supply of raw material in the right price, required quality, Introduction right place, and right time is very important for any
Nowadays, as competition between businesses increases, production plant. In this process that is very important to the importance of procurement in business also increases. develop large departments to cope with complexity of Procurement is a rather complex process for businesses. activities carried out with suppliers. Together with Procurement is an important intersection point, at which development of technology, the intensive competition sellers and purchasers meet. Before beginning the experienced led new ways of doing jobs to be discovered. production process, it is necessary to prepare the raw One of the most important ones of these ways is electronic material and materials to be used in production. The procurement (e-Procurement). e-Procurement is to realize quality of materials to be used must be complied with the all stages taking place in the purchasing process in properties of the product to be produced. Otherwise, any electronic media. Many factors such as global economic problem that may be experienced may lead costs to fluctuations, developing strategies that can be obtained by increase, production to be inefficient, poor quality competitive advantage, desire to reduce costs, and rapid products, and delay in deliveries, thus, customer developments in technology played a role in emergence satisfaction may not be met. and becoming widespread of e-Procurement (Davila et al., In the light of information expressed above, procuring 2003: 17). e-Procurement expresses exchange of various function, which is an important element of supply chain information between organizations using the internet as a and electronic procurement, is discussed as the main data transfer instrument (Sollish and Semanik, 2006: 169). element of this chapter. In this scope, definition of In other words, e-Procurement is defined as a electronic procurement, its processes, strategies, comprehensive process, in which businesses use advantage, and disadvantages will be explained in this information technology systems to make contracts for chapter. purchasing goods and service or purchasing goods and service in exchange of payment (Moon, 2005: 54). The Definition and Scope of e-Procurement e-Procurement Process Management e-Procurement process supports supply and resource Procurement, with the most general state of it, can be activities through internet technologies and provides an defined as the process to obtain quality in the right time effective negotiation between purchasers and suppliers. and the right price from the right resource. Procurement e-Procurement is examined by dividing into two as management is different from supply management. between businesses (inter-business) and in markets. Inter- Procurement is a functional group (for example, an official business e-Procurement is made in the form of goods and entity on organization chart) and a functional activity (for service supply and providing resources between two example, goods and service procurement). Procurement businesses through the internet (Turban et al., 2002: 217). function makes many activities (supplier defining and Markets are institutional media, which provide customers selecting, procurement, negotiation and contract, market and suppliers to announce their purchase and sale research, supplier assessment and improvement, and intentions. This can also be made official in a purchase or developing procurement systems) to present maximum sale action and all relevant activities through the internet value to organization (Monczka, et al., 2009: 8). as real time. Business world and e-Procurement are related Procurement expresses a process, in which a business or to each other oneto-one. Markets bring together more than organization purchases goods from other businesses to one purchaser and seller in a virtual market. Since the perform its targets just in time and at lower cost (Quayle, purchasing and supplier relations process is a link between 2006: 34). Procurement is a process, in which all businesses and a large amount of information sharing and necessary materials, service, labor force, and information transfer is required, the use of the internet in this process is supplied as outsourcing for businesses to be able to is highly effective. Businesses apply procurement make their activities more effective and sustain their solutions for not only reducing costs but also making it entities in the market (Weele, 2014: 9). Procurement and more effective. The largest effect of the internet on the supply are generally considered as synonymous concepts. supply process is information sharing, because this Supply is much more comprehensive than procurement process includes collecting, sharing, and storing a large that expresses purchasing goods and service in exchange amount of information and data. In this process, of money or any payment. The concept of supply is a information sharing becomes a key issue. Businesses, process including the concepts of power and loot, in which thanks to e-Procurement applications, readily and quickly there are different ways of obtaining something. reaching the previous data, can obtain important Procurement is therefore defined as: a function serving to information to make better decisions (Swaminathan and obtain the equipment, material, component, suppliers, and Tayur, 2003: 1390). services by purchasing, hiring, or via other legal ways, in order to use in production or introduction (Lysons, 2000: The Stages in e-Procurement Process 1). Procurement is among key connections in the supply A typical procurement process begins with the definition chain, and therefore, it can have an important effect on of procurement needs according to the demand of the final general achievement of business. Providing sufficient
consumer of business (Presutti, 2003: 220) and it ends Price Comparison with the report of receiving the good in a satisfied way by In the process of source selection, price is an important the procurement department (Doğruer, 2005: 394). At the point. For the repeatedly purchased elements, catalogues, beginning, specifications are developed. After developing price lists, and reduction programs may be useful. specifications, a procurement team first gives priority to However, catalogue prices are not obligatory for sellers. suppliers, they get the demand offers from suppliers, Ideal offer processes encourage competition between assess the offers and select a supplier according to suppliers on a fair and clear basis. selection criteria determined. Contract negotiations end with the provisions and terms of an official contract. Placing an Order
Contract methods and processing regulations are After agreement is provided and recorded in the established for all procurement activities in order to purchasing process, an order can be placed. Order stage is actualize under an umbrella of contract agreed. Cycle ends realized after preparing the procurement contract. Time with establishing a supplier assessment system, which intervals and sorts of orders are determined in this stage. provides information and assesses the supplier Order Follow-up performance (Presutti, 2003: 220-221). Procurement process is a complex process incorporating many factors. Follow up responsibility is generally given to the Quality identification is more difficult for services rather purchaser after placing an order. Office work can be than goods and necessitates a higher cooperation degree realized by an expediter or a follow up officer keeps the between purchasers and sellers. Since the procurement required records and makes routine actions.
