Uses of ICT in global Procurement

Chapman, et al, (2000); many companies conduct business using Electronic Commerce (ecommerce), whether focusing on business-to-business (B2B) or business-to-consumer (B2C) activities. They realize that easy access to information and communication and the delivery of their products or services are important drivers in developing and sustaining market competitiveness nationally and internationally.

Having a supportive electronic logistics (e logistics) system is very important to maintain the company‘s competitiveness. The application of computers, internet and information communication systems can be seen in virtually all activity in the logistics industry, such as transportation, warehousing, order processing, materials management, and procurement. It can help companies to achieve competitive advantages by providing customers with superior services.

1. Information sharing- is an important prerequisite relevant function in the global procurement concept, or securing information accessibility to all supply chain partners involved in global procurement. Information transfer which is probably the most relevant function in the global procurement concept ensures the widespread dissemination of the internet and e-business technologies. The faster information flows along the supply chain, the faster operational decisions can be made. The faster material and cash flow along the supply chain, the faster a company‘s money is freed from the manufacturing or procurement cycle.
2. Low priced/affordable goods and services – Successful companies either have a productivity advantage that gives a lower cost profile or they have a value advantage that gives the product or offers a differential or competitive offerings or a combination of the two. Companies are no longer staying competitive simply through focusing on product quality and pricing as customers are becoming higher demanding related to customer service offer.
3. Lead time- In order to be the winners in the marketplace, timing and superior customer service are becoming the keys to attain competitive advantage for a company. Time-based competition is an important; Companies are facing currently as customers are becoming more time-sensitive and time-oriented in terms of better services, reliability and delivery. The ways to renew the customers‘ services and how they are delivered are critical capabilities for many companies to acquire nowadays.
5. A growing percentage of the overseas countries‘ economy, and other advanced industrial economies depends on imports and exports. Foreign trade, both exports and imports accounts for more than 30% of the goods and services produced in these countries. Companies are also distributing core business functions in product design, manufacturing, finance, and customer support to locations where work can be performed more cost effectively. The success of firms today and in the future depends on their ability to operate globally
6. Communication – Today, information technology provide the communication and analytic power that firms need for conducting trade and managing businesses on a global scale. Controlling the far-flung global corporation—communicating with distributors and suppliers, operating 24 hours a day in different national environments, coordinating global work teams, and servicing local and international reporting needs—is a major business challenge that requires powerful information system responses.
7. Globalization– Because of global communication and management systems, customers now can shop in a worldwide marketplace, obtaining price and quality information reliably 24 hours a day. To become competitive participants in international markets, firms need powerful information and communication systems.
In a knowledge- and information-based economy, information technology and systems take on great importance. Knowledge-based products and services of great economic value, such as credit cards, overnight package delivery, and worldwide reservation systems, are based on new information technologies. Information technology constitutes more than 70 percent of the invested capital in service industries such as finance, insurance, and real estate.
8. Buyer-supplier relationships-A digital firm is one where nearly all of the organization’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning the entire organization or linking multiple organizations. Business processes refer to the unique manner in which work is organized, coordinated, and focused to produce a valuable product or service.
9. Productivity – Developing a new product, generating and fulfilling an order, or hiring an employee are examples of business processes, and the way organizations accomplish their business processes can be a source of competitive strength. Digital firms sense and respond to their environments far more rapidly than traditional firms, giving them more flexibility to survive in turbulent times. Digital firms offer extraordinary opportunities for more global organization and management.

Other significant trends
Apart from increasing technology and emphasis on customer satisfaction, there are several other important trends in logistics. The following list includes some of the most significant.

  • Globalization: Improved communications and better transport mean that physical distances are becoming less significant. Organizations can become global in outlook, buying, storing, manufacturing, moving and distributing materials in a single, worldwide market. As a result, international trade and competition are continuing to rise. Organizations used to look for
    competitors in the same town, but now they are just as likely to come from another continent.
  • Reduced number of suppliers: In the past, organizations have used a large number of suppliers. This encouraged competition ensured that they got the best deal and maintained secure deliveries if one supplier ran into difficulties. The current trend, however, is to reduce the number of suppliers and develop long-term relationships with the best.
  • Concentration of ownership: Large companies can get economies of scale, and they have come to dominate many supply chains. There are, for example, many shops and transport companies but the biggest ones continue to grow at the expense of small ones. The result is a continuing concentration of ownership, which you can see in many logistics sectors ranging
    from food wholesalers to cruise lines.
  • Outsourcing: More organizations realize that they can benefit from using specialized companies to take over part, or all, of their logistics. Using a third party for materials movement leaves an organization free to concentrate on its core activities.
  • Postponement: Traditionally, manufacturers move finished goods out of production and store them in the distribution system until they are needed. When there are many variations on a basic product, this can give high stocks of similar products. Postponement moves almost finished products into the distribution system, and delays final modifications or customization until the last possible moment.
  • Cross-docking: Traditional warehouses move materials into storage, keep them until needed, and then move them out to meet demand. Cross-docking co-ordinates the supply and delivery, so that goods arrive at the receiving area and are transferred straight away to a loading area, where they are put onto delivery vehicles. This dramatically reduces stock levels and associated administration. There are two basic forms of cross-docking. In the first, packages are moved directly from arriving vehicles and onto departing ones. In the second form there is some additional work as materials arrive in larger packages which are opened, broken into smaller quantities, sorted, consolidated into deliveries for different customers and transferred to vehicles.
  • Direct delivery: More customers are buying through the Web, or finding other ways of trading earlier in the supply chain, such as mail order or buying directly from manufacturers. This has the benefits of reducing lead times, reducing costs to customers, having manufacturers talking directly to their final customers, allowing customers access to a wider range of products, and so on. It also means that logistics has to move small deliveries quickly to final customers.
  • Other stock reduction methods: Keeping stock is expensive, so organizations continually look for ways of reducing the amount stored in the supply chain. There are many ways of doing this. One approach uses just-in-time operations to co-ordinate activities and minimizes stock levels. Another approach has Vendor Managed Inventory (VMI), where suppliers manage both their own stocks and those held further down the supply chain. Improved coordination reduces overall costs and can give economies of scale.
  • Increasing environmental concerns: There is growing concern about air pollution, water pollution, energy consumption, urban development and waste disposal. Logistics does not have a good reputation for environmental protection demonstrated by the emissions from heavy lorries, calls for new road building, use of extensive packaging, ships illegally gushing their fuel tanks, oil spillages from tanker accidents, and so on.
  • More collaboration along the supply chain: Organizations in a supply chain increasingly recognize that they have the same objectives which are satisfied final customers. They should not, therefore, compete with each other, but should co-operate to get final customer satisfaction. This is an important point. It means that competitors are not other organizations within the same supply chain, but are organizations in other supply chains.
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