E-PROCUREMENT AND SUPPLY CHAIN MANAGEMENT IN PRIVATE ENTERPRISES, ACASE STUDY OF CAPITAL SHOPPERS SUPERMARKET, KAMPALA UGANDA
This study will assess the significance of e- procurement and supply chain management in the Private enterprises using Capital Shoppers Supermarket as a case study. This chapter presents the background to the study, the statement of the problem, the general objective, the specific objectives, the research questions, the hypotheses, the scope of the study, the significance of the study and operational definitions of terms and concepts
Background to the study
Electronic procurement or e-procurement is the use of various forms of Information Technology (IT), such as electronic mail, Electronic Data Interchange (EDI) and electronic market place to automate and streamline the procurement process in government entities, improving efficiency and transparency and thereby reducing costs of operation within and between government entities (Joyce & Chan, 2002). Thus, e-procurement is the application of electronic commerce in procurement.
In 2002, CS it was set up in Kampala Uganda. Due to the los s of 1.2 billion shillings that was inherited by the new management, it held its annual general meeting on 14-Dec-2005 at the grand imperial royal and the grand budget was again proposed chopping the budget by c- 17 from procurement Merchant, e -procurement service, traders and businesses both locally and international were proposed and I expect a commanding performance from her when she does it. The internet rapid growth will drive many companies to add an e- procurement component to their operations to gain competitive advantage. .
E- Procurement refers to the purchasing of goods and services for the day today operations of the business on- line and authorizing the whole procedure with the underling aim of reducing costs. . E-Procurement platforms include; E-Ordering, E-Sourcing, E-tendering, E-reverse auctioning and E-informing among others
However, it’s not just a system of making purchases on- line, if properly implemented, it can connect companies and their business process directly with the supplier while managing all interactions between them (Malcom wheattly, 2000).
Supply chain management (scm) is the integration of key business processes from end user through original suppliers that will provide products & services and information that add value for customers and other stakeholders (Lambert]. Supply chain management can also refer to the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served. Supply chain management emphasizes the management of upstream and downstream supplier relationships and the role of supply chain opt ionization is to increase customer value at less cost (Christopher, 1998, Ross 1998). The word Management in supply chain education context, the planning, implementing and controlling of networks, where network consists of many players such as; Suppliers, Manufacturers, Wholesalers and Retailers among others.
The focus of a company’s e- procurement will be making its supply chain more efficient through paperless processing of order, receipt and invoices. Increasing costs, competition and customer pressure will drive companies to review their supply chain processes and tap into the enormous savings potential from indirect spending (e-procurement L stave R Leonard, 2001).
Lee (2004) specifies that to make a supply chain more agile, it has to short term changes in demand or supply quickly and to handle external disruptions smoothly. The use of e-procurement enables fast responses, creating high responsiveness and cuts costs right through the supply chain.
TALK MORE about E-Proc, , and link them to procurement effectiveness.
.2 Statement of the problem
With the growing modernity, dynamism and global village, the introduction/development/embracement of electronic procurement has greatly simplified business purchasing operations easy and real. By accommodating e-procurement in an organization, business, enterprise can automate their entire process especially purchasing that is costly, risky and purchasing that takes much time. However, in spite of its significance and application in the daily life, many organizations or companies have taken it up hence carrying out the study to establish e-procurement in supply chain management.
1.3 Purpose of the study
The purpose of the study was to establish the effect of e-procurement on supply chain management.
1.4 Objectives of the study
- To examine the e-procurement methods and procedures of CS supermarket Kampala-Uganda.
- To assess the management of supply chain of CS supermarket Kampala- Uganda.
- To establish the contribution of e-procurement on supply chain management.
1.5 Research questions
- i) What are the e-procurement methods and procedures of CS supermarket Kampala, Uganda?
- ii) How will supply chain be managed in CS supermarket Kampala, Uganda? iii) What is the contribution of e-procurement on supply chain management?
1.6 Scope of the study
The study will be guided by the following objectives:
- Subject scope: The study will be focused on e-procurement as the independent variable, supply chain management as the dependent variable and the effect of e-procurement on supply chain management.
- Geographic scope: the study will be conducted from the branches of CS supermarket, in the Nakasero hill, Kampala Uganda.
- Period scope: The study will cover the period from March 2020 to December 2020.
