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Part Three
Planning and control
buyers and sellers. They have been defined as, ‘an information system that allows buyers
and sellers to exchange information about prices and product (and service) offerings, and the
firm operating the electronic marketplace acts as in intermediary’. 5 They can be categorized
as consortium, private or third party.
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A private e-marketplace is where buyers or sellers conduct business in the market only
with their partners and suppliers by previous arrangement.
The consortium e-marketplace is where several large businesses combine to create an
e-marketplace controlled by the consortium.
A third-party e-marketplace is where an independent party creates an unbiased, marketdriven
e-marketplace for buyers and sellers in an industry.
The scope of e-procurement
The influence of the Internet on purchasing behaviour is not confined to when the trade
actually takes place over the Internet. It is also an important source of purchasing information,
even if the purchase is actually made by using more traditional methods. Also, even
though many businesses have gained advantages by using e-procurement, it does not mean
that everything should be bought electronically. When businesses purchase very large amounts
of strategically important products or services, it will negotiate multimillion-euro deals,
which involve months of discussion, arranging for deliveries up to a year ahead. In such
environments, e-procurement adds little value. Deciding whether to invest in e-procurement
applications (which can be expensive), say some authorities, depends on what is being bought.
For example, simple office supplies such as pens, paper clips and copier paper may be appropriate
for e-procurement, but complex, made-to-order engineered components are not.
Four questions seem to influence whether e-procurement will be appropriate: 6
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Is the value of the spend high or low? High spending on purchased products and services
gives more potential for savings from e-procurement.
Is the product or commodity highly substitutable or not? When products and services are
‘substitutable’ (there are alternatives), e-procurement can identify and find lower-cost
alternatives.
Is there a lot of competition or a little? When several suppliers are competing, e-procurement
can manage the process of choosing a preferred supplier more effectively and with more
transparency.
How efficient are your internal processes? When purchasing processes are relatively inefficient,
e-procurement’s potential to reduce processing costs can be realized.
Global sourcing
Global sourcing
One of the major supply chain developments of recent years has been the expansion in the
proportion of products and (occasionally) services which businesses are willing to source from
outside their home country; this is called global sourcing. It is the process of identifying,
evaluating, negotiating and configuring supply across multiple geographies. Traditionally,
even companies that exported their goods and services all over the world (that is, they were
international on their demand side) still sourced the majority of their supplies locally (that
is, they were not international on their supply side). This has changed – companies are now
increasingly willing to look further afield for their supplies, and for very good reasons. Most
companies report a 10 per cent to 35 per cent cost savings by sourcing from low-cost-country
suppliers. 7 There are a number of other factors promoting global sourcing:
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The formation of trading blocs in different parts of the world has had the effect of lowering
tariff barriers, at least within those blocs. For example, the single market developments
within the European Union (EU), the North American Free Trade Agreement (NAFTA)
and the South American Trade Group (MERCOSUR) have all made it easier to trade
internationally within the regions.