Wesley kiprop kilach.
Supervisor. Evans Obare
EFFECTS OF ELECTRONIC PROCUREMENT ON SERVICE DELIVERY AT MOI UNIVERSITY COLLEGE OF HEALTH SCIENCES.
This chapter discusses the background of the study, the statement of the problem, objectives of the study ,research questions, significance of the study, scope of the study and limitation of the study.
1.1Background of the study.
Since its inception in the late 1990’s to its current form electronic procurement has undergone changes to match today’s best reality shows from a pledging application that only solved half the problem to the twin automated creation that can offer organizations the true ROI and cost saving, the value electronic procurement continues to flourish.
Over the last decades, a wide variety of electronic procurement tools has changed and continues to change the procurement landscape. Potential benefits of electronic procurement application such as reverse, logistics, purchase to pay and supplier relationship management systems have been widely recognized in practice showing shorter order cycles,time,cost saving opportunities, the possibility to leverage spend and create compliance process and contracts (De Boer 2002).
Through these lines markets, buyers, can do one-stop,comparison shopping for thousands of suppliers and select the best source orders, make payments and receive invoices.Fundemental features of these procurement mechanisms distinguish them from extranets. They are open networks with potentially larger pool of business partners their member firms. And they give firms more flexibility and opportunities of searching for and selecting suppliers or customers potentially resulting in more attractive pricing. on the other hand, current electronic markets are limited in supporting information sharing and collaboration between suppliers and buyers .An important practical business process-related questions facing firms in this technology investment and adoption context is: To be or to B2B? More specially, what electronic procurement channel should be selected, depending on the competitive conditions, firm’s characteristics and the various important qualities of the systems solutions? An extranet ? Or an electronic market? And how important are network externalities? To provide insights and answers to these questions ,will develop and analyze a formal game theoretic economic model of buyers choices in adopting either the extranet or the electronic market- electronic procurement channels our analysis focuses on understanding the factors that lead a buyer to select one –electronic procurement channel versus the other. Electronic procurement is a process of purchasing goods and services electronically and can be defined as the use of intergrated (commonly web- based) communication systems for the conduct of part or all of the purchasing process. A process that may incorporate stages from the initial need Identification by users or user departments, through search, sourcing, negotiation, receipt and post-purchased (De-Boer 2002)
1.2 Statement of the problem
Electronic procurement can be an important part of a firms or company’s overall strategy to reducing costs. Historically, the individuals or departments responsible for purchasing an organizations goods and services relied on various methods for doing so. The most basic including placing orders via email, telephone or fax. Electronic procurement methods generally referred to as e-procurement potentially enable the procurement process to unfold in a faster more efficient manner and with minimal errors. These methods include Electronic data interchange (EDI) online markets or electronic market places, and various blends of the two in January 2001 work management article, a report from e-net revealed that 70 percent of companies and organization in the finance and retail sectors used the internet for some purchases, The adoption rate was much less among manufacturers, where only 17 percent used formal electronic procurement systems. Besides varying from organization to organization, different organizations use different blends of traditional and electronic procurement methods and individual electronic procurement systems themselves may incorporate traditional capabilities like, faxes or telephone.
Using an electronic means for purchasing ,buying companies or organizations like moi university college of health sciences can reduce order entry costs and inventory management costs and at the same time get quicker responses from their suppliers. IOS efficiency benefits are generated by reduced flow time and costs of document generation and transmission, improved data integrity and fewer errors . Due to all this factors the researcher intends to investigate the effect of electronic procurement as a method of purchasing in moi university college of health sciences.
1.3 objectives of the study.
The purpose of this study was to investigate on the impact of electronic procurement on service delivery at moi University College of health sciences. The specific objectives of the study were:
(i) To determine the effects of electronic procurement on service delivery at moi university college of health sciences.
(ii) To establish the strategies put for effective functioning of electronic procurement in purchasing at moi university college of health sciences.
(iii) To establish the benefits of electronic procurement in purchasing at moi university college of health sciences.
(iv) To find out the challenges of applying electronic procurement in purchasing at moi university college of health sciences.
1.4 Research Question
From the objectives of the study the researcher formulated the following research questions. This research questions were used as a means of summarizing the research objectives .They include:
(i) What is the effect of electronic procurement in purchasing at moi University College of health sciences?
(ii) what are the strategies for effective functioning of electronic procurement in purchasing in moi University college of health sciences.
(iii) What are the benefits of electronic procurement in purchasing at Moi University college of health sciences.