1.7 Significance of the study
- The study will help the researcher to gain skills of conducting research. The acquired skills will not only be limited to academic research but will also be of paramount importance to the researcher while in office after school.
- The study findings will help to identify the weaknesses in the use of e-procurement of CS supermarket this company to know the inherent weaknesses in their e-procurement system and device means of overcoming them.
- The study findings will help to add on the body of existing literature about the study variables and this will be of help to future students and researchers.
CHAPTER TWO
2.0 INTRODUCTION
This chapter reviewed the existing literature about E-procurement and supply chain management. It helps the researcher to get full understanding of the variables before actually going into the field to carry out the study and this gives a basis to the study.
2.1 E-procurement
E-procurement is the business – to – business purchase and sale of supplies and services over the internet. A company is extending the use of internet technologies from the traditionally known marketing and sales to logistics, payments and most importantly the procurement processes (KALUBANGA; November, 2005)
2.1.1 Definition.
E-procurement (EP) can be defined as using internet technology in the purchasing process. It is important to note that this definition is narrow in the sense that it excludes old applications like ordering by telephone or by fax. On the other hand, this definition is relatively wide, because it not only encompasses the use of internet applicant in the purchasing process, but it also includes the use of internet and extranet applications. For example, using this definition ordering office supplies by using a supplier catalogue on a website is a form of EP (Mr. Reunis Mare
E- Procurement is using the internet to operate the transactional aspects of requisitioning, authorizing, ordering, receiving and payment processes for the required services or products (The chartered institute of purchasing and supply (CIPS)
E-procurement refers to the purchasing of goods and services for the day to day operations of the business on-line and authorizing the whole procedure with the underlying aim of reducing costs.
However, its not just a system of making purchases on-line, if properly implemented, it can connect companies and their business process directly with the supplier while managing all interactions between them (Malcom whealthly, 2000)
2.1.2 Electronic procurement forms
Nowadays, e-procurement encompasses a variety of forms. In order to get the most out of these forms, a buying organization has to apply these forms in a coherent, integral way. Of course, it is not necessary that every organization applies every single one of these forms, but the forms that are applied, should interact optimally. This research defines the most important forms of e-procurement and positions these forms in the purchasing process.
L.De Boer, J. Harkin, G. Heyboer (2001) distinguished between the following forms,
E-ordering is the process of creating and approving purchasing requisition, placing purchase orders as well as receiving goods and services ordered, by using a software system based on internet technology. In the case of e-ordering, the goods and services ordered are indirect goods and services (i.e., non-product related goods and services). The supporting software system (an ordering catalogue system) is usually used by all employees of an organization. In case of enterprise resources planning (ERP) the goods and services ordered are product –related. It may be noted that ordering of direct goods and services usually is plan-based.
E-sourcing. Is the process of identifying next supplies for a specific spending category, using internet technology (usually the internet itself)? By identifying new suppliers, a purchaser can increase the competitiveness in the tactical purchasing process for this spend category. E-sourcing is a way of decreasing the supply risk associated with this spend category (Krajjic, 1983)
E-tendering- is the process of sending RFI’s and RFP’s to suppliers and receiving the responses of suppliers back, using internet technology. Usually e-tendering is supported by an e-tendering system often the e-tendering system also supports the analysis and assessment of responses. E-tendering does not include closing the deal with a supplier. As a matter of fact, e-tendering smoothens a large part of the tactical purchasing process (Van Weele, 1988), without focusing on the content (that is spend category) of that process.
E-reverse auctioning- in practice an e- auction enables a supplier to sell (surplus) goods and services to a number of (known or unknown) buying organizations. During a relatively short time frame the buying organizations involved submit bids for the goods and services that are auctioned. The auction operates with an upward price mechanism or downward price mechanism. A reversed auction is the opposite; it enables a buying organization to get goods and services needed from a number of (known of unknown) suppliers.
Usually e-reverse auctioning focuses on the price of the goods and services auctioned. In most cases, other criteria are neglected during the e-reverse auction. Of course, other criteria can be used in a previous phase in order to determine which suppliers should be invited to join the e-reverse auction. E-reverse auctioning does really close a deal between a buying organization and a supplier, if parties agree on the price.
E-informing- Unlike the previous forms, e-informing is a form of EP that is not directly associated with a phase in the purchasing, process like contracting or ordering. E-informing is the process of gathering and distributing purchasing information both from and to internal and external parties, using the internet technology. For example, publishing purchasing management information on an extranet that can be accessed by internal clients and suppliers is a way of e-informing. This form is also called purchasing intelligence or spend control.
