The introduction of E-Procurement.
The introduction of E-Procurement:
Price and availability are not the only factors to be considered in a purchasing decision, especially now that a strong supply chain has become an unmissable element for every company in today’s business climate (Namulo, 2017). The dynamic of business around the world is changing at a rapid pace due to fast-growing technological advancements. The ease of accessibility of this technology causes many organizations to shift towards E-Procurement as an effective and innovative Supply Chain support system to help companies reach goals including operational efficiencies, sustainability, and profitability.
According to (Namulo, 2017), “E-Procurement is the acquisition of goods, services or works from an external source. In procurement, it is necessary to ensure that the goods, services, or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality, quantity time, and location”.
The use of E-Procurement has recently increased as technologies are positively affecting different sectors around the world. E-procurement, which is known as ‘electronic procurement’ or ‘supplier exchange’, is changing the way companies are sourcing their goods and services. Over the last ten years, institutions have been using more electronic tools to manage their procurement activities. Organizations in both public and private sectors are adopting systems such as the Electronic Data Interchange tool (EDI), Enterprise Resource Planning (ERP), and of course the internet to benefit them when sourcing their goods (Adebayo, Dec 2015).
E-procurement is a tool that yields benefits in all kinds of ways. It enables companies to decentralize operational processes and centralize strategic procurement processes which result in higher transparency and integrity, as well as reducing transaction cost and boost decision-making processes. Furthermore, e-procurement enables price negotiation and supplier evaluation. It also enables selection to be automated between an organization and its suppliers which prevents time consumption. Instead of exchanging contracts or sending out a tender document, the entire operation is computerized, and therefore it helps reduce human errors, increase operational speed and allow staff to focus on other tasks (digital, n.d.).
Moreover, e-procurement enables companies to have a good workflow that facilitates end-users self-services. The inflows/outflows of goods through the supply chain improves as the tracing and tracking of those goods are automated which reduces emergency shipments. Institutions can visualize their purchasing behaviors to control purchasing management and save costs by identifying leverage buying power (digital, n.d.). Finally, being connected to external supply chains and enterprise resource planning (ERP) enables companies to get a better overview of supplier transactions and information by sharing real-time data through ERP systems which improve communication (digital, n.d.).
It is important to note that there are also obstructing factors that prevent implementing e- procurement. Lack of a strong business relationship, financial support, and organizational priority can also from obstacles as developing countries are usually late adopters and do not invest money into early adopters’ trends. On the contrary, firms from countries with low uncertainty avoidance such as Germany or the UK are early adopters of e-procurement, while countries that are less reluctant to change such as Spain or France have lower adoptions rate (Namulo, 2017).
Concept of implementing E-procurement:
Electronic procurement innovations (EPIs) are being utilized by many businesses to improve their supply chain sector. (EPIs) support the different parts of the core procurement process of businesses such as supplier selection, order placement, order fulfillment, payment, and settlement.
Many organizations are using the scheme below to help implement e-procurement into their supply chain (Namulo, 2017). Successful implementation of e-procurement depends on strong good management to achieve the firm’s performance goals. It is important to have sufficient awareness about what adopting e-procurement means on a long-term and short-term basis. E- procurement has become a powerful tool resulting in a competitive advantage for many businesses. It is integrated into many firms’ overall strategies as the role of IT has evolved from productivity to a strategic tool (KANDA, 2017).
Five forms of e-procurement:
E-procurement is categorized into five main applications which consist of E-ordering, E-sourcing, E-tendering, E-auctioning, and E-informing.
E-ordering: The ordering process is one of the major challenges for suppliers and buyers. Based on (Zaman, 2019), E-ordering captures electronic data which includes orders, requests, and information received by the customer. E-ordering benefits both suppliers and buyers in different ways such as speed, security, standardization, and traceability. From the supplier’s side, E-ordering can reduce errors and eliminate papers as invoices are automatically generated from the order information through the internet (Edicom, 2020).
E-sourcing: Described as the action of selecting and identifying the suppliers based on specific requirements. This approach allows the firms to select their preferable suppliers taking into account their competitive aspects.
