Boeing Australia Limited – E procurement Executive Summary As Russell Menere, I recommend the management of Boeing Australia Limited to follow the footsteps of Boeing US to adopt and implement cost effective e-Procurement system, which can be interfaced with the legacy information system as we have IT infrastructure in place that is our core strength. Through e-Procurement system we can improve redundancies in the business process and operations, gain in productivity by upgrading procurement processes. Cost savings by reducing processing time, rationalization of a large number of BAL suppliers and maintaining relationship with Key Suppliers.
Investing in an e-procurement system BAL would seek short term improvement tool that would simplify the procurement process across different division and support complex interfaces with suppliers. We can broaden our scope to include reverse auctions tool as well. Key Assumptions I would assume that the management has approved a reasonable amount for the cost of setup, implementation, training, interface and support of e-Procurement system with the BAL legacy system. Assuming that the BAL key suppliers have no problems with the changes to the procurement processes.
Statement of issues The main issue is processes. There are redundancies in the business process low productivity and high processing time in procurement processes, a large number of BAL suppliers and relationship with Key Suppliers is not maintained. BAL is having budgetary constraints to invest in an expensive new system and set up complex interfaces within inter organization and with suppliers. Existing legacy system is having large information system across the organization. A list of possible barriers is as listed below Barriers to e-procurement Upper Management Support / Lack of Leadership •Other Competing Initiatives •Resistance to change •Lack of a widely accepted solution •Magnitude of Change •Complicated procedures and extended relationships •Lack of technical expertise •Security in the process – Data transmission to the wrong person •Confidentiality of information – unauthorized viewing •Prevention of tampering with documents -changes to documents •Different national approaches to e-procurement •Proof of intent – electronic signatures •Clarity of sender and tendered information •Enforceability of electronic contracts Information technology investment costs •Cost of assessment of systems to find correct system to fulfill tasks •Internal Compatibility •External Compatibility •Investment in compatible systems •Reluctance to ‘buy-into’ one off system The major impediment is the Size of Company as the separate categories of commodities should have a volume enough so that it looks attractive to the suppliers for going in to an e-auction and going in to long term contract. These vendors are to be given a visibility of the order size during the contract period so that they can weigh their options.
Criteria The Boeing Company’s vision is interpreted according to the organization of the various divisions who are committed to the corporate vision by keeping customer as center and cost reduction with a good quality. Reverse Auction A reverse auction is an electronic auction where buyers enter requirements, and Suppliers bid to provide the required goods and services. It is conducted in real-time, And bidders see the offers of competitive bidders but no the names of the other Bidders. The bidding prices move downwards as the auction progresses.
The consortium of vendors participating in the e-auction process should be prescreened and graded on an index point scale on various attributes like Quality, Delivery timelines, financial standing, Competitors, market standing and other Customer feedback. The steps in a reverse auction: • Define the event. • Prepare suppliers. • Develop item specifications and auction parameters. • Conduct an RFQ period. • Run the auction. Potential Costs and Benefits The major costs involved are mainly under the following heads 1. Software cost. 2. E-procurement platform hiring fee. 3. Training Costs to all relevant employees and vendors. . Vendor classification and grading and appraisal cost. 5. RFQ and RFA clarification with vendors: Time cost. 6. Administrative costs. 7. Time involved in analysis and award of contract. 8. Quality check mechanism cost. Benefits •Process cost savings – (Tender / Purchase Process) •Service / Material / Product Cost Savings. •Reduced Waste •Transaction Administration Cost Savings •Reduced Administration •Increasing Profit Margins •Strategic Cost Savings •Enhanced Inventory Management •Decrease in Costs through reduced staffing levels •Shortened Overall Procurement Cycle Times •Shortened Communication Cycle Times Reduction in time through greater transparency(Less objections) •Reduction in Evaluation Time •Reduction in Time through improved internal workflow •Reduction in purchasing order fulfillment time •Reduction in time through increased visibility •Increased Quality through increased competition •Increased Quality through Benchmarking (Market Intelligence) •Increased Quality through increased visibility in the supply chain •Increased Quality through increased efficiency. •Increased Quality through Improved Communication •Gaining Competitive Advantage Recommendations In such competitive scenario E-procurement is apt solution for Boeing Australia.
I would recommend making relevant lots of commodities focused under various categories and offered to relevant set of vendors to give them a good business perspective and gain competitive advantage to the company during the contract period. All the bigger $-value lots to be awarded under e-auction and smaller lots can be awarded through open auctions for low risk items. An Online system should be aligned with vendor systems can be developed to process in time orders and payments. These steps will provide Boeing reduced cycle times, determine market price of goods and in turn reduce overall cost of goods.
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