(iv) What are the challenges of applying electronic procurement in purchasing in moi University College of health sciences?
1.5 Significance of the study
This research study is set to benefit both the public and the members of staff in the organization. This entire people shall benefit from the study as they shall learn from the policies of implementing electronic procurement in the organization.
The study assists the students of purchasing and suppliers’ management as the information will be vital for their training needs in management courses .in addition the findings will add to the existing body of knowledge in procuring entity. The stakeholders will use this study as an indicator in the performance of an organization procurement.
These would be primary beneficiaries of the research .For purchasing policy purposes this study may act as an eye opener in terms of procurement information technology. The study will also contribute to the literature in the procuring sector in information technology and online procuring that may boost procuring performance of an organization.
1.6 Limitations of the study
The following limitations were encountered by the researcher while carrying out the study.
Lack of co-operation from the members of staff which resulted in some the respondents, viewing the study with suspicion and probably fears that the information could be used to their disadvantage. The findings was only generalized within the organization if there was need to extend these generalizations to other organizations, differences in geographical locations and students characteristics should be taken into consideration. Due to inexperience of the researcher, the study was limited to a smaller size and few numbers of respondents . individuals differences in the organization also contributed to behavioral phenomenon observed in a given setting. Therefore data obtain from this study varied from other group setting. However , despite the above mentioned shortcomings the researcher took various measures to ensure that the process was objective and accurate. Therefore the findings of the study were cautious in general applicability in various Kenyan organization sectors and its environment.
1.7 Scope of the study
The scope was undertaken at Moi University college of health sciences ,opposite MTRH. The study was basically focused on the effort of electronic procurement on service delivery in moi university college of health sciences.
The study applied a case study research design and target populations of 40 employees draw from various departments. The sample size was derived using census random sampling. Data was collected using questionnaires.
2.0 LITERATURE REVIEW
The main purpose of this literature review is to identify and examine what has been done by other scholars and researchers in relation to E-Procurement as a method of purchasing .This review also assists the researcher to limit the problem to define it better. A detailed knowledge of what has been done helps the researcher to avoid unnecessary and unintentional duplication of other projects , demonstrates familiarity with the existing body of knowledge form a framework within which the researcher findings are to be interpreted and finally to overcome limitations of previous studies.
2.2 past studies.
The advent of the internet as a business platform has been a catalyst for major changes in the operation and status of organizational procurement. Early E-procurement literature forcast significant improvement in procurement costs on improving status of the purchasing fuction and changes to the structure of supply markets . The study seeks to evaluate the validity of these forecasts through the development of the structural model of the e-procurement effect. This model is intented to define the dynamics of the e-procurement process in an organization and provide a foundation for a research stream into the transformational effect of e-procurement deployement (yetton ,2000)
Broadly speaking , business –to-business e-procurement involves conducting business with suppliers , customers and other companies through computer and telecommunication technologies.
During the 1990’s organizations began to deploy information systems to support information sharing and communication with suppliers , distribution channels and customers .cash and kinsynki (1985)
These IOS’S started the practice of B2B e-procurement and Electronic procurement , Albeit outside the scope of the technological innovations associated with the internet today. The fuctions of such IOS range from simple order entry and invoicing to product, promotion, to document data sharing, to joint product development and knowledge transfer (Jonhson and vitale,1988,Riggins and Rhee,1999 ,chatfield and Yetton,2000).
2.2.1 Meaning of E-procurement (Electronic procurement)
Sometimes also known as the business to business or business to customer or business to government purchase and sale supplies works and services. E-procurement is the business to business purchase of goods and services through the internet.E-procurement can be implemented through either manual process or using automated softwares such as Enterprise Resource planning (ERP) tools.
2.2.2 Types of E-procurement.
There are several types of e-procurement each of which offers benefits to maintaining enterprises in ensuring both materials are delivered in time to meet production schedules and that they are at best price of maximizing profit margins. They include.
(a) Web based Enterprise Resource planning.
(c) E- Sourcing.
This is the use of internet for the identification of new suppliers for a category of purchasing requirements.
(f) E-Reverse auctioning
(g) E-market sites
2.2.3 Benefits of E-procurement.
(a) Increase efficiency in executing purchase orders and other transactions
(b) Broadening the pool of suppliers
(c) leverage volume
(d) Based auction
Benefits of E-procurement to suppliers .
Reduction ordering and processing times , costs , of credit control substantial increase in operating efficiency and shorter order cycle.