E-tendering: is the procedure when the suppliers receive the invoices and the purchase requests. This process allows both suppliers and buyers to realize their online transactions. Moreover, the procedure covers the tender requirements which will be exchanged electronically (Zaman, 2019).
E-auctioning: Online reverse Auctions facilitate the process of a buyer investigation ability to select the right suppliers to buy products or services. Instead of negotiating with several suppliers before selecting one, online reverse auction enables temporal and geographical convenience as well as reducing the cost of contact, providing feedback and privacy (Namulo, 2017). In other words, the buyers give a contract to the suppliers who have ‘won’ the online process of bidding where suppliers compete in real-time (Zaman, 2019).
E-informing: This method includes assembling and gathering information regarding purchases of buyers and suppliers by using web-based technology (Zaman, 2019).
The supply chain performance is dependent on each of the stated independent e-procurement steps. These steps aim to improve the overall supply chain performance. (Zaman, 2019).
Would you like to know more about adopting E-Procurement within your Supply Chain? Contact one of ModusLink’s Industry experts by clicking here.
Adebayo, V. &. (Dec 2015). Adoption of e-Procurement Systems in Developing Countries: A Nigerian Public Sector Perspective. In V. &. Adebayo, 2015 2nd International Conference on Knowledge-Based Engineering and Innovation (KBEI) (Vols. pp. 20-25, pp. 20-25). Tehran, Iran: IEEE.
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Sustainable Supply Chain Management.
Green supply chain history:
The origin of Supply Chain Management can be dated back to the early 20th with Henry Ford who vertically integrates the automotive supply chain and organizational practices. The approach of “Just in time” and “supply chain management” focused on optimizing efficiency and reducing waste. But at that time, the reduction of waste was mainly due to economic reasons, not environmental.This was because waste means greater economic loss. At that time, pollution wasn’t mentioned by economics scholars, that’s why pollution caused by industries was not part of economic discussions. After recognizing the importance of pollution within the economic systems, a tax was suggested for environmental pollution caused by industries (EM Ojo). Nowadays, a lot of different factors are increasing the urgency for emerging economies to become sustainable. A great example would be today’s prominence of climate change.
Why go green?
Due to climate change, firms are rethinking their strategies to guarantee environmental initiatives to start environmental actions. Furthermore, the notion of Sustainable Supply Chain Management is often linked with social responsibility or environmental management (Ali Esfahbodi, 2016). Green Supply Chain Management emerges as a new environmental approach in Supply Chain Management and has been increasingly used by forward-thinking organizations. There are different reasons to turn to GSCM (Green Supply Chain Management) included being sustainable, profitable, and cost reduction. Customers usually say that they would rather buy products that are environmentally friendly and with a minimum of environmental impact. Business practices ought to become increasingly transparent therefore implementing green policy can generate profits, provide a positive social impact, and reduce environmental impact. Any steps taken to become greener will favor companies in visibility, credibility, and develop a leadership reputation. (Bhattacharjee, 2015).
The purpose of going green is shown in the table.
Sustainable supply chain management:
The original model of Supply Chain Management follows a linear production that hypothesizes the constant input of natural resources and an unlimited capacity to assimilate waste. Unlike the traditional supply chain, being sustainable considers the environmental impact of a product through its entire process cycle and reduces maximum environmental damages. The idea of being sustainable is done by closing the loop and including the reuse, recycle step. This will aim at reducing environmental impact from the acquisition of raw materials to the final use and disposal of the product (Ali Esfahbodi, 2016).
Based on (Ali Esfahbodi, 2016), the main activities in a typical sustainable supply chain management (SSCM) are illustrated above. When the product has a defect after its production, it is sent back to the inventory to reuse or recycle it. When the product comes to its end, it goes to the plant where the product is reused, recycled, or refurbish before heading back to the supplier.
