LAZZARO GRACIELA PAOLA Y ALI SERGIO MANUEL POR DIVORCIO VINC

De Boer et al. (2002, p. 2) define eProcurement as ‘using Internet technology in the purchasing process’ and describe it as having six principal forms:

1 eMRO – to create and place purchase orders for maintenance, repair and operating supplies;

2 web-based ERP – to create and place purchase orders for product-related goods and services;

3 eSourcing – to identify/compare potential suppliers;

4 eTendering – to request/receive information and prices;

5 eReverse auctioning – to buy goods and services (see more on eAuctions below);

6 eInforming – to exchange information internally and externally.

The benefits for suppliers that allow web-based access to their on-line catalogues include reduced printing and distribution costs and delays; the ability to market new products, or reduce prices on older ones, very quickly; fewer incoming telephone calls; more accurate ordering; and improved customer satisfaction. The benefits for buyers include access to up-to-date product and price data; fewer outgoing telephone calls; and, when online order processing is also available, faster ordering.

The disadvantages of eProcurement are largely felt by suppliers and include IST costs; downward pressure on prices; and the ease with which customers can compare and switch suppliers. Both suppliers and buyers may welcome or regret the decreased personal contact of sales visits, telephone calls and face-to-face competitive tendering.

eAuctions

Online auctions are becoming increasingly popular in two specific areas of B2B com-merce: sourcing supplies and disposing of surplus stock or other assets. Unlike traditional auctions, online auctions tend to be longer and end at pre-set times. Buyers (or sellers) do not have to attend face-to-face, indeed participation is in real time, can be global and transaction costs drastically reduced (Sashi and O’Leary, 2002).

Organisational buying behaviour 129

Figure 5.3 Managerial roles in global account supply management Source: Harvey et al. (2003). Copyright © 2003. With permission from Elsevier.

Traditional role

Traditionally, the manager maintains arms-length relationships defining s p e c i f i c a t i o n re q u i re m e n t s a n d closely monitoring if specifications are met in the delivery phase of the final product to the global customer.

Monitoring role

The manager maintains arms-length relationships but extends monitoring t o i n c l u d e m a n u f a c t u r i n g a n d logistics processes and assesses if each party can further maintain global account relationship.

Co-developmental role The manager maintains

c o - d e v e l o p m e n t a l re l a t i o n s h i p s stimulating intensive information sharing but controls the working of each relationship in the global account system.

Co-partnering role The manager maintains cooperative relationships joining R&D efforts on a long-term basis in order to build commitment and trust to achieve entrepreneurial but common and mutually acceptable outcomes for both global parties.

Stable U nstable

GlobalCountry-specific

Environmental conditions of supplier–customer relationship

Scope of supplier–customer relationship

Openmirrors.com

A Google search in English for B2B and ‘online auction’ in May 2003, turned up 9,970 results. The listings obtained from following just one of those links is shown in Snapshot 5.6.

Chen and Wilson (2000) cited research suggesting that overall growth in B2B auc-tions would be from $8.7 billion in 1997 to $52.6 billion in 2002. eBay, which

ONLINE PROCUREMENT SYSTEMS

Alfa, a major Mexican industrial conglomerate with a turnover of over $4.56 billion, consists of five businesses and a series of alliances with more than 20 companies around the world.

The purchase of indirect goods and services was worth approximately $600 million per year, but each business managed their own purchases. As a result the process was highly fragmented and inefficient. To enhance its competitiveness across all businesses, Alfa explored the efficiencies and potential savings offered by a centralised on-line procurement system.

Part of the specification required that the system would connect seamlessly with the different SAP ERP implementations used throughout the corporation. By standardising and centralising the procurement process, Alfa achieved the following benefits:

n greater ability to fully leverage volume discounts n better control of maverick buying

n improved spend management.

At the time the system was installed most domestic suppliers in Mexico were unfamiliar with this level of online procurement. BearingPoint, Alfa’s consultants, undertook strate-gic sourcing and procurement methodology training, provided supplier on-boarding and jointly developed electronic catalogues.

Apart from radically changing the processes and procedures associated with the pur-chase of indirect goods, Alfa have made significant savings in terms of the time and costs associated with these purchases. The organisation is in a better position to control their spend and costs and have made savings of up to 50 per cent from the strategic sourcing effort of some indirect commodities.

This illustration demonstrates how IST can help organisations manage their purchases, make huge cost savings and advance an organisation by working with their suppliers.

Although Alfa has continued to consolidate the supplier base and standardise the indirect procurement processes, installation of the online procurement tool has enabled the corporation to develop new competitive advantages and work with and benefit their preferred suppliers.

Source: Based on material retrieved and adapted from www.bearingpoint.com/ (Accessed 16 February 2003.) Permission to reproduce granted by Alfa.

S N A P S H O T 5 . 5

increased its registered users, both personal and business, from just over 42 million at the end of 2001 to just under 62 million at the end of 2002, certainly welcomes the contribution of organisational buying and selling to its profitability and has a business-orientated portal (see p. 136) at business.ebay.com. Other examples, are ‘Auction USA’

(www.auction-usa.com/) which offers ‘wholesale B2B and private party auctions’ for all of the United States and Canada; and ‘Indiamart’ (auction.indiamart.com)

‘Designed to enhance your business by bringing global B2B buyers and sellers together to make profitable deals online, day after day!’

