Procurement Process and Supply Chain: Analyzing the Impact of New Technologies on Procurement

Procurement Process and Supply Chain: Analyzing the Impact of New Technologies on Procurement

Florea Nicoleta Valentina (Valahia University of Targoviste, Romania)
DOI: 10.4018/978-1-7998-0202-0.ch010

Abstract

Organizations are operating in an environment which offers opportunities but also dangers, risks, changes, and challenges. To face these changes, organizations must develop effective strategies based on relationships with stakeholders and profit decisions, and cost-based in order to obtain competitive advantage. To satisfy customers' needs, the organizations seek a position of superiority over its competitors. To deploy its activities and to achieve its objectives, any organization must dispose resources such as material, human, financial, informational, and technological. This chapter treats a very interesting theme, that of procurement, as commercial activity, in the complex activities of organizations. The chapter starts with the literature in the field and presents the evolution of the process, the objectives, the roles, the functions, the activities, and the typology. The author presents the impact the new technologies have on procurement process, using a simulation model, based on mathematical and statistical models and IT programs.
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Introduction

Alongside the human, financial, information and technological resources, an organization, in order to carry out its activities and achieve its objectives, needs also material resources, such as goods (supplies) and services, which are obtained through procurement process directly from the surrounding environment or indirectly from suppliers, contractors or engineering firms who may be subjected to a transformational complex, modern or traditional and original transformation, obtaining new products and services who may be offered to the consumers having a certain quality, a desired quality, at a certain moment and at a certain price.

Willing to maximize added value and minimize costs, and satisfy consumers’ needs (because they are the focus of any business) (Florea & Duica, 2017, p. 47), an organization must build a successful procurement strategy, known at all its levels, by having an effective organization structure, inform all specialist about the costs existent in the procurement process, and an efficient flow of goods.

Procurement department is involved in buying many items such as (van Weele, 2009, p.34):

  • production-related items: raw materials, catalysts and semi-manufactured products,

  • indirect materials: spare parts, office supplies, cleaning materials and work clothes,

  • investment goods: buildings, manufacturing equipment and computers, trucks, cars, etc.

Not all the goods and services bought by many companies are obtained by the procurement department.

Obtaining these supplies is an action of financial agreement of buying material resources, services or products, being a transaction between a seller and a buyer and comprises:

  • Development of a procurement strategy,

  • Making the documentation,

  • Selecting the future contractors:

    • o

      Implying the clients,

    • o

      Motivation or changing the contractors (choosing the right suppliers, with the right quality and the right price, closing the contracts, obtaining warranties, managing risks and loosing, etc.),

    • o

      Managing risks (cash flow) (Bower, 2003, p. 3, 4, 19, 20, 26, 31), which became a critical tool of added value by improving performance and reducing costs (Turner, 2011, p. xiii), but taking into account strong principles, such as: ethics, social responsibility and sustainable development in order to have control of its activities and obtain performance (Ochonma, 2015), and focusing on better transportation, inventory, motion, waiting, overproduction, over-processing, defects, and skills (Myerson, 2018, p. 5-6).

Obtaining of these supplies and services means procurement by various ways (loan, transfer or purchase).

This chapter has as objective to determine the impact could have the Internet on procurement process along supply chain. This analysis used data from European level between 2010 and 2018, mathematical models and IT simulation to observe the relationship between the analysed variables (the number of enterprises having purchased online, digital single market- promoting e-commerce for businesses, use of computers and the internet by employees, enterprises with internet access), and to determine some measures from time in order to reduce the eventually risks, costs, and negative implications.

Key Terms in this Chapter

Regression Function: is an omnipresent tool used by many persons and specialists which may measure the link between two or more variables, the impact of a variable on other variables, and to determine important cause and effect relationships.

Simulation Techniques: are those processes based on using different sciences as mathematics, econometrics, statistics and informatics in order to help specialists to see future possible actions or approaches, based on using data from the past and create models necessary to predict risks and errors which may appear and could be reduced their impact and most of all reducing costs and increase skills and knowledge through relationship and multidisciplinary work team.

Supply Chain Management: the management of the flow of goods and services (according to strong principles as trust, sustenability, responsibility, equity, ethics, transparency, and increased quality of products and human capital), involves the movement and storage (using different networks) of raw materials and goods from producer to consumer.

Procurement: is an important process of commercial function with long-run impact over the performance of organization, and help specialists to deal with suppliers to acquire material resources, in order to deploy in good conditions its production activity, at the best cost, quality, quantity, time, and location.

Internet: is formed by unifying the term interconnected and the term network used by the specialists and organizations in many fields and especially in procurement field in order to offer new programs, tools and instruments which may reduce costs, improve quality, improve employyes skills and knowledge and the relationships between organizations and suppliers.

E-procurement: is a purchase process found under the impact of the new technologies, and help develop new programs as e-vendor, e-sales, e-commerce, e-purchase, e-invoicing, e-payment, e-ordering, reducing costs, linking suppliers and organizations anytime, anywhere, improving continuous replenishment, reducing time, improving relationship.

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