Wesley kiprop kilach.
Supervisor. Evans Obare
EFFECTS OF ELECTRONIC PROCUREMENT ON
SERVICE DELIVERY AT MOI UNIVERSITY COLLEGE OF HEALTH SCIENCES.
CHAPTER ONE
1.0 INTRODUTION
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.
Student/Academic
scholars:
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.
Organizations:
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.
CHAPTER TWO:
2.0 LITERATURE REVIEW
2.1 Introduction.
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.
(b) E-MRO.
(c) E- Sourcing.
This
is the use of internet for the identification of new suppliers for a category
of purchasing requirements.
(d) E-tendering
(e) E-informing
(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.
A.T.M
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
-Arquition costs
-Holding costs
-costs of stock outs
2.2.17 Logistics and E –commerce
2.2.18 Costs reduction techniques
-Re-examine strategy
-establishing the core base
-set cost reduction targets
-inventory view
-competitive view
-operation view
-identify potential initiatives
-external comparative analysis
-cost structure analysis
-internal comparative analysis
-management knowledge
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.
-Re-order point
-Safety stock
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)
2.2.24 Summary
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
Dependent
variable
|
SERVICE DELIVERY
-Teaching
-Transport
-Research
-Catering services
-Central services
|
Independent variable.
Dependent variable
|
E-PROCUREMENT
|
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 Benefits
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.
CHAPTER THREE
3.0RESEARCH DESIGN
AND METHODOLOGY
3.1 Introduction
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
|
Department
|
Employees
|
|
Purchasing
|
30
|
|
Finance
|
20
|
|
Information technology
|
7
|
|
Top management
|
3
|
|
Totals
|
60
|
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
|
Department
|
Target population
|
Sample Size
|
|
Purchasing
|
25
|
20
|
|
Finance
|
10
|
10
|
|
Information technology
|
5
|
7
|
|
Top management
|
2
|
3
|
|
Totals
|
42
|
40
|
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.