Figure 1: shows the six forms of e-procurement plotted in the purchasing process according to (Van Weele 1988
E-sourcing supports the specification phase: it identifies suppliers that can be used in the selection phase. E-tendering supports the selection phase: It facilitates the RF1 and RFP activities, usually including support for the analysis and assessment activities. E-reverse auctioning supports the contract phase. It enables closing a deal with a supplier.
Additionally, the researcher included a separation between transaction-oriented forms and information-oriented forms. The transactions-oriented forms are separated in indirect transactions and direct transactions.
Advantages of e-procurement
E-procurement has got a number of benefits or advantages and the researcher focused on David Eakins version of measuring e-procurement.
Transactional benefits
E-procurement enables the purchaser to pay process on line. A typical example uses a web-based transacting tool where by items are selected predominantly from resourced catalogues and submitted for electronic approval. This tool is then linked to the back-end enterprise resource planning system for entry payment of invoices and collection of management information. This leads to great time saving and efficiency.
Compliance benefits
In many cases with an organization, compliance and materials spending is a significant issue not because employees deliberately purchase outside because of preferred arrangements, but rather through lack of awareness. E-procurement address this through tools such as catalogues and standards, order processing and approval processes: compliance will be achieved due to;
A simple and quick requisition-to-payment process
A simple and quick strategic sourcing process
The e-procurement system the only procurement mechanism available.
Management information benefits
The fact that key information is hard corded against the user dramatically reduces coding errors and provides highly detailed and easily accessible data. This is essential to maximize the financial benefits of strategic sourcing. A successful e-procurement implementation will provide high quality, detailed management information and will negate the need for data warehousing or resource-heavy data mining.
Price benefits
The ability to prove to your suppliers that you are using e-procurement as a tool to ensure users do honor their contract status will enhance ability to negotiate down prices through;
Greater enhanced capture and therefore reliability of spending information.
Increased confidence that spending volumes can be guaranteed from increased compliance with the system thus allowing volume price breaks and discounts to be achieved.
Payment benefits
The successful operation of the first four benefits enables electronic payment of invoices. This includes the ability to better control the business cash flow and to manage the efficient payment of suppliers due to more streamlined procurement processes providing more timely and accurate information to the accounts payable department.
Reduced manpower
The use of e-procurement reduces on the number of man power employed and thus cutting the costs involved in maintaining this man power like salaries, rent, allowances, health and even their offices on which to work from.
Replacing the paper documents, purchase orders, acknowledgements, invoices and so on-used by buyers and sellers in commercial transactions with standards electronic messages conveyed between computers, often without the need for human intervention for example. Electronic point of sale at the supermarket where a product is purchased, the checkout operator scans a barcode on its label which automatically registers the price on the cash till.
2.1.4 Disadvantages of e-procurement
Killer and Kamauff point out that before adopting e-procurement, an organization should;
Ensure that exchanging –information electronically supports the overall organizational strategy. If the 2 are in conflict then there will raise a problem in implementing e-procurement.
Consider the cost and ramifications of e-procurement specifically (EDI) electronic data interchange standards tools and techniques, including implementation, software maintenance, man power and participant training and how to promote systems and applications integration.
Price- The major disadvantage is the financial commitment a company must make in order to invest in the software necessary to participate in the e-market place. And of course, the costs can vary depending on the applications for companies that plan to buy and install in house e-procurement software, the price can range from $ 200,000 to $ 3million, says Sharyn leaver. This just covers software license costs and getting suppliers connected.
Implementation problems
Just because the software set up is available implementation is not necessarily easy. Getting employees to use-e-procurement services can be difficult. And surprisingly, equipment suppliers are not always anxious to join in the process, either. According to an October 2001 forester report titled “E-procurement Applications” companies reported four types of problems with e-procurement projects.
Back-end system integration is bear
User expectations/charge management can be difficult
Suppliers do not always want 2 get on board and – Content management is tough.
Loss of direct relationship between the buyer and the seller
The lack of personal contract between the two parties can be off-putting to some companies. E-procurement relationships are reduced to electronic transactions with no personal interactions – companies must choose whether this is the way they want to conduct business between the different entities that sustain them.