process is more complex for services, different risks can Keeping Records arise for purchasers such as evaluating sellers, specifying and assessing service. Therefore, employees of A procurement department generally keeps files related to procurement units should continuously work on making computer records and procurement processes. A large part this process effective and make an effort. In the of all purchases consists of reorders.
procurement process, needs are recognized; suppliers are Professional Supplier Relationship sought; whether or not the expectations are met is Establishing a strong mutual relationship with suppliers identified and, good relationships with suppliers are made, enhances the overall performance of the business. A well- and continuous improvements are provided (Andersson et managed supplier relationship will result in an increase in al., 2006: 22; Valk and Rozemeijer, 2009: 4). In this customer satisfaction, low costs, better quality, and better scope, in industrial procurements and e-Procurement, the service than other suppliers. process is executed as follows (Zenz, 1994: 10-13; Dobler and Burt, 1996: 62). The Importance of e-Procurement
Needs Recognition Procurement is one of the most basic functions of every kind of processes and organization. Procurement, as a Procurement process begins with the recognition of job result of its activities, is a basic and integrative function of needs and requirements. In a process, in which a purchaser business management. To become successful, it is needs something, when any difference is perceived necessary for any business to perform at full capacity in its between real case and desired case, the procurement main segments, such as production finance, marketing, process begins by identifying problems and determining distribution, human resources. These functions can the needs. This stage is also qualified as a problem perform well if the procurement department perfectly identification and needs recognition stage (Cant et al., performs its activities. Procurement provides benefits to 2009: 65; Kotler et al., 2013: 204; Weele, 2014: 28). business and has a great importance (Pooler vd., 2004: Needs Identification 183).
After a need is accepted, it should be accurately identified. Procurement department, reduces business activities, For providing adequate and perfect identification of needs, increases savings, establishes sustainable relationships, procurement personnel should have comprehensive and encourages innovation. Procurement can contribute to information about elements and functions in the business performance in two ways. Procurement can lower organization (Zenz, 1994: 11). costs or, helps to introduce products that are compatible
Source Selection with customers’ desire quickly which in turn makes it possible to increase sales. The next step in the procurement process is to select resource/s (for the element demanded). For most Procurement unit, making cooperation with suppliers, can procurements, there are many comparable alternatives. In develop both mutual relationships and innovation inventory selection, the main criteria are price, service, strategies both parts can utilize. delivery, and quality (Zenz, 1994: 11). An effective procurement management can be succeeded not only by reducing costs but also by supplying high quality products and materials. Purchasing low price
products can be the first option but it should not be long term contract with a single supplier, is strategic ignored that the quality of these products may be low. partnership. The second strategy is online call up, in which the internet is used to select suppliers to be placed an The benefits of procurement functions can be given as order. In this case, it is assumed that unit price randomly follows (Nair et al., 2015: 6263; Carr and Smeltzer, 2000: occurs; however, distribution is previously known, and it 41; Fiesel vd., 2003: 9). is assumed that the number of suppliers made contact for • It has a direct effect on inter-business competitive price offer has a function. The third strategy is a united advantage. strategy, in which a supplier is used as a long term partner, • It makes it possible to provide advantages about however, a second resource can be selected through the reducing cost internet.