2.2.4 Adaption of E-procurement systems.
The adoption of E-procurement systems requires the participation of multiple firms ,among which certain firms will act as initiators by selecting the procurement channel and strongly encouraging their business partners to adopt the related technology , more often than not,buyers play the role of initiators and suppliers are followers. e.g chrysler launihed its EDI program in 1984 and ,according to mukhopadhyay,kekreand kalathur (1995),almost all its suppliers adopted this network by 1990. More recently ,when big buyers start to more to online markets ,they also request specific suppliers to participate to make the solutions viable.Texas – based schlumberger for example ,asked its suppliers to participate in commerce ones markets site was chosen as the purchasing channel for schlumbergers office supplies .
However , buyers often find that they have induce suppliers to join the electronic networks such as EDI system by subsidy or punishement (Banua and lee ,1997) more importantly in addition to internal operational efficiencies ,buyers benefits are also related to the benefits that suppliers can appropriate, and result in significant incentives for suppliers to participate. As a result buyers selection of extranets versus e-markets will depend on their own and their suppliers costs and benefits involved in adopting e-procurement systems.
We next consider the benefits and cost of the two potential e-procurement channel choices. Extranets and electronic markets. Our assessment provides a basis for formal modeling for buying firm. Adoption choices in away that reflects what we know about the literature and current industry practices (Barua and lee,1997)
2.2.5 Role of management in implementation.
To implement an attractive internet procuring it is necessary to give to the information system capacity to deliver the same information by all the distribution channel whether the place the hour, or date of the access. This is a challenge to African bank managers and their responsibilities to consider this (sahut 2001).
2.2.6 Choices of Electronic Distribution channel.
2.2.7 The internet structure of Retail Brach outlet
2.2.8 The buyers operational efficiently.
2.2.9 Suppliers benefits
Comperative efficiency and competitive advantage
2.2.10 Bargaining power Transfers
2.2.11 Contractual payment Transfers
2.2.12 System setup costs
2.2.13 Buyers subsidy
2.2.14 Effects of Electronic markets
2.2.15 Costs of E-procurement
2.2.16 Aims of E-procurement management
-costs of stock outs
2.2.17 Logistics and E –commerce
2.2.18 Costs reduction techniques
-establishing the core base
-set cost reduction targets
-identify potential initiatives
-external comparative analysis
-cost structure analysis
-internal comparative analysis
2.2.19 Stock valuation.
Central of stocks refers ………
Stock value –categories stock further ,according to its value
2.2.20 Economic order quantity and Economic production quantity models for inventory management. Inventory control is considered with minimizing the total costs of inventory in uk the term
The three main factors of inventory control decision making process are .The costof holding the stock, e.g based on the interest of rate, the cost of placing an order for raw materials stocks or the set- up cost of production and cost of shortage. i.e what is the cost if the stock is insufficient to meet all demand.
2.2.21 The importance of using Technology on procurement. Organizations operating in a very competitive environment can obtain cost advantage by using technology to for example sell electronically ,keep potential actual customers informed about product information through web page ,keep electronic records sales information and Electronic point of sale (EPS) and through liking this to an IT stock and reporting system knew when to purchase new supplies of inputs.
Customers can also be kept informed if the organization has a web page. Information giving products details and on-line booking buying from organization brings significant advantages to both the customers and the organizations.
The fact of the web operates 24 hours a day is not affected by time zone shutdowns and is available through out the world , allows organizations to communicate with customers oversees and enter foreign markets without the costs to establishing a physical presence.
If information technology systems has been designed properly and managers/ users trained in using the system. The information is likely to be up- to –date, accurate and relevant .Thus managers /users can utilize this information to make informed decisions than if they came from a manual system, where its not likely to set- up to the minute. Having the latest information is important for making decisions regarding to the pricing and the purchasing of products for sale and for deciding on future action information technology in an organization can also reduce material management costs. According to agency theory, the organization is viewed as ;views of contruct among self interested individuals rather than a unified profit maximizing entity (Bradly 1990).
2.2.22 Application of IT to organization performance IT as a tool.
It can be considered as a tool. People can use IT to support them in their work such as for calculating ,word processing , producing spread sheets ,diagrams ,tables ,and even for computer aided design and manufacturing. IT can enhance task performance (Jeeup, 2003)
-IT for automating
-IT for embedding
-IT for information business data
-IT for communicating
2.2.23 Critical Review
According to seidmann and sundararajan (1997) in comparative efficiently, suppliers can obtain competitive advantage by joing e- procurement networks. Besides the ordering and invoicing information. According to Ovans,(2000)
2.2.25 Conceptual framework.
There are two variables on this topic independent and dependent. The independent variables is effect of E- procurement while dependent variables is organization service delivery .The research on this topic reveals that both positive and negative correlation between E-procurement and organization service delivery.
