e-procurement
DESCRIPTION
Describe about E-ProcurementTRANSCRIPT
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IBM India
© Copyright IBM Corporation 2004
e-Procurement
07.06.2004
Rahul Pasrija
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IBM India
© Copyright IBM Corporation 2004
Contents
e-Procurement
Benefits of e-Procurement
e-Procurement for Public Sector
Case Study
3
IBM India
© Copyright IBM Corporation 2004
Introduction
Procurement is a competitive differentiator
World Competition Technology Explosion
Pressure on Prices Shorter Product Lifecycles
MARGINS SQUEEZED
1980 1990 2000Increased fixed costs
+ Increased fixed costs
%1980 1990 2000
Non Materials
10 years
5 years 3 years
• Increase sales by 50%• Reduce overheads by up to 20%
Profit
OtherCosts
ExternalExpenditures
45
50
45
47.5
57.5
100 100
- 5%
+50%
Revenue
0%
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IBM India
© Copyright IBM Corporation 2004
Procurement challenges and expectations
Procurement organizations are expected to lower the material cost coupled with high process efficiencies
Material costs
Material costs
NegotiationNegotiation Centralized procurement
Vendor Leverage
Item standardization
Vendor base rationalization
PredictionPrediction
Process efficiency
Process efficiency
Activity costsActivity costs
TimeTime
Eliminate non value adding activities
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IBM India
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Procurement process
The opportunities lie across the procurement process
PayDevelop Category Strategy
Complete Supplier
Evaluation
Select Suppliers & Negotiate
Agreement
Supply
Conduct Spend Analysis & Determine Customer
Requirements
Conduct Market
Analysis
Low value buying
High value buying
Value No. of Transactions
Centralized procurement
Item Standardization
Vendor Base Rationalization
Vendor Leverage
Transaction Costs
Cycle Time
Prediction Models
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IBM India
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Procurement process
Multiple options are available at various points
PayDevelop Category Strategy
Complete Supplier
Evaluation
Select Suppliers & Negotiate
AgreementSupply
Conduct Spend Analysis & Determine Customer
Requirements
Conduct Market
Analysis
High value buying
Value No. of Transactions
Centralized procurement
Item Standardization
Vendor Base Rationalization
Vendor Leverage
Prediction Models
• e-Requisition• e-Approval• RFI, RFQ, RFP• Tenders
• Reverse Auction
• e-PO• e-Release• e-Changes• e-Confirm
• e-documents:• ASN• Ship status• Receipt
• Supplier web report card
• e-Invoice• EFT
• Credit auth.• Debit auth.
• e-Credit/Debit
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IBM India
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Procurement process
Multiple options are available at various points
Conduct Spend Analysis & Determine Customer
Requirements
Low value buying
Value No. of Transactions
Centralized procurement
Transaction Costs
Prediction Models
• e-Catalog• Pricing• Availability• Commit
• e-Configure
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IBM India
© Copyright IBM Corporation 2004
Contents
e-Procurement
Benefits of e-Procurement
e-Procurement for Public Sector
Case Study
9
IBM India
© Copyright IBM Corporation 2004
Reduced Product/Process Costs
Improved Compliance
Reduced Inventory Costs
1
2
3
4
5
Reduced Maverick Purchasing
Value Drivers Pain Points Mitigation/Savings Estimates
• Fragmented data
• Unreliable/inaccurate data
• Rampant off-contract spend (approximately 27% of indirect spend)
• Long lead times result in purchase of large safety stocks
Purchase requisition process-ing time reduction of 70%-80%;averaging a week faster
Purchase requisition process-ing expense reduction up to 73%; price of goods 5%-10% less on average
Data integrity is improved through contract compliance, strengthening a company’s supplier negotiation leverage
Maverick spending decreases up to 51%
Inventory expense reduction between 25% - 50%
Improved Process Efficiency
• Long lead times due to high manual processing, 1/3 time spent reviewing manual requisitions
• High transaction costs• Long supplier negotiations• Non contract compliance drives up price
eProcurement benefits
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IBM India
© Copyright IBM Corporation 2004
Contents
e-Procurement
Benefits of e-Procurement
e-Procurement for Public Sector
Case Study
11
IBM India
© Copyright IBM Corporation 2004
e-Procurement for Public Sector
e-Procurement, a significant opportunity within E-GovernanceGovernment – an attractive case for e-Procurement
Probably the “single largest buyer” of goods and services in a state
Serious initiatives underway from AustralAsia to Europe to USAImportant Value Drivers
Potential savings – aggregated demand Cost reduction – process efficiency Compliance
Attractive business models – Public Private Partnership (PPP)
As many as 42 states in the USA, in addition to the Federal Government, will embark on some form of e-Procurement project by 2004 (Gartner)
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IBM India
