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Role of Eis in Procurement

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ROLE OF ENTERPRISE INFORMATION SYSTEMS IN THE PROCUREMENT PROCESS
Ashley Wright

What is procurement?


 

Steps taken to acquire raw materials or finished goods Also known as “Requisition-to-pay” process People, data, documents and information are essential components of procurement

Who relies on procurement?


Manufacturers
 Raw



Legal/ Purchasing
 Contract

Materials  B2B Model


Management  Vendor Management


Resellers
 Finished

Goods  B2C Model


Purchasing
 Cost



Business owners, management and shareholders Consumers

Analysis  Inventory Analysis

Business Models


B2B commerce- Business-to-Business
When a business sells directly to another business  Includes transactions for raw materials & finished goods  Examples: Wood to make a skateboard, helmet, first aid kit




B2C commerce- Business-to-Consumer
When a business sells directly to the consumer  Includes online transactions or internet retailing  Examples: Airline tickets, eBay, Wal-Mart online


Raw Materials to the Consumer
Business-to-Business Business-to-Consumer

Producer

Manufacturer

Distributor

Retailer

Consumer

Business-to-Business (B2B) Commerce


Manufacturers use B2B commerce to:
 Acquire

Raw Materials from a Producer  Manufacturer assembles raw material into a good  End product sold to Distributor or Reseller


Resellers use B2B commerce to:
 Acquire

Finished Goods from a Distributor



Different B2B Models
 Small

Business  Enterprise Business  Distributor Channels

Business-to-Consumer (B2C) Commerce


Resellers use B2C commerce to:
 

Sell finished goods to Consumer This can take place face-to-face or online
Storefront




Different B2C Models


www.Walmart.com www.google.com/shopping


 

Portal


Community Provider



www.pintrest.com http://windows.microsoft.com/enus/windows7/products/features/action-center Service Provider

Competitive Advantage
With the help of a well defined Procurement Process and fully utilized Enterprise Information System (EIS) any business model can be competitive. This is also known as eProcurement.

eProcurement Process
Purchase Order

Shipping

Invoice

Requisition

Enterprise Information System

Payment

Each step done electronically by an employee. Approval and proceeding steps are sent via work flow. Additional perk is the mitigation of administrative costs

Procurement functions within EIS


Requisition
To restock inventory quantities to an acceptable level



Shipment
To verify contents, perform quality inspection, proper storage



Purchase Order
To select the appropriate vendor and designate delivery location


Invoice
 To

confirm accuracy of amount owed and to begin payment process

eProcurement Process
Trigger the process
 

Formal B2B process begins with trigger Example: Super Skate Board Builders realizes inventory of certain merchandise falls too low


skateboards, helmets, shirts and first-aid kits



The users of the EIS will create a requisition for Black Widow Skateboards

Step 1 – Create Requisition
Warehouse

Elements 1) Requestor 2) Materials 3) PO details 4) Sign Off 5) PO Number

Step 2 – Create Purchase Order
Purchasing

Elements 1) Delivery location 2) PO details 3) Materials Ordered 4) Sign Off 5) PO Number

Step 3 – Receive / Check Shipment
Warehouse

Elements 1) Vendor Information 2) Order details 3) Delivery location 4) Materials Ordered

Step 4 – Three-way Match
Accounting

Elements 1) Unique Identifier 2) Receipt details 3) Materials Received 4) Person who verified shipment

Step 5 – Make Payment to Vendor
Accounting

Elements 1) Recipient 2) Order Number and Payment Terms 3) Details of Order 4) Payment Remittance 5) Approval

Types EIS / ERP


Packaged aka Plug and Play
 E2

Shop  Accelerated/ICIM ERP  Sage 300


Custom
 Blue

Link ERP  Infor LN  Oracle E-Business Suite  IQMS Enterprise

Consideration on EIS / ERP


Research to find a system that fits,
  

Business Strategic Organizational Structure Budget and sales forecast Personnel and other essential resources Physical equipment and work space Calculate additional workloads Establish goals & objectives



Prepare & Plan for new EIS / ERP by,
   



Execute the plan with,
Monitor migration and newly established EIS  Control & adjust action plan as needed Contingency planning Allow Competitive Advantage






EIS/ERP Disaster- Nike


Spent: $400 million on ERP upgrade Issue: Had erroneous orders or false demand





Result: $100 million lost sales

EIS/ERP Disaster- Hershey’s


Spent: $112 million ERP and SAP upgrade
Issue: Software not understood well Result: $100 million lost sales





EIS/ERP Disaster- Hewlett-Packard


Spent: Contingency planning for migration to SAP
Issue: Data modeling and programming Result: $120 million backlog of orders and $40 million lost revenue





EIS Impact on Procurement Process

Warehouse
• Inventory Analysis • Shipment Reports

Purchasing
• Cost Analysis • Contract Management • Vendor Management

Accounting
• Cash Flow Management • Budget Control • Financial Reporting

Bottom line
If carefully planned and implemented the enterprise system can help procurement,  Manage internal activities  Identify & correct deficiencies  Control costs & inventory to realize maximum savings  Streamline the procurement process

Works Cited
Bossari, Jessica. "Real Costs of Choosing the Wrong Software Vendor." Forbes. Forbes Magazine, 04 Oct. 2014. Web. 12 Sept. 2014. Davenport, Thomas H. "Putting the Enterprise into the Enterprise System."Harvard Business Review (1998): 1-12. St. Francis Xavier University. J. Valencia, 01 Dec. 2011. Web. 30 Nov. 2014.

Gunasekaran, Angappa, et al. "E-Procurement Adoption In The Southcoast Smes." International Journal Of Production Economics 122.1 (2009): 161-175. Business Source Complete. Web. 15 Nov. 2014.
Magal, Simha, and Jeffrey Word. Essentials of Business Processes and Information Systems. Hoboken, NJ: Wiley/SAP, 2009. Print. Pinecone, Kiri. "Top 20 ERP Software Vendors Report." Top 20 ERP Software Vendors Report. Business-Software, 01 Dec. 2014. Web. 03 Dec. 2014.

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