e-PROCUREMENT ADOPTION BY SUPPLIERS

Enablers, Barriers and Critical Sucess Factors

Paulo Andrade

PT-SI, ISCTE, Avenida Jacques Delors, Portugal

Bráulio Alturas

ADETTI, ISCTE, Av. das Forças Armadas, Portugal

Keywords: e-Procurement, Collaboration, e-Commerce, B2B.

Abstract: This paper presents a current research with the aim to identify the enablers, barriers and critical success

factors for e-procurement adoption by suppliers. Any successful e-procurement system needs suppliers

disposed to trade electronically. We present a review of the actual literature about e-Procurement, with

focus on the barriers, enabler´s and CSF´s already identified. A research methodology is proposed to study

the problem, and this work will contribute to better address the issues faced by suppliers on e-procurement

implementations.

1 INTRODUCTION

E-procurement allows buyers to automate

transactions and focus on more strategic activities. It

has ben defined as “the use of electronic

technologies to streamline and enable the

procurement activities of an organizations” (OGO,

1999).

E-procurement solutions contribute to a better

organizational performance, allowing reductions in

cost and time when ordering from suppliers, and

helping to achieve a well-integrated supply chain

with the objective of reaching the market as quickly

as possible with the right products and services in

the most cost-effective manner (Hawking, Stein, &

Wyld, 2004).

Although there are many benefits in e-

procurement solutions, there also appears to be some

barriers to their successful implementation. Former

research shows that numerous companies still prefer

the traditional methods (telephone, fax and e-mail)

to communicate and exchange with business

partners. Companies need to better understand how

to implement e-procurement solutions in an efficient

and effective manner. Any successful e-procurement

system relies on suppliers that are willing and able to

trade electronically. Their co-operation is crucial to

the project's success. This degree of openness and

transparency is new to most organizations, and it

requires relevant cultural changes and high levels of

trust between the participants (Harris & Dennis,

2004).

Users of e-procurement technologies reported

that they can acquire goods over the Internet from

only 15 per cent of their supply base (Davila, Gupta,

& Palmer, 2003). A report from EU also confirms

that only 13% of EU enterprises are receiving orders

online (EU, 2005). If suppliers are not involved from

the beginning,then a low adoption rate can constrain

buyers from leveraging the full associated

capabilities from e-procurement solutions. The lack

of a critical mass of suppliers accessible through the

organization’s e-procurement system might limit the

network effect that underlie these technologies,

further delaying the acceptance and adoption of the

technology.

Suppliers need to be convinced about e-

procurement benefits. E-procurement may not

guarantee additional sales but it can provide many

other benefits like lower transaction costs and faster

payment through better invoice processing.

However, small and medium entrepises (SME´s) in

particular may experience a number of barriers that

need to be overcome. The main issues must be

addressed to achieve effective electronic trading

196

Andrade P. and Alturas B. (2009).

e-PROCUREMENT ADOPTION BY SUPPLIERS - Enablers, Barriers and Critical Sucess Factors.

In Proceedings of the International Conference on e-Business, pages 196-201

DOI: 10.5220/0002184101960201

 SciTePress

between companies.

2 LITERATURE REVIEW

2.1 Supply Chain Management and

Collaboration

Supply chain management includes the planning and

management of all activities included at the sourcing

and acquisition process. According to the Council of

Supply Chain Management Professionals (CSCMP,

2008), supply chain management encompasses the

planning and management of all activities involved

in sourcing and procurement, conversion, and all

logistics management activities. It also includes

coordination and collaboration with channel

partners, which can be suppliers, intermediaries,

third party service providers, and customers. In

essence, supply chain management integrates supply

and demand management within and across

companies.

The Web and associated technologies facilitate

the constitution of collaborative networks, which

enable collaboration and sharing of information

among companies. Collaboration may range from

intra-organizational to inter-organizational and

across the boundaries of the organization.

The procurement is an integral component of an

organization supplier relationship management

strategy, and often is the ﬁrst and major step towards

trading partner collaboration (Gilbert, 2000).

Collaboration between supply chain members also

requires the exchange of sensitive information. Teo

and Ranganathan (2004) argued that the heart of

B2B e-commerce was in inter-organizational

collaboration and it required a fundamental shift in

the organizational mindset to collaborate and engage

in effective B2B e-commerce.

2.2 e-Commerce

E-commerce is the process to buy, sell or exchange

products or services across the internet. In a business

perspective the e-commerce definition is much more

than simply buying and selling goods and services. It

also represents the collaboration with business

partners and electronic transactions between

organizations. Different models of e-commerce have

been presented in order to describe the nature of

these transactions. When all members are companies

or other organizations, the type of association is

named business-to-business (B2B). A B2B

association can be supported by the company’s

private network or have an extranet basis, taking

advantage from the internet to establish multiple

networks.

Electronic marketplaces allow collaboration and

data sharing within or across industries. They are

attractive to both the buy and sell-side organizations

for different reasons. On the buy side they provide

demand aggregation, enable quick and easy

supplier comparisons, and allow activity

reporting, strategic sourcing, and so on. On the sell

side, they provide low-cost introduction to

customers, better capacity management and efficient

inventory, production management via demand

aggregation, and analytics that help suppliers

position their product better in the market .

