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C0RP

E-B0SINESS

T0T0R: P0WELL }.


REPORT TTLE:

E-PROCUREMENT AT SAPCO



STUDENT NAME: AMT KHARE
STUDENT D: P08023448




WORD COUNT: 2,514





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EXECUTVE SUMMARY


This Report Analysis the level to which ranian Automotive Company SAPCO
(Supplying Automotive Parts Co.). Supply chain management has a seen a lot of
growth in recent times. Companies strategically implement e-procurement as they
see it as a medium to get the edge over rivals. mportance of using latest technology
in supply process is well-known to the managers these days. The company faced
problems during the implementation of e-procurement processes but the firm is
trying its best to overcome it.





















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Sno ConLenL age
no
1 lnLroducLlon 4
Company lnLroducLlon 4
WhaL ls LprocuremenL 4
4 LrocuremenL Model aL SACC

3
3 LrocuremenL Model aL SACC

3
6 LrocuremenL rocess aL SACC 6
7 8eneflLs 8ecelved by Lhe lmplemenLaLlon of L
procuremenL 8y SACC

7
8 8arrlers And roblems laced durlng
lmplemenLaLlon of LprocuremenL by SACC

7
9 Concluslon 8
10 8ecommendaLlons 9
11 8eference LlsL 10
1 8lbllography 11
1 Appendlx 1 1
14 Appendlx 14


























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ntroduction

The enlarging importance of supply chain management, rather than more
conventional purchasing, requires managers to move ahead of typical focus on
purchasing where price and availability are the major driving factors. Supply chain
managers are expected to have a strategic view. And such thing is e-procurement,
the efficient view of web to improve supply chain processes.
This report analysis the e-procurement processes followed by the ranian Automotive
parts company SAPCO. As supply chain management is a broad topic, this report
only focuses on e-procurement. This report tries to scrutinize the procurement
theories from range of academics to draw meaningful findings, which as a result
allowed drawing of meaningful conclusion and recommendations.

Company ntroduction - SAPCO

SAPCO (Supplying Automotive Parts Co.) is an automotive parts company n ran.
SAPCO was established in 1993. t is subsidiary firm of KCO (Iran Khodro
Company). t is the biggest auto-manufacturing firm in the ran with yearly
manufacturing capacity of 800,000. Also due to undeveloped automotive parts
supply chain in the region, SAPCO was formed by KCO to take accountability for
engineering, design and procurement of domestic constituents and parts and also
arrangement and quality aspects of automotive parts localization. n 2004, its
turnover grossed $2.862 bn. SAPCO employs 1,438 people and its supply chain has
500 companies(SAPCO Profile 2009). SAPCO keeping in mind the aim of its
formation i.e. designing and supplying parts set the following objectives for it:

O To classify promising manufacturers
O To draw eligible potential sources to join supply chain cooperation.
O To offer required guiding principle for product quality enhancement.
O To invent efficient automotive parts distribution network.
O To unblock the path of communication between other vehicle producers and
parts suppliers outside the country (SAPCO n.d.).

What is E-Procurement?

Procurement points to all the actions involved in acquiring items from a supplier
(Chaffey). E-procurement is a B2B acquisition and sale of services and supplies over
the web. Usually, the e-procurement websites allow registered and qualified
suppliers to look for potential buyers and sellers of their goods and services.
Transactions can be completed online. Ongoing transactions may enable sellers to
offer discounts or special offers if purchases are on a large scale.

Organisation level procurement typically covers up two types of acquisition: one is
direct procurement and the other is indirect procurement (Subramaniam and Shaw
2002, Chaffey 2004). Direct Procurement deals with parts that are employed in
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manufacturing procedure of final product and raw materials. While, ndirect
procurement deals with services and goods that are not an element of final product
but are essential part of internal processes. They include office equipment,
computers, operating and repair goods(Quesada et al. 2010).

Buy Side e-procurement includes a single buyer setting up an web based purchasing
system with many of its suppliers, usually through a centralized e-procurement
solution(Chaffey, 2009).

E-Procurement Model at SAPCO

According to Chaffey (2004), three basic models for place of Business to business e-
commerce are based on buy-side, sell-side and marketplace (Chaffey 2009).
SAPCO internally developed a incorporated and integrated databases, with different
components for its procurement processes. Their electronic information transmitting
system, based on ORACLE (Appendix 1), consist of suppliers information,
information on contracts, orders, indirect and direct acquisitions and amount of
inventory. Because of the reason that SAPCO's procurement of its components is
done through computerized system, it can be said that SAPCO's e-procurement
model is based on buyer side model(SAPCO SCM n.d.).

