ECT 589

1
ECT 589

• E-Procurement

2
Agenda

• Market News
• B2B E-Hubs
• E-Procurement
• Case Newark in One
• Eastman Chemical
• Next Week GHX

3
Classifying B2B Hubs
What business buy operating input manufacturing
inputs
How business buy systematic sourcing spot
sourcing
Catalog Hubs aggregation
MRO Hubs Aggregation
Yield Managers Matching
Exchanges Aggregation Matching
Source E-Hubs 2000
4
How Companies Conduct Purchases

• Strategic sourcing
• Long-term contracts based on negotiation between
  the sellers and buyers
• Can be supported more effectively and efficiently
  through a streamlined supply chain
• Spot buying
• Purchasing of goods and services at market
  prices, as determined by supply and demand in a
  dynamic manner. Buyers and sellers do not know
  each other. Eg. Stock exchanges, or commodity
  exchanges (oil, sugar, corn)
• Can be more economically supported by the 3rd
  party exchange

5
E-Procurement

• Purchasing electronically, usually via an
  electronic procurement application
• Value propositions
• Increase efficiency in the buying process and
  reduce the internal cost per transaction.
• Streamline and automate a companys purchasing
  process
• Provide purchasing and finance with the
  information and time to better control spending
  and negotiate more advantageous supplier pricing.
  
• Eliminate maverick buying.
• Reduce the cost of products
• Reduce the number of suppliers

6
Streamline the Procurement Process

• Finding approved vendors and products
• Creating requisitions
• Getting necessary approvals
• Placing orders with suppliers
• Confirming the receipt of goods
• Getting them to the requisitioner
• Settling accounts.

7
Benefits

• Industry average cost per MRO transaction is
  107, MRO e-procurement systems is 35 (72
  savings)
• 25 of MRO purchases are maverick buys resulting
  in purchase costs 20 over contracted price.
  E-Procurement adoption results in a 51 average
  reduction of maverick spending
• . An industry average of 5-10 reduction in
  prices paid for goods, through increased contract
  compliance.
• The industry average MRO requisition cycle time
  reduction is 70-80.
• A one time 25-50 reduction in inventory is
  possible by matching stocking requirements to
  actual and forecast demand.
• Average inventory carrying costs are 20-45 of
  inventory value.

8
MRO and Direct Materials Purchase

• MRO e-procurement reducing the cost of the
  transaction (20 of corporate purchase)
• Direct Materials reducing the cost of materials
  for production
• AMR Research Trim purchased goods costs by
  15-20 saving ranges from 5 (purchased energy),
  15-20 (chemical), 19 (metal and machinery
  components), 36 (for temporary labor), 40 (MRO
  items.)

9
Changing Relations

• Negotiation 3 months? 90 minutes
• Who benefits?
• Quality and service?