In the modern world of business, businesses are operating in a world that has completely changed. The economic arena is different, competition has increased, and technologies have changed, placing a lot of demand for efficiency on companies. One of the areas that have been affected by the change is procurement within the supply chain. The trend is evident in the development of major technological systems that are emerging to streamline the supply chain. The use of electronic channels in procurement is being driven by the increase in the need for information and predictive analytics. E-procurement has emerged in the environment within which various information technologies are coming up. The paper discusses the trend involving the use of electronic channels in procurement, and radio frequency identification (RFID) as an example of this trend. The system is based on auto-identification system aimed at providing identification of a product, with a number of applications that allow coordination of processes within the supply chain.
Keywords: electronic channels, RFID, e-procurement, technology, supply chain management
The Trend of Information Processing in E-Procurement
The world of business has been changing in the recent past, changes that have come along with serious uncertainties. The operators within the business world have experienced an epoch of economic recovery since the 2008 global economic crisis (Alcalde & Dahm, 2013). However, this has not eradicated the concerns that things might take a downturn, especially because of the recent events, where the Britain has left the European Union and the election of Trump as the United States president. The events have led to major considerations by companies to look ahead and rethink their operational and production costs. The focus on cost-cutting is becoming evident, even as competition in the global market is becoming steeper (Monczka et al., 2015). The reality is leading to the considerations of assuming indirect procurement through electronic management of the supply chain. The move is critical, but it will only work for the businesses whose managers have adequate understanding of the trends in e-commerce for supply chain management.
Even before implementing technology in supply chain, one of the trends that should be understood is the nature of competition. It is only by understanding what the business is up against and what the competitors are doing that a business will be able to use e-supply chain for competitive advantage. With the increase in the globalization of markets, competition is a reality in various industries and sectors. As competition intensifies, the actors are realizing that competition is not only pegged on the rivalry between companies, but also between supply chains. The companies are not only competing in the markets for their finished goods, but also for the supply of the resources for their production processes (Alcalde & Dahm, 2013). Companies operating in the same industry are looking at the suppliers for common raw resources for the running of their operations. From such a viewpoint, Qrunfleh & Tarafdar (2014) noted that the company with an efficient supply chain will reach the suppliers easily and competitively. Hence, the focus should on streamlining the supply chain to beat the competition.
Companies are expected to develop effective strategies in their procurement management functionality to remain competitive. After all, the future will still be faced with critical competition in the supply chain operations. The future projects in organizations expected to include more intensive management of the supply chain. Hassini, Surti, and Searcy (2012) elucidated an increase in the demand for more effective function, under supply chain, including better control over the supplies obtained by the company, effective delivery, and elimination of wastage. In this arena, the projects that will be assumed by the companies are geared towards re-engineering of processes, consortium-based buying, and continued improvement of the overall supply chain. There is an increase in the demand for the sourcing organizations to modernize their tools and strategies and include professionals with the critical knowledge of the modern procurement tools and strategies (Alcalde & Dahm, 2013). Evidently, this is one of the most critical areas for the companies to beat competition in the modern business environment.
Areas of Strategic Importance
There are various areas of strategic importance for the companies operating within the modern competitive business environment. The companies should understand the need for preparation in the area of modernizing the supply chain. Failure to prepare, simply means that the businesses will continue to chase targets with low value (Lanzolla & Suarez, 2012). Use of technology is not an end in itself as there are things that should be put into consideration to ensure that technology is used in the most efficient manner for the business. Hence, among the most significant areas for the companies despite the industry within which they operate is the importance of delivering goods, services, and information with minimum erring and on a timely basis to the customers (Hassini, Surti & Searcy, 2012). In fact, starting with the forecast of the demand for the raw resources and the production process, procurement is a critical function for businesses. Streamlined supply chain is critical to the competitive capability of a business. As a result, the focus should be on the adoption of the different information technology to optimize procurement and the overall supply chain.