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Challenges
Adhere to EU and WTO rules for public procurement processes
Ensure transparency and efficiency for both suppliers and buyers
Solution
An open, secure and scalable e-procurement solution – Electronic Tender Handling, Information and Communications (ETHICS)
Case Study – Public Sector
National Procurement Limited, Copenhagen-Denmark
Solution caters to around 8200 institutions in EU
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IBM India
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Business Doubled productivity with same
staff Knowledge transfer among
employees Improved vendor satisfaction Double digit growth in contract
turnover Reduction in administrative
costs by 40-50% Increased transaction
transparency and auditing Improved decision making via
well defined transparent evaluation process
Case Study – Public Sector
Benefits
Solution caters to around 8200 institutions in EU
Technical An end to end, open standards
based tender solution based on IBM Lotus Domino
State of the art security including PKI Infrastructure
More user friendly design questionnaire to help buyer automate decision making process
A robust, secure decision support system, based on Lotus QuickPlace and Sametime, enabling teams to meet and collaborate virtually in an online voting room and gain access to important proposal related data
National Procurement Limited, Copenhagen-Denmark
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IBM India
© Copyright IBM Corporation 2004
Contents
e-Procurement
Benefits of e-Procurement
e-Procurement for Public Sector
Case Study
15
IBM India
© Copyright IBM Corporation 2004
In 1993, IBM was in midst of a severe financial crisis
Case Study - The IBM Way
RevenueOp. Income
$69 B 10
$65 B 4
$ 65 B 3
$ 63 B -4
1990 1991 1992 1993
1990 1991 1992 1993
IBM Cash Flow
1993
5
12
-3
IBM Debt
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IBM India
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IBM adopted a holistic approach to cost reduction which was critical to its turnaround...
$B
'85 '93 '97-20
0
20
40
60
80
100
120
Profit
'98
Market Value
Revenue
US$ 9 Billion Saved
Case Study - The IBM Way
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IBM India
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The approach encompassed strategic, tactical and operational initiatives as highlighted...
Strategic Sourcing
Global Sourcing
Aggregated Sourcing
Value Engineering Tax Chain
Skills Upgrading
Outsourcing e-Procurement
Supplier Relations
Management
Strategic
Tactical
Operational
Case Study - The IBM Way
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IBM India
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Supplier Relations Management (SRM) seeks to map the supplier into appropriate relationships...
Relative supplier management skills and effort required
Problem solving
Influencing
Negotiation
Team-working
Market analysis
Behaviour
Values
Strategic, complex issues
Influencing the Board agenda
Complex, multi-dimensioned
Cross functional, joint-supplier
Market, competitors, technology
Principled, trust-based
Urgency to prove model works
Operational, simple trade offs
Influence stakeholders
Trading
Limited
Price testing/quotations
Confrontational
Secure best deal available
Competitive Leverage
Preferred Supplier
Performance Partnerships
Strategic Alliances
Case Study - The IBM Way
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Effective SRM with appropriate technology support paid rich dividends for IBM...
Before SRM
High and unmanaged
Constant Problem
Slow
After SRMReduced part cost 15-25 %Eliminated 50% of parts
Reduced cycle time 75%Reduced design cycle time 35%
Reduced time to market 70%
Part Cost
Design Cycle Time
Time-to-Market
Case Study - The IBM Way
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IBM India
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e-Procurement applications facilitate the transformation process and enable organisations to sustain the benefits…
Sourcing
Fulfillment
Settlement
Internet quotingAuctionsOn-line contracts
Information warehouseRequisition / ERPElectronic catalogs"Buyerless" automationSkills matching
EDI EFTe-Invoices
Authentication / Authorization
Buyers / Requesters Suppliers
Case Study - The IBM Way
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IBM India
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IBM realized significant benefits from e-Procurement…
Business Metrics
Escapes (By Pass)
Acceptable Business Controls
Client Satisfaction
P.O. Processing Cycle Time
e-Transaction: Invoice Hands Free
Contract: Cycle TimeLength
Competitive Advantage
Ledger Miscodes
Suppliers Connected via Web
Savings via Web
Supplier Survey Rating
Early 1990's
30%
40-50%
40%
30 Days
??20%
6-12 months40 (+) pages
Cost Savings
>30%
0
0
5
Today
<0.5%
+90%
>80%
1 hour
95%+80%
30 days6 pages
>3%
5%
27,000
$380M
1
Case Study - The IBM Way
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IBM India
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We all live under the same sky …
… but have different horizons
Thank You
We all live under the same sky …
… but have different horizons
Thank You