Fig. 2.1 Conceptual framework.
Illustrution of dependent and independent variables
Buyers operation efficiency
Using an electrical means for purchasing buying companies can reduced order entry costs and inventory management costs and at the same time get quicker responses from their suppliers.
IOS efficiency benefits are generated by reduced flow time and costs of document generation and transmission, improved data integrity and fewer errors. The savings come from reducing inventory holding costs,obsolute inventory costs and transportation costs .E-procurement systems also cut down on the time and cost of purchasing by reducing the amount of time employees spend ordering supplies and freeing them to do their jobs.
Easy access of information,
Access to buyers, business information, including inventory management data, and product design and sales data, has potential to increase the suppliers bargaining power in buyer-supplier relationships.
Once suppliers have such information, buyers will find it difficult to control the use of these resources and inevitably become more vulnerable to supplier opportunism. As a result suppliers will gain bargaining advantage relative to their buyers for pricing and more beneficial contract terms. From the point view of buyers this is a cost due to sharing business information with the suppliers.
Suppliers also benefit from joining the buyers electronic procurement network. Since the amount and nature of information shared between buyers and suppliers will greatly affect the value that suppliers can extract from the relationships, we identify two different components of supplier’s benefits. Comparative efficiency and competitive advantage. Comparative efficiency comes from lower cots in producing goods or services than competitors through sharing, ordering and invoicing information electronically with buyers. The response time for feedback on product availability and price will also be reduced .Another benefit is that suppliers will be able to provide a lower level of customer service since buyers can shop and track electronically by self-service.
3.0RESEARCH DESIGN AND METHODOLOGY
This chapter discusses the design and methodology used in collecting and analyzing of data. This chapter contains target population sampling design and procedure of data collection instruments and data analysis.
3.2 Research Design
The study used a case study research design. The researcher preferred a case study approach as explained by sekeran( 2000) it involves in depth ,constextual analyses of similar sitituations ,Hence it is appropriate to observe impact of E-procurement on organization service delivery and also get a general representation of the population. (Sekeran 2000)
3.3 Target population
The target population refers to the group of people or study subjects who are similar in one or more ways and which forms the subject of the study in a particular study. The target population was 62 employees. Data was presented on the table 3.1
Table 3.1 Target population
3.4 Sampling Design and Procedure.
The researcher adopted census technique. Census method involved identifying inclusion of all the target population due to the small population targeted. The method ensured equitable representation of the population .Table 3.2 below illustrates the sample size.
Table 3.2 Sample size
3.5 Data collection Instruments.
The researcher prepared questionnaires as the main questionnaires included both open and closed ended questions. The researcher adopted the questionnaires as the main data collection tool because it is simple to interpret and analyze.
3.6 Data collection procedure
Data collection was done using questionnaires as the main data collection tool. The questionnaires were personally administered. The organization was informed earlier before the data commences to make the respondents aware of the research to take place in their organization. The questionnaires was distributed on the day of data collection and left for a period of seven days to be filled.
3.7 Validity and Reliability.
Validity is the extent to which differences found with a measuring tool reflect true differences among respondents being tested. The purpose of validity in the study is to seek relevant evidence that confirms the answers found with the measurement device which is the nature of the problem. The validity of the instrument was entered through constructive criticism from the project supervisor who has had an experience and expertise in questionaire construction.The item were revised and improved according to the supervisors advice and suggestions on the other hand reliability is the accuracy and precision of a measurement procedure.
The reliability of the instrument was improved through piloting and protesting. Piloting testing involves the detection of weaknesses in design and instrumentation and to provide proxy data for selection of a probability sample while pre- testing involves relying on colleagues, respondents or actual respondents to refine measuring instrument validity and reliability of the instruments was done in order to limit the distorting effects of random efforts on the findings .
3.8 Data Analysis and Presentation.
The study used descriptive statistics data analysis technique to analyze data. This ensured that the data was analyzed in a systematic way in order to come some useful conclusions and recommendations.Data was obtained from the questionnaires and document analysis was coded, organized, analyzed and presented using frequency tables and percentages.