2.2 SUPPLY CHAIN MANAGEMENT
A supply chain is that network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customers or consumer.
Supply chain has a number of characteristics
Customer – supplier characteristics
Virtually
Scope supply chains
Complexity
Supply chain management (SCM) is an integrating philosophy to manage the total flow of materials, information from supplier to ultimate consumer. The goal of SCM is the meet the needs of the final consumer by supplying the right product and the right place time and price. (Kalubanga and Reus).
Supply chain management can be considered as an aggregation of approaches and efforts supporting the efficient consolidation of producers, suppliers and distributors in effect a coordination of the value chain so that products are produced and distributed in the right quantity, at the right quality, at the right time and at the right place to ultimately achieve consumer satisfaction (Simchi-Levi etal, 2000).
Mentzer et al state that the many published definitions can be classified into 3 categories
Supply chain as a management philosophy. This has 3 characteristics.
A systems approach to viewing the supply chain as a whole and managing the total flow of goods inventory from the supplier to the ultimate consumers.
A strategic orientation towards cooperative efforts to synchronize and converge intra-firm and inter firm operational and strategic capabilities into a unified whole
A customer focuses to create unique and individualized sources of customer value, leading to customer satisfaction.
Supply chain management as a set of activities to implement a management philosophy.
The seven activities listed below are essential to the implementation of a management philosophy; Integrated behavior
Mutually shared information
Mutually shared risks and rewards
Cooperation
The same goal and same focus on serving customers.
Integration of processes
Partners to build and maintain long-term relationships Supply chain management as a set of management of process.
Lambert et al, listed eight SCM processes originally postulated by the international centre for competitive excellence; – Customer relationship management
Customer service management
Demand management
Order fulfillment
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Returns management
2.2.1 Supply chain management enablers
Mavien identified four key enablers, all of which must be fully leveraged if SCM is to be successful. Marich also observed that these four enablers become barriers to effective
SCM if they are not in place. The four enablers and their relative rankings by Marine’s respondents are;
Organizational infrastructure
How business units and functional areas are organized, how change management programs are led and coordinated with the existing organizational structure constitute the organizational infrastructure. Therefore, having a coherent business strategy that aligns business units towards the same goal, having a formal process and having the right process metrics to guide the performance of operating units towards the strategic organizational SCM objectives will help improve SCM.
Technology
The word (technology) (not just IT but also the „physical‟ materials management technologies for material design operations and materials handling) is a factor in the selection of business allies and how intercompany relationships are built and managed. Having operations marketing and logistics data co-ordinate within the company, having data reading available to managers and the coordination of operations, marketing and logistics data between supply chain members help improve SCM.
Strategic alliance
This factor covers how external companies (customers, suppliers and logistics –service providers) are selected as business allies and how intercompany relationships are built and managed. Having expectations clearly stated, understood and agreed to upfront, collaboration on supply chain design, having top management of partnering companies’ interface on a regular basis and having compatible information technology systems may help manage the supply chain.
Human resource management
This area involves managing how job descriptions are designed, positions filled, people are recognized and compensated and career paths directed. Sourcing, hiring and selecting skilled people at all levels, finding change agents to manage SCM implementation, having compensation and incentives and finding internal process of facilitators helps manage the supply chain.
The relationship between e-procurement and supply chain management
Since procurement is very important element in supply chain. In order to understand the concept in more details, this study is using these factors as constructs to study the relationship of e-procurement methods on supply chain performance.
According to (Malcom Wheattly, 2000), procurement is not just a system of making purchases on line. if properly implemented, it can connect companies and their business process directly with the supplier while managing all interactions between them.
Lee (2004) specifies that to make a supply chain more a gile, it has to react to short term changes in demand or supply quickly and to handle external descriptions smoothly. The use of e-procurement enables fast responses, creating high responsiveness and cuts costs right through the supply chain.
The focus of a company’s e-procurement will be making its supply chain more efficient through paperless processing of order, receipt and invoices. Increasing costs, competition and customer pressure will drive companies to review their supply chain processes and tap into the enormous savings potential from indirect spending (E-procurement L Steven, R Leonard, 2001).
According to Leenders and Fexion, 1997; the major part of supply chain management is traditionally supported by information technology with the use of enterprise resource planning (ERP), manufacturing resource planning (MRP) or electronic data interchange connections with suppliers that were established in 1980s.
