all data is presented
  correctly (or at all)

20
But

• Contains pointers to databases (namespaces) to
  synchronize static information (e.g. Item Master
  pricing, description)
• Placing company jewels outside the firewall
• Again, we need security

21
Besides

• It can be conversational, real time
• Most companies dont have applications that are
  ready for real time EBT

22
So, dust off your EDI

• Traditional EDI will be viable for at least 2 to
  4 years, if not longer
• Faxes didnt completely replace mail e-mail
  didnt replace phone, etc.
• We will be bi-lingual

23
eProcurement Traps

• Compliance

24
eProcurement TrapsReasons for Poor Compliance

• Lack of knowledge about policy and process
• Lack of knowledge about which supplies to use
• Misinformation regarding the true cost of supply
• The process is too time consuming or difficult
• Bad match between supplier and need

25
Resources

• www.instill.com
• iSource Magazine www.isourceonline.com

26
Conclusion

• History of B2B
• What is eProcurement?
• Impact of eProcurement
• Solutions
• eProcurement Traps