E-Procurement System at SAPCO

According to Croom (Croom, 2001), e-procurement system is in two separate, but
joined infrastructures which are nternal processing (for example corporate
intranet) and external communication with group of suppliers (for example through
nternet based podium). n case of SAPCO, its internal infrastructure is in harmony
with the theory. But the majority of the firms processes are based on the T solutions
they have build up over an exclusive database called Oracle. n case of a direct
procurement, the procedure of procurement from consumer's requirement to putting
a new order is done by the above mention method. Yet, few orders which also
include the signing of contracts are carried out manually. n the interior of SAPCO, to
observe the information to produce reports, both SAPCO's ntranet and Oracle
Viewer can be used(SAPCO SCM n.d.).

SAPCO's external communication is found to be in disparity with the theory; there is
neither incorporation nor direct association between SAPCO and its supplier
associations. The communication which is electronic with the suppliers is somewhat
one-sided; to put it in short it's a one way communication. Supplier is given the
needed information on the website of SAPCO and the extranet designed especially
for them. Concisely, SAPCO extranet has some data on manufacturing plan,
descriptions of quality inspections on parts, components and evaluation of various
suppliers based on their delivery, quality and their payment and financial status. Also
in case of Electronic KANBAN, suppliers can see their orders and submit their
Advance Shipment Notice (ASN) to SAPCO. Although entering or updating their
supplier information in the SAPCO's databases has not yet been made possible yet.
Consequently, SAPCO has no access to its supplier systems(SAPCO n.d.)(SAPCO
SCM n.d.).

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Taking into account Croom theory, SAPCO's e-procurement supports theory, but
only to some extent, not entirely. The primary reason behind this is that SAPCO e-
procurement solution is only created for the internal process then they also
developed it for the external process keeping in mind about the suppliers(Wu et al.
2003)(Afshari et al. 2006).

E-Procurement Process at SAPCO

As McKie (2001) declares, e-procurement software maintains the procedure from
requisition to cheque (payment). A major feature of e-procurement software is that
most of the buying relationship with the supplier is administrated electronically,
instead of paper.
SAPCO's direct procurement procedure is originated from its T solutions and a
majority of its procedure is computerized by the use of self developed software
(SAPCO SCM n.d.).
SAPCO's procurement process, which is software based are:

#06:89onng: this procedure is based on incorporated BOM system in the firm
that is to produce purchasing requisitioning list, making available the amount
required and their favourable delivery date of each item and conveyed to different
departments automatically. After processing is done, suppliers receive buying
request by mail or fax, due to small amount of reliability between SAPCO and its
suppliers(SAPCO SCM n.d.).

Ord0r S:-m88on: This procedure is run by computerized system, which produces
orders for the suppliers of SAPCO inventory and KCO manufacturing plan. There
are two ways in which suppliers can receive orders, SAPCO extranet for the
KANBAN parts and Zetafax for the other items. This procedure is entirely maintained
by software(Afshari et al. 2006).

Ord0r Trackng: n the case of electronic KANBAN (Appendix 2), suppliers should
fill the relevant information, documents on the issue of delivery like the total number
of parts requested, particular about the transporter (truck and the driver), and time of
reaching its destination into the website so that SAPCO can track the delivery to
KCO warehouses. Nevertheless, it is still not possible to track other items
online.(SAPCO SCM n.d.)

#0c0p9 Proc088ng: subsequent to delivery and inspection, initial and final receipt
of delivery, delivery sends to SAPCO habitually from KCO's cargo receiving
inventories. The processing of receipt, which is an interior procedure between
SAPCO and KCO, is done through network (Afshari et al. 2006).

Paym0n9 Proc088ng: Software is a tool to maintain payment procedure in SAPCO,
but is limited within the firm due to some inadequacy in legal framework (no
acceptance of electronic signature in ran). Finance staff with the help of
computerized system verify the approved final receipt with the objects included in the
main contract or buying authorizations and then according to SAPCO equilibrium of
payment with the suppliers, they set up the payable voucher file which is sent to
treasury or bank with contracts automatically. Therefore, there is a chance that
suppliers tag along to all the procedures on the firm's website, until their payment is
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prepared to send and accordingly they should go to bank for their payment(Afshari et
al. 2006)
Accordingly, SAPCO e-procurement procedure to a few degree is based on
software, which is produced internally, although, it cannot maintain the whole
procurement process. Thus Mckie theory is inequitably sustained by SAPCO's e-
procurement software (Kim & Shunk 2004).