Lanzolla & Suarez (2012) established that procurement for companies in this century have a secret weapon that should be well understood. The insight in spending is critical for the success of the companies. The focus is mainly to establish the way of cutting down the cost of procurement and the entire supply chain, such that there will be huge cuts in the cost of production. However, long before cutting the cost, the companies that are operating competitively will have cut the spending on data and understand when the action will have the greatest effect on the operation of the business. Over the last decade or so, there has been hard squeezing of prices, which means that the companies should no longer look at pricing as their source of competitive advantage (Hsin Chang, Tsai, & Hsu, 2013). For the companies, the greatest benefit will be by looking at cutting the cost of the entire supply chain. Challenging the scope and demand instead of focusing on the pricing is the main source of advantage for the businesses operating in the world today. The solution is founded on having an effective information technology strategy for use in the supply chain.
Another critical area where technology is beneficial is going far down the supply chain. Lanzolla and Suarez (2012) suggested the criticality of the business to support the supplier, down the supply chain, because of the important role they play in enhancing the operations of the business. The idea is to look way down than the procurement because supporting the suppliers is the basis for achieving effectiveness in procurement. It is critical for the businesses to focus on what they can do for the suppliers, instead of only concentrating on what the suppliers can offer. Doing this, allows for more efficiency in the delivery of value through the use of advanced communication capabilities (Qrunfleh & Tarafdar, 2014). Motivating the suppliers means that they can provide value to the company. For instance, it becomes a motivating factor for the suppliers to provide much more than raw materials. Company insights allows for a more streamlined supply chain, way from the vendors offering values which is, in turn, passed on to the customers of the company. Within the supply chain, the process will engage a great deal of data mining.
In the supply chain, the application of IT is becoming a major factor behind competitive advantage. Evidently, Hsin Chang, Tsai and Hsu (2013) posited that companies cannot operate effectively without the use of IT in one way or another. IT is revealed to have made a huge contribution to the restructuring of the distributive function of the business. The result has been an increase in the service levels, cutting off the supply chain costs, and reducing inventory. It is critical for companies to enhance their cash flow cycle to ensure that there is a shorter period between the cash going out and coming into the business. It is critical to ensure that the company does not hold excessive inventory that holds on to the cash that should be circulating through the business. From the time of procurement to the time the finished goods are delivered to the customers, the operations that take place in between should be efficient and at the lowest cost possible (Monczka et al., 2015). Use of the most up to date information technology is the most effective way of ensuring the streamlining of the entire supply chain.
E-procurement is the basis for adequate cost-cutting in the supply chain for greater productivity and profitability. However, Hsin Chang, Tsai, and Hsu (2013) highlighted the importance of understanding the geopolitical setting and the changes that are taking place within it. Particularly, it is necessary to take into consideration the reality that technology is changing for the better. Hassini, Surti, and Searcy (2012) added the importance of the business responding to the changes that are happening from the outside to transform operations from the inside. Technology has always been considered a change catalyst, but the view is no longer enough. Most importantly, technology is enabling change in business operations. In the recent years, technology has become a pervasive reality in the procurement department. Companies are assuming modern e-sourcing tools and strategies to improve not only the sourcing of the supplies but also to communicate well with the actors within the supply chain. The main factor informing success in the use of technology is taking advantage of advanced analytics because of the importance of information in the process.
Predictive Analytics in Procurement
Analytics play a key role in forecasting and keeping track of performance and possible cost savings in the entire supply chain. Availability of data and data processing tools is the critical factor for businesses to capitalize on e-procurement. Like any other process, risks are involved in procurement and the management of the supply chain. For effective risk management, it is critical for the business to have adequate data and strong data processing tools. The advantage for the businesses is that the market has continued to develop strong tools for the processing of big data. There are important technological trends in procurement that are developing, with the objective delivering reduction in the cost of the entire process. Predictive analytics is one of the trends that have become evident in e-procurement. Hsin Chang, Tsai, and Hsu (2013) indicated that most companies are yet to capitalize on the use of analytics in the procurement process. The author added that this is regardless of the fact that there is huge potential in the use of predictive analytics.