There are several criteria for classifying e-

marketplaces. Kaplan and Sawhnew (2000) offered a

classification based on the type of goods and the

way these goods are purchased. An e-marketplace

can either provide indirect goods that support the

business process or the direct goods used in

production. The way the buying process occurs can

fall into two categories: long term contractual

buying between two entities, or a one-time (spot)

purchase with no long term relationship between the

two parties.

It is also possible to classify the e-marketplaces

based on their degree of openness. E-marketplaces

with a high degree of openness are those accessible

to any company. At the other end of the spectrum, e-

marketplaces with a low degree of openness are

accessible only upon invitation. Based on this

distinction, Hoffman, Keedy and Roberts (2002)

recognized three main types of e-marketplaces:

public e-marketplaces, consortia and private

exchanges.

Figure 1: Main types of e-marketplaces.

E-procurement is closely related with supplier´s

selling activities. Kim and Shunk (2004) consider e-

procurement systems as various internet B2B

commerce systems, which are located at the buyer,

the supplier or at a third party, with the following

categorization:

 Buyer-centric e-procurement systems;

 Supplier-centric e-procurement systems;

 Neutral e-marketplaces;

e-PROCUREMENT ADOPTION BY SUPPLIERS - Enablers, Barriers and Critical Sucess Factors

197

 End-to-end electronic document/message

exchange systems.

It is common to distinguish direct procurement

from indirect procurement. The role of procurement

and the emerging use of large information systems

to conduct e-procurement was analyzed by Hawking

and colleagues (2004) and presented with the results

of a survey of 38 major Australian organizations.

The main results show that direct procurement is

heavily dependent upon traditional practices while

indirect procurement is more likely to use "e"

practices. Dedrick (2008) also found that the use of

electronic procurement is associated with buying

from more suppliers for custom goods but from

fewer suppliers for commodity goods. In an

efficiently functioning transparent market, few

suppliers are sufficient for commodity goods,

whereas for custom goods the need for protection

from opportunistic vendor leads to the use of more

suppliers.

2.3 e-Procurement Adoption

Companies are approaching e-procurement adoption

with different strategies. Davila and colleagues

(2003) identified two main types of companies. The

ﬁrst type is moving aggressively to adopt e-

procurement technologies, frequently experimenting

with various solutions. The second type adopts a

more conservative strategy by selectively

experimenting, typically with one technology.

(Davila, Gupta, & Palmer, 2003).

Also an increasing number of public institutions

identified electronic purchasing as a priority to e-

government. Many implemented or are

implementing e-procurement systems. The adoption

of e-procurement in public administration has a huge

impact since governments spent large amounts in

acquiring materials and services (Pereira & Alturas,

2007).

Country maturity in ICT also plays an important

role in e-procurement adoption by companies. A

report from European Union declares that e-business

activity is higher in companies belonging to

countries more advanced in their Information

Society those who are not so advanced (EU, 2005).

2.4 Enablers for Supplier Adoption

On this research, we considered enablers as the

factors identified as having a positive influence on

the adoption of e-procurement by suppliers. By

understanding the main enablers that influence

suppliers, companies can develop strategies to

leverage their adoption on e-procurement

implementation.

Suppliers need to gain conscience of the benefits

resulting from their adoption of e-procurement. For

suppliers, the adoption of e-procurement may be an

opportunity to expand their market. According to

Sharifi, Kehoe, and Hopkins (2006) they will find e-

procurement attractive because they could easily and

cost effectively reach new customers, improving

their sales. Also, on private e-marketplaces, by

making the electronic catalogue accessible in a

direct way to all employees and buyers, or using e-

hubs and e-commerce communities, the seller can

widely increase the number of selling’s (Berlak &

Weber, 2004).

The integration between the buyer and the seller

systems allows exchanging information

automatically. Therefore, it is possible for the buyer

to make an order more quickly. This will also reduce

the chance of occurring errors that are common

when an order is dependent on paper (Berlak &

Weber, 2004). Linking to a customer directly and

collaborating to ensure accurate and on-time

delivery provides better service and lower overall

procurement costs to the customer, and can result

in much more collaborative buyer-seller

relationships (Neef, 2001).

Carayannis and Popescu (2005) analyzed and

evaluated some electronic procurement projects

carried out by European Commission. They

concluded that the transparency of EU public

procurement market was improved by a systematic

use of electronic tendering. The improvements on

the transparency allow the involved stakeholders to

know how the system is intended to work, and all

potential suppliers have the same information about

procurement opportunities, award criteria, and

decisions.

In considering how e-procurement will impact

buyer-seller relationships Ellram and Zsidisin (2002)

argue that close buyer–supplier relationships have a

strong positive impact on the adoption of e-

procurement. Therefore, while e-procurement may

not deliver improved levels of trust, it has been

found that e-procurement transactions are more

likely to be established ﬁrst between partners in high

trust relationships. In addressing this issue, both

Croom (2001) and Kumar & Qian (2006) support

the view that increased use of e-procurement tend to

create more effective customer–supplier

relationships over time.