Benefits Received by the mplementation of E-procurement By SAPCO

Prc0 advan9ag08 are a result of better administration capability of the e-
procurement systems. Procurement charges are decreased via economies of
supplier search and price war among the suppliers(Croom and Johnston, 2003;Shaw
and Subramaniam, 2002).

Shor9 proc:r0m0n9 cycI0 9m08 - by the means of a computerized system,
procurement cycle and finance procedures got smaller, as if suppliers exceed their
time limit in case of delivery, it would affect their evaluation results. t was easily
done as automation made some steps very easier(Afshari et al. 2006).

D0cr0a80d admn89ra9on and 9ran8ac9on co898 - by the use of computerized
systems, too much paperwork is decreased. Thorough this information flow is
smoother and easier. n association with the vigorous changes in KCO's in the last
ten years, SAPCO's number of employees nearly changed.

Improv0d v8-I9y of c:89om0r d0mand and 8:ppIy chan - e-procurement
helped and enabled the firm to perk up their supply chain visibility and contractor
assessment system. This online enables them to better evaluate customer demand
and fulfil their needs and expectations.

#0d:c0d op0ra9ng & nv0n9ory co898 organizing inventory level became more
precise and analyzing prices, quality assessment, engineering systems, and
decreasing the operation costs and work load in all departments. Utilizing automated
systems has made a huge transformation in SAPCO management costs and
inventory management(SAPCO SCM n.d.).

Improv0d d0c8on makng - the majority of the desired information such as
manufacturing information, contact information, and all the desired reports were just
click away. Having internet-based relation with SAPCO is very useful as conveying
info is very simple. All the data needed is in the records so the suppliers can refer
them to see when the order took place in order to regulate their system. Decision
making by suppliers improved and became much and became much more accurate
and supply time is becoming shorter (Afshari et al. 2006).

Barriers And Problems Faced during mplementation of E-procurement by SAPCO

In8:ffc0n9 90chnoIogy Infra89r:c9:r0 - a lot of people have felt the need and
importance of such system, but country infrastructure is not ready for such change
when it comes to make use of e-technologies. Poor infrastructure has caused major
issues for SAPCO and its suppliers. Numerous times they have faced problem of not
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able to access their database due to power cuts or problem in telecommunication
lines.
In8:ffc0n9 T0chnoIogcaI Infra89r:c9:r0 of par9n0r8 - no form of electronic
relationship or communication are accessible to suppliers because of their
infrastructure, budget, culture and lack of skilled employees.
Lack of 8kII0d p0r8onn0I - absence or shortage of skilled workforce and needed
e-procurement information in implementing in the entire supply chain are still
missing.
Lack of In90gra9on w9h a88oca908 and 9h0r m:9:aI ad - having insufficient or
little relationship and incorporation with suppliers is an e-procurement
implementation issue by SAPCO and it needed to be removed though formation of
conditions and culture for its suppliers.
ImpI0m0n9a9on Co898 the cost incurred in the implementation of e-procurement
is still a barrier for some suppliers.
Company C:I9:r0 this barrier is very relevant in low tier one suppliers as it is
difficult for some suppliers to act upon customers plan to be given recurrent orders
for short time utilization.
In8:ffc0n9 -:8n088 proc0d:r08 9o 8:ppor9 0-proc:r0m0n9 - even though
placing order electronically for their procedures have not distorted and the present
ones are not measured as a barrier for its working. But reengineering SAPCO
procedures before automation was still sensible for some suppliers.
L0gaI and r0g:Ia9ory I88:08 using internet as a mode of payment is a barrier. For
example, e-signature is not supported by many people in the country.
S0c:r9y SAPCO knows that security is possible by the implementation of proper
solution. Security is very crucial as sensitive information like supplier data and
contact information is very important for SAPCO while executing standard e-
procurement system.
In8:ffc0n9 0-proc:r0m0n9 8oI:9on shortage of suitable offerings is one of the
barriers of e-procurement named by Tanmit (2002). Majority of e-procurement
resolutions have focused on crucial front-end procedure-to-order cycles, offering
very little, if any assistance to crucial back-end processes, which consists of
sourcing, financial settlement, supplier management and order fulfilment(Afshari et
al. 2006).
Upp0r Manag0m0n9 S:ppor9 the upper management of the firm has
enthusiastically supported the whole process but no noteworthy benefits have been
achieved by suppliers(Afshari et al. 2006).
Conclusion
n SAPCO, e-procurement is moderately used for acquiring components and parts
between SAPCO and its supplier base though the use of an T solution produced by
the firm based on the buyer side model.
SAPCO's e-solution up to a little extent support e-procurement system identified by
Croom (2001). SAPCO's e-procurement arrangement is obtained from its
ERP(enterprise resource planning) solution and primarily centres around simplifying
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internal acquiring processes. The primary objective of developing this system was to
develop a fully programmed system to perk up the capability and productivity of
internal processes via less paperwork, computerized calculations and data
processing.
As a result, the growth of this system has to a certain extent been unstructured
without worrying about the e-procurement structure requirements. Nevertheless,
SAPCO's interior infrastructure maintains e-procurement process with the firm's
process for direct things from requisition to payment. SAPCO's exterior contact with
suppliers cannot follow Croom theory totally because of less incorporation between
SAPCO and its supplier's structure as well as insufficient T knowledge and
acceptance of it by suppliers.
Recommendations
Based on the conclusion, the following recommendations can be drawn:
Bearing in mind about the benefits of buyer side model including solitary interface,
simplicity, incorporation with ERP and better purchasing control, it can be
recommended that SAPCO as a buyer should develop its e-procurement process
based on the current model in which they are operating, i.e. the buyer side model.
SAPCO should make better use of its procurement systems, as the existing self
developed software is not enough to meet all their demands and they should figure
out a new approach, which generates sense out of their e-procurement system.
SAPCO is well aware of these facts so they have recently purchased SAP software.
Alongside, it is very important that they redesign the whole procurement process
from suppliers to customer so to better integrate with the SAP software.
Also before implementing application procedures like web based ERP, SAPCO
needs to restructure their order and receipt processing, because inaccuracy in any
form would hinder their processes and operational activities.
SAPCO need to stop looking e-procurement activities just for the benefit of the
internal processes and it should cover all the supply chains including every supplier
from every tier. t needs to apply all needed training and investment into supply chain
as they cannot apply it to e-procurement system because of finance and lack of
education. f they don't there is a chance that the risk and chance will move to
another party.
Also, when SAPCO will approach indirect e-procurement, it will also open the doors
for them to acquire international market.