Particularly of interest in B2B purchasing, is the ‘reverse auction’. Instead of search-ing online auction sites for the supplies it needs and biddsearch-ing for them, an organisation posts its requirements and invites potential suppliers to bid to fulfil them. The buying unit staff can do this themselves or use an intermediary such as FreeMarkets (see Snapshot 5.7).

For reverse auctions to operate effectively, Smeltzer and Carr (2003) identified four particular conditions that needed to exist. First, commodity specifications, such as ISO 9000 certification, order sizes, quantities and so forth, must be clearly stated.

Second, purchase quantities or lots must be of sufficient size that suppliers want to bid. Size is important in order to generate transaction cost reductions and obtain pro-duction economies of scale. Third, the appropriate supply market conditions must exist, namely that there are a sufficient number of suppliers to make the market com-petitive and also sufficient incentives (for example excess supply capacity) to make it worthwhile for suppliers to become involved. Finally, these researchers identified that the correct organisational infrastructure must be in position for the buying organisa-tion. This entails staff being trained, motivated and receptive to this form of

Organisational buying behaviour 131

LISTINGS RESULTS FOR B2B MARKET FOR MACHINE TOOLS 1 eBay: Machinery and tools B2B markets

Listing found in > Machinery and tools B2B markets Online marketplace for buying and selling machinery and tools.

2 Machinery and tools B2B markets Category found in > Machinery and tools

Online business exchanges, marketplaces and auctions matching buyers and sellers of industrial machinery and tools.

3 Machine net

Listing found in > Machinery and tools B2B markets Online trading system for machine tools and accessories.

4 Machinetools.com

Listing found in > Machinery and tools B2B markets

Business-to-business e-commerce site for the machine tool industry where the user can search new and used machinery, receive quotes from dealers around the world, and view online brochures for upcoming auctions.

Source: www.business.com/search/rslt_default.asp?query=b2b%20market%20for%20machine%

20tools (Accessed 19 May 2003.) S N A P S H O T 5 . 6

purchasing, plus having the necessary systems infrastructure in place to forecast accu-rately the amount required and communicate across a number of divisions when pooling occurs to increase the number of units being auctioned/bought.

eCollaboration

Interorganisational use of network technologies to share business information and coordinate supply chain activities has been termed eCollaboration. As noted by Karpinski (2001), ‘Now comes the latest catchphrase, especially in B2B circles: collabo-ration. Suddenly, every supply chain and e-commerce vendor is rolling out collaborative commerce tools. Every e-marketplace is trumpeting its move from cata-logues and auctions to collaborative design and forecasting.’

Despite the sceptical tone of that quote, there is an increasing number of well-documented cases of B2B eCollaboration. For example, Mirani et al. (2001) describe how a company in the energy management sector, Ion Systems, used a customised online Partner Relationship Management (PRM) application to improve collaboration with resellers. Before the system was implemented resellers of Ion’s products and ser-vices could access general information from the company website or telephone for more specific requirements. Problems with these sources included outdated, unspe-cific information and unacceptable waiting times. Ion integrated an off-the-shelf PRM package with its current order management system to create a customised extranet for each reseller ‘with product photos, selling strategies, purchasing and order verification capabilities – all tailored to the [reseller’s] unique profile and needs’ (Mirani et al., 2001, p. 9). The improved access to targeted information, more efficient ordering and better service, were deemed to be responsible for a significant increase in online sales.

Hoffman et al. (2002) suggest that a substantial organisational IST budget will be spent in the next few years on setting up and operating these sorts of ‘private exchanges: that is invitation-only networks that connect a single company to its cus-tomers, suppliers, or both’. While remarking on the similarities with EDI, they add that such networks enable the sharing of ‘documents, drawings, spreadsheets and product designs in standard formats and in real time, thereby facilitating closer collaboration’.

Karpinski (2001) suggests that changing the B2B culture may be more of a barrier to successful eCollaboration than implementing the technological requirements. He quotes the chief executive officer of the World Wide Retail Exchange, an

e-market-REVERSE AUCTION SERVICE

FreeMarkets (www.freemarkets.com) offers a complete reverse auction service to B2B clients. The service includes working with the client to develop a ‘Request for Quotation’

(RFQ), seeking potential suppliers, helping to form bidding consortia, training suppliers to use FreeMarkets’ own, free, bidding software, helping buyers evaluate bids and choose the best suppliers. FreeMarkets prides itself on carefully selecting suppliers to meet the buyers’ needs.

Source: Adapted from Chen and Wilson (2000).

S N A P S H O T 5 . 7

place involving over 50 of the world’s largest retailers, as saying ‘collaborative plan-ning, forecasting and replenishment (CPFR) has not taken hold in the past mainly because of the cultural issues around it … Businesses have to get used to operating in a more transparent way and sharing information in ways not customary in the past.’