Most of the procurement teams in companies still depend greatly on historic and retrospective analytics. In the process, they have limited their capability to offering actionable insights from the beginning. Hsin Chang, Tsai, & Hsu (2013) posited that the teams have failed to take advantage of the analytics of the big data. The changes have greatly led to greater capabilities in predictive analytics. As opposed to the use of historic and retrospective analytics to establish trends, the focus should be on the use of predictive analytics which are more accurate in revealing trends in procurement. Like it is evident in the title, predictive analytics is the source of the business capability in predicting, the results of some actions, with a high level of precision. For businesses, it is necessary to understand the trends in the market and the entire industry in order to prepare the business process in line with the trends (Hassini, Surti & Searcy, 2012). Predictive analytics is a technology with vast potential explaining the importance of investing in it. Without such tools, it is possible for companies to lose out in the competition.
Technological advances indicate that procurement is long past the age of banging the fist on the table and demanding that the suppliers give a better deal. The solution is for the companies to develop better intelligence to understand the supply environment and use the information to get the best deals from the suppliers. Intelligent forecasting suggests that businesses have, not only the necessary tools but also professionals with the necessary skills to perform the analytics. The professionals should be capable of understanding the trends within the industry and establish the most suitable timing for seizing opportunities and taking risks. The capacity to make the right decisions is founded on a blend of insightful data as well as the capability for interrogating the outcomes (Monczka et al., 2015). Hence, with the use of the advanced tools, procurement teams should be able to gather and process, and use the data to make procurement decisions that are beneficial to the business.
Conventionally, supply chain management was involved in the procurement and management of the inventory, without taking into consideration the information aspect of the process. While the supply chain worked at the time, the modern competitive environment has increased the demand for more efficiency while operating at reduced cost. Thus, Hsin Chang, Tsai & Hsu (2013) revealed that information has a critical place in the entire supply chain, including in the procurement process. While procurement included management of a great deal of paperwork, things have changed in the environment with information systems. During the 1980s, flow of information between different players in the supply chain involved a great deal of paperwork because of the manual transactions. The process was also very slow, which made the entire process very costly. As a result, information was not generally considered important to the achievement of competitive advantage (Qrunfleh & Tarafdar, 2014). The problem emerged from the possibility that the procurement team did not understand the role of information in supply chain management.
Things have changed greatly in the recent past with the advent of information technology and systems meant for the processing of data and management of information. The role of information is increasingly being understood in the modern environment of information technology. Recent developments in technology have allowed companies to provide information readily for use at different stages of the supply chain. The systems are also critical in allowing coordination of various actions at different stages of the supply chain, including procurement. Development of information geared towards improving procurement has cut down the cost of processing information, and hence enabling the accommodation of feedback from the suppliers. E-procurement as Hassini, Surti & Searcy (2012) elucidated, has improved the processes such that the supplies are being received within the shortest time possible, cutting on the cost involved in potential delays. They also allow for the proper management of the inventory, such that the business always has adequate inventory, not little or excess.
The modern business environment has experienced the move from reliance on manual systems of operations to electronic ones. There are many sophisticated IT infrastructures, including the computers and the internet on various portable and smart devices. Research indicates a number of information technologies designed for the support of procurement and supply chain management. The systems include electronic data interchange (EDI), barcoding for systems, and the radio frequency identification among others. These systems are used for different purposes, including the management of procurement logistics, communication between actors in the supply chain, and planning of enterprise resources and solutions among other purposes. To better understand the use of information systems in procurement, it is important to develop an in-depth analysis of a system that is currently in use. The analysis of RFID information technology is carried out, revealing the role it is playing in enhancing procurement for competitive advantage.