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#0f0r0nc0 L89
Afshari, A., Afsharipour, A. & Sahaf, L., 2006. e-Procurement in AutomotiveSupply
Chain of ran. Available at: http://epubl.ltu.se/1653-0187/2006/08/LTU-PB-EX-0608-
SE.pdf [Accessed March 26, 2011].

Chaffey, D., 2009. E-Business and E-Commerce Management 4th ed., Prentice Hall.

Chaffey, Dave, ed. 2004, E-business and E-commerce Management, 2nd ed.,
Prentice Hall

Croom, S.R and Johnston R.,(2003).ndustrial Journal of Service ndustry
management,VOL:14,No.5,2003,pp.539-555.MCB UP limited

Croom, S.R., 2001, Supply Chain Management in the E-Business Era, An
nvestigation into Supply Chain Strategies, Practices and Progress in E-Business
Adoption, Warwick Business School, University of Warwick, Coventry, UK,
Available at:
http://easyweb.easynet.co.uk/simon.croom/research/research_start.html) [Accessed
March 31, 2011]

Kim, J.-. & Shunk, D.L., 2004. Matching indirect procurement process with different
B2B e-procurement systems. Computers in Industry, 53(2), pp.153-164. Available at:
http://www.sciencedirect.com/science/article/B6V2D-4B0X84H-
1/2/3e8cb6cfe519001d3d44c9c01f96e5ba [Accessed March 31, 2011].

Quesada, G. et al., 2010. mpact of e-procurement on procurement practices and
performance. Benchmarking: An International Journal, 17(4), pp.516-538. Available
at: http://www.emeraldinsight.com/journals.htm?issn=1463-
5771&volume=17&issue=4&articleid=1865196&show=html [Accessed March 31,
2011].

SAPCO, SAPCO (Supplying Automotive Parts Co.). Available at:
http://www.gmdu.net/corp-149703.html [Accessed March 31, 2011].
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SAPCO Profile, 2009. SAPCO's PROFLE. Available at:
http://www.sapco.com/Downloads/Sapco.pdf.
SAPCO SCM, SAPCO SCM. Available at: http://scm.sapco.com/default.aspx
[Accessed March 31, 2011].

Shaw M.J, and Subramaniam C., 2002, "The Effects of Process Characteristics on
the Value of B2B E-Procurement, Working Paper CTEBM-02-02. Center for T
and e-Business Management, University of llinois at Urbana/Champaign, 2002.
Available at: http://citebm.cba.uiuc.edu/ecforum/Process-effects-B2Bvalue.pdf
[Accessed March 31, 2011]

Tranmit, 2002, Purchase-to-pay: no change here?, Tranmit plc and EP
News.,(http://www.tranmit.com/pdf/Nochangehere.pdf).