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2.5 Barriers for Supplier Adoption

For the purpose of this study, barriers are considered

as the factors not contributing to the successful

adoption of e-procurement by suppliers.

Cooperation with suppliers requires them to meet

the business criteria that organizations have set to

accept them in their networks. Since some of the

business models associated with e-procurement

technologies clearly envision the use of suppliers

with whom the buyer has not previously transacted

business, companies need to develop mechanisms

that provide the buyer with assurances that the

supplier meets or exceeds recognizable and industry

enforced standards (Davila, Gupta, & Palmer, 2003)

Buyers are concerned that e-procurement

technologies will push prices down to the point

where suppliers cannot invest in new technology or

product development, upgrade facilities, or add

additional productive capacity. Additional price

pressures can even push suppliers with a poor

understanding of their cost structure out of business

(Davila, Gupta, & Palmer, 2003)

For e-procurement technologies to succeed,

suppliers should provide sufficient catalogue choices

to satisfy the requirements of their customers.

Ideally, suppliers will provide e-catalogues in the

formats required by customers, reﬂecting custom

pricing and/or special contractual agreements and

will send updates on a regular basis (Davila, Gupta,

& Palmer, 2003).

The majority of the companies believe that

barriers include insufficient financial support, lack

of interoperability and standards with traditional

communication. Developing standards and systems

for facilitating effective interoperability with

traditional communication systems will help the

adoption of e-procurement fairly well with minimum

investment and changes to the business processes

through reengineering (Hawking, Stein, & Wyld,

2004).

A study conducted in SME´s revealed a lack of

knowledge of e-business related benefits. For those

companies e-business adoption is an incremental

process that involves on-the-job learning. This

means that companies beginning to do some online

sales are educating their staff through experience.

Experience will accumulate and companies will

move towards more online activities as they and

their business partners become more experienced

(Archer, Wang, & Kang, 2008).

2.6 Critical Success Factors

The factors that are critical to the successful

adoption of e-procurement have been identiﬁed

based on previous experience and literature

available. This could be deﬁned as the best practices

for the successful adoption of an e-

procurement solution.

The organizations who are implementing an e-

procurement solution should assess the impact of the

system on suppliers and their technological

promptness to implement the system at their end,

providing the services necessary for the system to

succeed. It is necessary to put together a supplier

adoption team, train the suppliers, and get them

synchronized with the organization’s

implementation (Rajkumar, 2001).

According to Davila and colleagues (2003)

providing suppliers with Internet or Intranet access

to company internal data, or integrating suppliers

applications with company information systems,

both key to supply chain management, is still

unusual. This observation reinforces the prudence

that companies must demonstrate on integrating e-

procurement technologies into existing systems and

relationships.

A study conducted in the Swiss market revealed

that the lack of supplier involvement and

infrastructure to optimize B2B processes was a

hindrance to integrate the B2B solution scenarios.

Integration solutions are not always offered

appropriate to suppliers and the majority of

companies agree that the position of the suppliers is

insufficiently considered (Tanner, Woumllfle,

Schubert, & Quade, 2008).

Some case studies in Scotland and Italy where a

supplier engagement process was developed,

documented and facilitated to ensure supplier’s

business and technical requirements were met

resulted in a high incident of supplier activity. In

contrast, the buyer centric approach adopted in

Western Australia meant that suppliers did not

understand the beneﬁts of joining the marketplace

and therefore were reluctant to join (AGIMO, 2005).

Figure 2: Enablers, Barriers and CSF for e-Procurement

Adoption by Suppliers.

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199

2.7 Research Questions and

Methodology

This research will provide a better understanding of

issues affecting the suppliers within an e-

procurement implementation. The research questions

formulated were based on the enablers, barriers and

CSF´s felt by suppliers when confronted with the e-

procurement adoption.

The following research questions will be

answered:

• What are the major perceived barriers to the

adoption of e-procurement by suppliers, and

how can they be addressed?

• What are the major perceived enablers to the

adoption of e-procurement by suppliers, and

how can companies explore it?

• What are the critical success factors to the

adoption of e-procurement by suppliers?

This effort started by reviewing the background

to the application of e-procurement, which was then

followed by various dentitions of e-procurement.

Subsequently, we made a review of the literature

available on the adoption of e-procurement by

suppliers with the objective of developing a

theoretical framework for determining the barriers

against, enablers and possible solutions for the

successful supplier adoption of e-procurement. The

questionnaire will be pilot tested by e-procurement

consultants and academics, before being sent out.

The proposed framework will be validated with the

help of empirical data collected from Portuguese

companies. Finally, based on the empirical results

and analysis, we will develop a framework for the

supplier adoption of e-procurement.

3 DISCUSSION

Based on the database that we hope to collect, we

plan to apply a quantitative approach to identify the

enablers and the barriers that influenc companies to

adopt e-procurement solutions. Besides, these

empirical evidences could be relevant for managers

of companies who seek better understanding and

predict the procurement of their products. We hope

that companies could leverage their e-procurement

implementations by engaging the maximum number

of suppliers, and to successfully collaborate on a win

to win basis.

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