e-Business ToolBox

Analyzing e-Procurement Benefits

• Consolidate supplier base - allows a company to work with fewer suppliers leveraging its ability to aggregate spend.

• Improves communication - reduces variability in the supply chain.

• Free buyers to work on strategic tasks - buyer's spend less time on tactical buys and more time on strategic issues.

• Decrease cycle times - especially important for companies in the technology industry.

• Lower transaction and processing costs - automating the purchasing process will decrease the amount of non-value added activities

• Reduce maverick spending -  maverick spending is said to be 10%-20% higher than purchasing from companies with negotiated contracts.  

• Enhanced reporting and auditing tools - an e-procurement system will track all costs allowing a company to determine the spend to each supplier.

• Decreased prices

• Improve compliance with approved suppliers increasing bargaining leverage

• Better Approval Controls

• Head count reduction

• Better utilization of assets

• Increase inventory turnover

• Quicker ramp up for new employees

• Faster response times

e-Business Selection Criteria

FUNCTIONALITY/FLEXIBILITY

• Ease of use (type of interface)
  • Searching functions
  • Intuitiveness
  • Wizards
• Will the software meet the specific needs of the company
• Security
  • Authentication
  • Authorizations
• Scalability
• Customization

COST

• Price of software (annual or one time purchase)
• Price of implementation
• Hardware/software requirements
• What added resources will the company need
• On going maintenance
• Total cost of ownership
• NPV
• ROI

IMPLEMENTATION/INTEGRATION

• Average implementation time (worst and best case)
• Integrator resource consultants (who should implement)
• Pre-built adapters/connectors
• Tools to increase integration methods
• Business Process support
• What does the integration cost cover
• Who is responsible and for what
• Penalty and bonus incentives
• Ability to integrate suppliers
• Ability to enable suppliers
• Ability to integrate with current and future business systems
• Current systems using product

VENDOR EXPERIENCE/HISTORY

• What are the company's revenues
• Is the company profitable
• Training
• Number of customers using the software product within the industry  
• Number of "live" customers
• Number of customers using the product
• What type of hardware systems currently use the product
• Customer Support
• Market acceptance
• Vision - where is the company and what will it be doing in the future
• Responsiveness
• Reputation of company

Evaluating ERP Systems (3rd party site) New

Technology Evaluations (3rd party site) New

e-Procurement Supplier Adoption

• Number of transactions placed to supplier (POs)
• Products with a high number of PO transactionS allow cost savings by automating the process
• Total spend to supplier
• Percent maverick spending of commodity
• Spending outside of a contract can increase the price of the item by as much as 20%
• Which commodities have the highest amount of maverick spend.
• Commodity category of product (indirect or direct item)
• The product should be standardized to allow easy categorization
• Is the product an item or service
• Items will be the initial targets
• Services such as car rentals, hotels, and insurance are good candidates for reverse auctions
• Eagerness of supplier to participate
• Eagerness of supplier to participate will be outweighed if supplier is difficult to do business with
• Do current strategic initiatives align well with supplier
• What are the current contracts set up with each supplier
• Will the supplier be a long term vendor
• Will your company consolidate the supplier base of a particular commodity
• Have long term contracts recently been signed
• How strategic is the item to your company
• e-Procurement experience
• Does the supplier have Internet access (most basic form)
• Does the supplier have a website
• Is the website information based or an e-commerce website
• Does e-commerce site offer various pricing structures
• How are products currently stored
• Paper based
• Electronic (%)
• Spreadsheet/database
• 3rd party software (catalog enabled)