• It presents an opportunity to increase e-Procurement Models profitability. • Cost limiting provides large benefits about All e-Procurement models try to solve similar business quality, delivery, flexibility, and innovation problems. e-Procurement models were categorized by Kalakota and Robinson (2000a: 362) as follows: • Increasing purchasing skills provides an important advantage for the effectiveness of 1. EDI (electronic data interchange) Networks businesses. 2. Demand Applications from Businesses to • Raising qualified staff about procurement makes Employee (B2E) contribution to organizational performance. 3. Institutional Supply Portal 4. First Generation Commodity Exchanges e-Procurement Strategies (communities and offer demand facilitators)
e-Procurement is an area, which serves the needs of the 5. Second Generation Commodity Exchanges market, leads technologies and new strategies to be (virtual distributors and open bidding centers) developed, and develops and changes extremely fast. 6. Third Generation Commodity Exchanges e-Procurement strategies are examined in three groups to (Commodity Cooperation Centers) examine the situation of existing market, integrate results, 7. Industrial consortiums (Joint Enterprise Supply and keep a step with e-Procurement technologies (Cohen Centers) and Levinthal, 1990: 141; Davila vd., 2002: 14-15; Kalau, 2016: 10): - EDI (electronic data interchange) Networks: Large businesses, making connections through special networks • Wait and See Strategy: Most businesses adopt called EDIs (electronic data interchanges) with their wait and see strategy. Businesses that adopt this suppliers, provide time and cost saving. These systems strategy are aware of the developments but do not make automated supply processes, support automatic commit resources or invest selectively until the inventory completion; and provide good relationships to best e-Procurement model is identified. These be made between purchasers and their primary suppliers kinds of strategies reflect active experimentation; (Parida and Parida, 2005: 18). however, until identifying the best e-Procurement - Demand Applications from Businesses to Employee model, there is no considerable investment. (B2E) When e-Procurement from business to employees • Passive strategy: Rather than making (B2E) is successfully applied, it is an e-trade enterprise experimentation, it is a strategy combining helping organizations present useful services, information, observation. While businesses adopting this or products to their employees. strategy show resistance to changes, they do not care for new opportunities. - Institutional Supply Portal: After recognizing the • Aggressive strategy: When there are no well- benefits of making automated demand processes, many defined solutions, it is a strategy that has higher businesses (especially those having important power like risk and income expectation. Aggressive strategy IBM) choose to apply procurement portals to purchase requires considerably investing to obtain a goods related to production and not related to production. leadership or quickly proceed to e-Procurement - First Generation Commodity Exchanges (communities strategies. Businesses basically adopt these and offer demand facilitators): First Generation strategies to provide costs to be properly Commodity Exchanges are information and content managed and margins to be improved. In general, centers. e-Procurement applications stand out the businesses having aggressive strategies seem to developed B2B portals called commodity exchange. This be better positioned in market or predictable exchange contains functions such as online trade market environments. magazines, industrial news and trends, product From another point of view, in a study carried out by information, classified contents of sectoral participants, Peleg et al. (2002: 459), there are three e-Procurement and technical examinations. strategies. The first strategy, in which a business signs a
- Second Generation Commodity Exchanges (virtual • Accelerating participation in new markets, where distributors and open bidding centers): Transaction competition is high, and reaction to competitors. incomes obtained from the second generation product buying and selling become critical. Virtual distributors are Opportunity advantages are
an example of this kind of commodity exchange. • Developing business image and institutional trade
- Third Generation Commodity Exchanges (Commodity relationships, Cooperation Centers): This kind of commodity, providing • Developing purchaser-supplier relationships, functionality to participant businesses, helps them manage • Possibility to access to more accurate from end to end. information.
- Industrial consortiums (Joint Enterprise Supply Operational Advantages
Centers): Large businesses exert their influences to form • Facilitating financial audition industrial consortiums. These consortiums are of two • Eliminating document costs types as purchaser consortiums and supply consortiums. • Providing that personnel and supervisors follow The Advantages and Disadvantages of movements of orders through the system, e-Procurement increasing supervision and security. • Shortening delivery time by eliminating the need In this context we touch the subjects about advantages and to wait for paper documents by mail disadvantages of e-Procurement. • Removing impediments of time slice Advantages of e-Procurement • Reducing inventory levels.
In the light of explanations made until here, advantages of • Reducing workload, cycle time delays, stocks e-Procurement can be put in order as follows (Croom, and errors, increasing effectiveness in each stage 2000: 7; Neef, 2001: 128; Roche, 2001: 56; Lancioni et • Allowing for flexible access in every time and al., 2003: 216; Raghavan and Prabhu, 2004: 732; Ash and every place Burn, 2006: 6; Tatsis et al., 2006: 63): • Providing delivery in time
• Providing lower transaction costs Disadvantages of e-Procurement • Faster order providing Disadvantages of e-Procurement can be generally put in • Presenting larger seller options, order as follows (Rankin et al., 2006: 83); • Standardized and effective supply processes • More control on supply expenditures and • In this system, data are obtained from internal providing better employee compliance catalogues that are often updated. Provided that there is no effective follow up system, • Presenting more accessible internet alternatives disadvantageous cases can be led to. for purchasers • Data taking place in e-Procurement systems • Presenting less document work and less repeating include prices of materials, and these prices and administrative procedures even discounts should be regularly updated. In • Arranging restructured supply workflow case that system is not continuously updated, • Lowering stock levels problems for business can arise. • Providing direct and indirect supply of goods and • Prices, discounts, wages, and values continue to services vary, and all of these should be often controlled. • Providing developed strategic resource Due to lack of control, problems can occur in the • Making cooperation with suppliers system. • Increasing technological cooperation and • That main service providers are not operating for planning possibilities with job partners a time or, due to interruptions in internet, system
Attaran and Attaran (2002: 18) divide advantages of is not supported, and work stops. e-Procurement into three different categories. • Long repayment times may form a disadvantage. • Due to technological troubles, technical problems The contents of advantages presented in this way are: can occur.
Strategic Advantages are in the way of • In unexpected cases such as costs, time, and etc., some confusion can occur in business. • Realizing procurement applications that will • Due to communication difficulty between provide more discount and better service, potential purchasers and suppliers, impediments • Accelerating information flow between can be met. purchasers and suppliers, • With reducing administrative hours, directing staff to the other tasks, and