Use of the RFID Technology to E-Procurement
The radio frequency identification is one of the technologies in the supply chain that are growing in use, especially within the most competitive environments. It is among the new and developing information technology solutions, which are geared towards supporting e-procurement management in the modern business environment (Monczka et al., 2015). Before the development of this technology, the technology that was in use was the bar code information system. The systems have developed with the objective of rectifying the inefficiencies evident in the supply chain because of lack of effective technologies. Within the retail space, the bar code did not have the capability to perform identification of specific objects effectively; for instance, information on the date of production, the quantity of productions and the date of expiry (Qrunfleh & Tarafdar, 2014). To correct the limitations in the use of the bar code technology, the radio frequency identification technology has emerged. The system is meant to provide identification based on more information, through adequate processing of big data. The system has greater capacity than those systems that have been used in the past.
The radio frequency identification is founded on auto-identification system aimed at providing identification of a product. Data reading using this technology is more advanced than in the bar code technology. The bar code involves printing of a label whose scanning provides the relevant information. The use of RFID captures the data by reading the radio frequency signals with a specialized reading device. Hsin Chang, Tsai, and Hsu (2013) expounded that with the increase in the quantity of items being procured; it means that the procurement has to deal with a vast amount of data. With a less sophisticated system of capturing and processing the data, it simply means that the procurement team can be overwhelmed and will operate amid use of a lot of resources. Hence, by using the new system, it means that more data will be captured and processed within a shorter time, and hence greatly cut on the cost of procurement (Qrunfleh & Tarafdar, 2014). The system has developed out of the demand to reduce the assets used in procurement and the operation costs.
Inventory management as it relates to procurement is one of the areas that are expected to benefit from the use of RFID. Tracing the inventory can be a daunting task without the use of effective technology. Most businesses have in the past experienced an environment where they have excess inventory because of procurement of more than they are able to sell (Hsin Chang, Tsai, & Hsu, 2013). Such events are as a result of the lack of an effective system for tracking the inventory across the supply chain. Information is the basis for success in effective management of the cash flow, ensuring that the inventory procured is the much that is needed. Predictive analytics, using a proper system will allow for better forecasting and planning capacities. The use of RFID provides the necessary tool for use by the procurement team for efficiency from the beginning to the end of the procurement process (Hassini, Surti & Searcy, 2012). The most successful businesses are those that are able to capitalize on the use of the most advanced information systems.
Radio frequency identification has the primary function of transmitting data through a tag, which is a portable tool. The RFID reads the tag, and the information is processed based on the conditions outlined in the system. According to Hsin Chang, Tsai, and Hsu (2013), the data processed into information plays a role in the assessment of the locations of the target items through identifying information. Some of the data collected in the process include date of purchase, price, and color among others. The system is designed in such a way that it is capable of capturing as much amount of data as possible (Hassini, Surti & Searcy, 2012). The idea is to make it possible to manage as much information as possible because information is the driver of efficiency in business operations. Any procurement team that is not able to streamline its operation without information cannot be productive or achieve a competitive advantage.
RFID Technology for Competitive Advantage
The entire supply chain comprises interconnections that should be adequately managed and monitored for efficiency. Without proper management, the process can have inaccuracy and management functions that are incomplete. At each point in the chain, there are processes that should be properly tracked on the basis of their operations. Failure to achieve this can cause poor visibility as well as failure to have adequate stock transparency. Wong et al. (2012) argued that an environment without proper systems can also create issues with cash flow, which is the backbone of business operations. Without information management systems, the discrepancy can arise relative to the physical flow of products as a result of lack of real-time data (Tsai & Tang, 2012). The result could be inaccuracy in the inventory information causing inadequacy of inventory failing to meet the demands of the customers or excess inventory leading to holding up of cash flow. The solution lies in having in place a system to manage the data in real time.