Four fundamental practices:
Based on (Ali Esfahbodi, 2016) research, Chinese and Iranian governments have focused their fight for SSCM based on four fundamental practices: sustainable procurement, sustainable production along with sustainable distribution, and reverse logistics. These practices represent to which extend each country engages itself toward Sustainable Supply Chain Management. In addition, these initiatives are not used just taken in China and Iran but also in many other emerging economies. These innovations represent a strong commitment from through strategic environmental plans towards sustainable Supply Chain Management.
- Sustainable procurement: consists of environmentally friendly purchasing that carry reduction, reuse, and recycle. Furthermore, it is a solution to achieve a selection of products and services that reduce the negative impact of the lifecycle. The sustainable purchase becomes easier through the year with fewer barriers as customers increase their demands for environmentally friendly goods (Vishal Gupta, 2013). Ikea is a good example as it has sourced close to 50 percent of its wood from sustainable foresters and hundred percent of its cotton from farms that meet better cotton standards (Ikea, n.d.).
- Sustainable production: is the production process that uses inputs with low environmental impact, is greatly effective and provoke no waste pollution. Green production can improve the corporate image and lower the raw material cost. Companies are starting to take actions and produce materials that intend to be reliable, energy-efficient with no or lesser waste which benefits companies in many ways as it will have an impact on customers, shareholders, and the recognition of the company in the marketplace. (Vishal Gupta, 2013). Patagonia produces their wetsuits from natural rubber and parkas which are made from plastic bottles. (Cardwell, 2014).
- Sustainable distribution: Distribution of goods usually generates a lot of waste and is can damage the environment, but green distribution consists of green packaging including size, shape, and materials that have an impact on transportation of the goods. Better packaging can reduce material usage, increase space utilization in the warehouse and trailer, and lower the quantity of handling required (Vishal Gupta, 2013). It is done by Logistrap in Mexico, they reduced their space within the warehouses and container ships to transport more within the same number of trips (Logistrap, 2020).
- Reverse logistics: According to (Vishal Gupta, 2013) the concept of Reverse Logistics (RL) not only means the returns from the customers but also the management of E-waste. RL is a process where a manufacturer accepts previously shipped products from the customers point for potential recycling and/or re-manufacturing”. Kobo360 from Nigeria is a leader in the practice stated. They Pick up returns and bring them back to a warehouse or other location to be restocked, inspect and repackage returned products or parts (Kobo360, n.d.).
Do you need help figuring out how to become more Sustainable? Contact one of ModusLink’s experienced industry experts today by clicking here.
12 Million Bottles Used in Patagonia Recycled Clothes. (1995, April 12). Los Angeles Times. Ali Esfahbodi, Y. Z. (2016). International journal of production economics (Vol. 181 part B). (S.Minner, Ed.) Birmingham , UK: Elsevier.
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Research scholar, Patna University, Applied economics & Commerce, Patna. Cardwell, D. (2014, July 30).
At Patagonia, the bottom line includes the earth. The New York Times(section B), 1.
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The Circular Economy.
The Circular Economy
Taking the fastest route towards your destination is often the most effective one as you will use the least time possible. However, is it also the most efficient? This is a completely different question. Your efficiency depends on how you determine your efficiency factor. Is your idea of efficiency to spend the least amount of money on fuel? To take the route in the most sustainable way possible? To see the most beautiful scenery along the way? If your idea of efficiency is one of these mentioned, your strategy of taking the fastest route is probably not a good idea. This concept of efficiency is crucial for businesses to understand as it allows them to optimize their operational activities and business model.
Businesses often conduct their operations as streamlined as possible. To oversimplify, let’s take an average Supply Chain from a start-up. First, the sought-after raw materials are procured. Then, the business uses these raw materials together with labor to convert them into their final product. Lastly, this product is sold, and any waste material is disposed of. This Linear way of conducting business is often how many start-ups begin their journey as it seems effective and straightforward. Depending on your business model/goals, there might be an alternative way to conduct business that yields benefits such as increased resource utilization, labor force efficiency, and sustainability within your business model.
The Circular economy is a term used within Business practices that primarily aims to reinforce sustainability within Business elements (Ministerie van Infrastructuur en Waterstaat, 2019).