Wu, F., Mahajan, V. & Balasubramanian, S., 2003. An Analysis of E-Business
Adoption and its mpact on Business Performance. Journal of the Academy of
Marketing Science, 31(4), pp.425 -447. Available at:
http://jam.sagepub.com/content/31/4/425.abstract [Accessed March 31, 2011].


-Iography

Davies, P.B., e-business 2004th ed., palgrave macmillan.
Padhyay, N.B., 2002. e-commerce - context, concept and consequences 2002nd
ed., McGraw Hill Education

Turban, E. et al., Electronic Commerce - A Managerial Perspective 2004th ed.,
Prentice Hall.

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PPENDIX 1: ORACLE DATABASE

The OracI0 Da9a-a80 (commonly referred to as racle RDBMS or simply as racle)
is an object-relational database management system (ORDBMS) produced and
marketed by Oracle Corporation.
Phy8caI and IogcaI 89r:c9:r08
An Oracle database systemidentified by an alphanumeric system identifier or
SD
[4]
comprises at least one instance of the application, along with data storage.
An instanceidentified persistently by an instantiation number (or activation id:
SYS.V_$DATABASE.ACTVATON#)comprises a set of operating-system
processes and memory-structures that interact with the storage. Typical processes
include PMON (the process monitor) and SMON (the system monitor).
Users of the Oracle databases refer to the server-side memory-structure as the SGA
(System Global Area). The SGA typically holds cache information such as data-
buffers, SQL commands, and user information. n addition to storage, the database
consists of online redo logs (or logs), which hold transactional history. Processes can
in turn archive the online redo logs into archive logs (offline redo logs), which provide
the basis (if necessary) for data recovery and for some forms of data replication.
f the Oracle database administrator has implemented Oracle RAC (Real Application
Clusters), then multiple instances, usually on different servers, attach to a central
storage array. This scenario offers advantages such as better performance,
scalability and redundancy. However, support becomes more complex, and many
sites do not use RAC. n version 10g, grid computing introduced shared resources
where an instance can use (for example) CPU resources from another node
(computer) in the grid.
The Oracle DBMS can store and execute stored procedures and functions within
itself. PL/SQL (Oracle Corporation's proprietary procedural extension to SQL), or the
object-oriented language Java can invoke such code objects and/or provide the
programming structures for writing them.
S9orag0
The Oracle RDBMS stores data logically in the form of tablespaces and physically in
the form of data files ("datafiles").
[5]
Tablespaces can contain various types of
memory segments, such as Data Segments, ndex Segments, etc. Segments in turn
comprise one or more extents. Extents comprise groups of contiguous data blocks.
Data blocks form the basic units of data storage.
There is also a partioning feature available on newer versions of the database, which
allows tables to be partitioned based on different set of keys.
Oracle database management tracks its computer data storage with the help of
information stored in the SYSTEM tablespace. The SYSTEM tablespace contains
the data dictionaryand often (by default) indexes and clusters. A data dictionary
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consists of a special collection of tables that contains information about all user-
objects in the database. Since version 8i, the Oracle RDBMS also supports "locally
managed" tablespaces which can store space management information in bitmaps in
their own headers rather than in the SYSTEM tablespace (as happens with the
default "dictionary-managed" tablespaces).
D8k fI08
At the physical level, data files comprise one or more data blocks, where the block
size can vary between data files.
Data files can occupy pre-allocated space in the file system of a computer server,
utilize raw disk directly, or exist within ASM logical volumes.
Source: http://www.oracle.com/us/corporate/index.html

































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PPENDIX 2: Electronic KANBAN

Electronic KanBan is a software tool that dramatically simplifies the process of
implementing and maintaining a lean / visual execution system. Electronic KanBan is
a sophisticated bin calculation, management and execution system.

Electronic KanBan streamlines the process of generating an order for kanban items
to a simple wand of a barcode. Just wand a bin and an order is created. A second
wand receives and closes the order, generates the appropriate inventory
transactions and can be tailored to backflush labor and materials.
Electronic KanBan can also be tailored to automatically send an e-mail notification to
key personnel and vendors when a kanban event occurs. The system can even be
tailored to send an end-of-day cumulative demand notification to streamline
communications.
Electronic KanBan can make the operation more efficient. Electronic KanBan is
simple to use, easy to implement, and offers a quick return on investment. f you are
not currently utilizing lean visual techniques and need guidance, our team of
manufacturing experts can help you implement the techniques that will work best in
your unique environment.

Source: http://www.electronickanban.com/documents/electronic_kanban.pdf

















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