With the RFID, the inaccuracies in the procurement process are greatly eliminated by coordinating the processes within the supply chain. The technology comes in a wide range of tags for the procurement team to select from, based on the needs of the individual business. Based on fitting with a sensory tag, the system improves coordination of the supply chain via the monitoring capability and the potential to record a variety of other information. The information is critical to determine the physical conditions of the product and the location through tracking. Hence, depending on the business, the information is critical in ensuring that urgency is observed. The coordination is necessary because of the reality of competition, especially from other companies in the same business (Tsai & Tang, 2012). Information is critical for the achievement of competitive advantage, which shows the benefit of RFID.
The need for effective storage of data is evident in the modern business environment where management of big data is a reality. If a system is in place that cannot contain all the data collected and processed across the supply chain, then such a system does not meet the needs of the company and cannot support its competitiveness. The ability to store all the data is another capability of RFID, enabling the competitive advantage for a company. There are three types of data storage capabilities allowed by the system (Tsai & Tang, 2012). The first one is read only. Read-write is the second, while the last one is the WORM (write one, read many) data tags. The capacity of the memory ranges from a single bit to 32 kilobytes, while there are others that can even hold more data. With such a capacity, it is evident that the system can hold and contain big data. The data makes it possible for the managers to recognize the gray areas to be improved. Mistakes are identified and rectified on a timely basis, hence forestalling negative ramifications.
The other potential for the RFID in allowing coordination in procurement is its frequency function. The capability is beneficial as it works to resist interference in operating the system for effective management of procurement data. In terms of performance needs, the system is different from those that have been in use in the industry, including the bar code system. The system allows for the users to choose from the different ranges depending on the needs of the business. For the higher ranges, there is a low level of interference, which means that the results in data processing will be more precise. The capacity for reduction in interference is necessary for precise results critical for decision making (Wong et al., 2012). In procurement, the need for accurate decision making cannot be ignored because any bad step can be costly to the company. The system also allows the process to be unique from those which the competitors use; hence, making it is hard to replicate (Tsai & Tang, 2012). The environment allows the business to be unique and competitive.
The system has the capability of a reading range, which is another important factor in allowing better coordination in procurement and supply chain management. The storage of information in the system is based on the reading range. According to Wong et al. (2012), the reading range varies from one centimeter to a number of meters, all depending on the needs of the business. The unique element of the system allows for effective monitoring of the procurement functions. It also allows for timely correction of mistakes as it records discrepancies in the data being managed. The system has proven to be a very strong and powerful tool to achieve streamlined actions and processes within the supply chain (Tsai & Tang, 2012). Hence, with the system, the business ensures continued improvement of activities and functionality across the supply chain, making the business more effective and competitive.
Because of the diversity of applications available within the system, it has allowed for better performance of procurement activities. It has led to improvement at a level not experienced with the use of the previous information systems. Communication across the supply chain is critical for success of operations (Wong et al., 2012). Hence, the system makes this possible through the data management and delivery capabilities. Improvement of efficiency is a reality, this being among the business needs in the modern competitive business environment (Tsai & Tang, 2012). Although there are many other systems that are applicable to the same functions as the RFID, there is no doubt that the system is playing an important part in achieving a competitive advantage for the businesses that are using it. It is not only allowing the much needed competitive advantage, but also allow for the optimum use of resources and cutting the cost in procurement, and hence, in production. It is also eliminating or reducing counterfeiting based on the uniqueness in the management of data. Improvement in the general performance of a company is made possible through the use of the system allowing for increased productivity.
Procurement is a very important process in the supply chain because it determines the success in the production and supply of finished products to the customer. Efficiency and competitiveness in the supply chain are the elements demanding for increased use of technologies in procurement and supply chain management. The need for improved coordination of procurement and effective communication has led to the continued development of technological systems. The trend is evident in the use of electronic channels for use in the management of information for effectiveness and efficiency in procurement. One such system is
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