The fundamental pillars of a circular economy are made of the term reusability. Instead of disposing of waste, waste materials are used through methods such as recycling, aiming to give purpose to waste. For example, during the creation of glass, the residue is formed that is normally disposed of. In a circular economy, this residue is again melted to create new glass. In this way, new raw materials are obtained in a sustainable way without damaging the environment or obstructing economic activity.
Circular Supply Chain Management (CSCM), integrates the philosophy of the circular economy into supply chain management. This creates a new and compelling perspective on the supply chain sustainability domain (Farooque et al., 2019).
There are many Supply Chain elements where the Circular Economy concept can be integrated. These elements include Product Design, Procurement, Production, Logistics, Consumption, Waste management and Supply Chain Technology. Each of these elements will be briefly elaborated upon below.
- Product design
Fundamentally altering product design can yield strong sustainability benefits. This is often best done when releasing/starting a new product, as big changes could take time to implement on scale. Sustainable packaging and product labelling is a way to integrate the Circular Supply Chain concept. The razor blade company ‘Boldking’ for instance gives their customers discounts on future products when sending back their packaging. The used packaging is later converted into new razor blade packages.
Raw materials that are technically restorative or intrinsically reusable have a low negative environmental impact thus increasing sustainability within Supply Chains. The concept of acquiring such materials is often called ‘Green Procurement’. These materials increase the utilization rate and decrease waste generation. Examples are glass and paper as mentioned earlier.
Sustainable manufacturing practices are a great way to maintain a Circular Supply Chain. Although green production hasn’t been widely used (mostly due to cost-benefit comparing cheap labor), it certainly yields strong benefits when implemented correctly. Producing using renewable energy sources such as Solar Power reinforces a self-sustaining production process.
Sustainably distributing products can be achieved through route optimization and avoiding concepts such as same-day delivery. It is important to be aware of your current logistical process. Consulting experts on the best way to distribute your products or manage your internal logistical process can be extremely beneficial as professional expertise can guide (in)experienced businesses in the right direction.
Consumption is an interesting way to apply Circular Supply Chain Management as it has not been used until recently. It is predominantly gaining traction within the mobile phone industry where unwanted phones are returned to the respective company in return for discounts on newer models. Since new phones are often released on an annual basis, this is a great way for companies to regain their resources.
- Waste Management
Waste management is essentially reusing waste material for your production process. To take the prior example, the unwanted and returned phones (waste) are not disposed of but instead taken apart carefully. Individual elements such as the processing unit, battery, Glass, metal frame, are all given a new purpose by reusing them in the new production process.
- Supply Chain Technology
The newest addition to integrating a Circular Supply Chain into a business is done through Sustainable Technology. This concept hasn’t been adopted on a wide scale as much technology is relatively new, however, some companies see the benefits gained from certain technology. Techniques and concepts such as IoT (Internet of things) and Additive manufacturing (3D printing) can yield strong benefits when adopted correctly. If there is no inside knowledge on these concepts, it is strongly advised to seek professional expertise.
Need professional advice on the right way to integrate Circular Supply Chain Management? Contact one of ModusLink’s Industry experts by clicking here.
Angelis, D. R. (2018). [PDF] Supply chain management and the circular economy: towards the circular supply chain | Semantic Scholar. Semanticscholar.Org. https://www.semanticscholar.org/paper/Supply-chain-management-and-the-circular-economy%3A-Angelis-Howard/68c441507594095a7f07af8018c844194b88fa84
Farooque, M., Zhang, A., Thurer, M., Qu, T., & Huisingh, D. (2019, April 1). Circular supply chain management: A definition and structured literature review. ResearchGate. https://www.researchgate.net/publication/332690616_Circular_supply_chain_management_A_definition_and_structured_literature_review
Ministerie van Infrastructuur en Waterstaat. (2019, March 26). From a linear to a circular economy. Circular Economy | Government.Nl. https://www.government.nl/topics/circular-economy/from-a-linear-to-a-circular-economy
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