Gebaner and Seger, 1998 identifies that the diffusions of e-procurement systems in the late 1990s has created the potential for reorganizing supply chains. Compared to enterprise resource planning, these systems were considerably less expensive and more flexible due to increased standardization on a tactical level. More or less all studies on e-procurement, report large efficiencies regarding supply chain management.
The main idea of e-procurement is to include the end-user in the procurement process via an electronic multi-vendor catalogue and to close the process gaps in the supply chain for indirect goods (Neff, 2001).
According to (Dalmalch et al, 2000), e-procurement deals with the management of supply chains in the procurement of indirect goods that is based on internet information systems and also e-markets.
Croom and Johnson (2003) identified five main improvements in the supply chain that e-procurement enabled supporting managers‟ budgetary control offering robust process performance with fewer failures, offering far greater transparency and accessibility across the whole process and improving management information reinforced user compliance, improving systems reliability and ensuring compliance to process.
Conclusion
The study discovered that firms should implement e-procurement systems in supply chain for better communication and performance improving. E-procurement undoubtedly promotes information sharing and improves supply chain performance. Furthermore, there was no literature reviewed that concern the operations of CS Kampala Uganda. This further made it imperative for the researcher to carry out a study in order to establish the impact of e- procurement on supply chain management of CS Supermarket Kampala Uganda.
CHAPTER THREE
METHODOLOGY
3.0 Introduction
This chapter presents the methods and instruments that will be used to carry out the study. It presents the research design, procedure of the study, study population, sampling technique and size, sources of data, data collection methods and instruments, presentation and analysis of findings, and the limitations of the study.
3.1 Research design
The study will use both quantitative and qualitative research design. This design will prefer because the researcher will base on the views of the respondents to derive conclusions and recommendations.
3.2 Procedure of the study
The researcher shall pick an introductory letter from the research coordinator, which will be presented to the management of CS supermarket Kampala Uganda to seek permission to carry out a study from this company. The researcher through sampling will select respondents from whom data will be collected. the researcher will conduct both library and internet research to collect secondary data that helped to back up primary data in compiling a report.
3.3 Study population
The study population will include the management and employees of CS supermarket Kampala Uganda.
3.4 Sampling technique and size
3.4.1 Sampling method
The study will use stratified sampling to group the study population into two groups that is management group and employees’ group. Then from each stratum, the researcher will use simple random sampling to select a representative sample.
3.4.2 Sample size
The study will use simple random sampling to select a sample of 50 respondents in different proportions presented in the table below;
3.5 Source of data
The researcher will collect data from both primary and secondary sources. The primary source will provide first hand data from the respondents through interviews/ questioners, and observation.
The secondary source provided second hand data from the company’s records, the library and the internet.
3.6 Data collection methods and instruments
The researcher will use four different types of methods and instruments to collect data they include;
- Questionnaire method: the researcher will use semi-structured questioners to collect data. These were given to respondents to fill them in and were collected after a period of one week.
- The researcher will conduct a face to face interviews with the respondents. The interviews will be based on the answers provided in the questionnaires.
- Observation method: the researcher used this method to collect firsthand data by looking at the different purchasing activities taking place in the field and the body language of respondents during interviews.
- Library research: the research will be conducted by library reading in order to collect secondary data from the company’s documents and the university library
3.7 Presentation and analysis of findings
After the data collection exercise, data will be arranged and edited to ensure accuracy, relevance and completeness. It will then be analysed using frequencies and percentages as units of measurement and using frequency tables.
3.8 Limitations of the study:
- The time allocated to the study wlll be too limited for the researcher to exhaust the study variables. In spite of the fact that time was a problem, the study was still successful.
- The study will involve a lot of financial expenditure in terms of transport, stationary, printing, binding. Luckily enough, the researcher managed to raise enough funds to finance the study.
REFERENCES
Christopher, 1998, Ross 1998. Supply chain Management 6th edition
Kenneth Lysons and Brian Farrington: Supply Chains: Purchasing and supply chain management Seventh edition PP91.
Ballon. H. Ronald (1987), Basic Business Logistics: Transportation, Materials management, physical distribution (2nd ed), Prentice Hall Inc. New Jersery.
Kalakota and Robinson: Evolution of e-procurement models: Purchasing and supply chain management PP. 187
Malcom Wheathly, (2000)
Institute of Logistics, Principles of warehouse design, 1993, reproduced with permission
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