INTRODUCTION TO E-

PROCUREMENT
PST 06211
E-PROCUREMENT
 TOPIC ONE: INTRODUCTION TO E-
PROCUREMENT
Definition of e-procurement
Electronic procurement systems
Drivers/benefits and challenges of e-procurement
6Rs of e-procurement
Types of e-procurement
 Definition of E-procurement
• E-procurement refers to the use of internet or company
intranet to procure goods and service in the conduct of
business. OR refers to the process of purchase and sales of
goods or service through electronic methods.
• E-procurement is defined as the use of Internet to operate
and manage the transactional aspects of requisitioning,
authorizing, ordering, receipting, and payment processes for
the required services or product.
• E-procurement is the electronic integration and
management of all procurement activities including purchase
request, authorization, ordering, delivery and payment
between a purchaser and a supplier.
 Cont……….
• E-procurement is the value-added application of e-commerce
solutions to facilitate, integrate & streamline the entire
procurement process, from consumer to supplier and back again.
Or
• E-Procurement is the term used to describe the use of electronic
methods in every stage of the purchasing process from
identification of requirement through to payment, and
potentially to contract management.
• E-procurement is the business to business or business to
consumer or business to government purchase or sale of
supplies, work and service through the internet as well as other
information and networking system such as Electronic Data
Interchange(EDI) or Enterprise Resource Planning(ERP).
Alternatively, E-Procurement includes a range of technologies that apply the speed of
computer processing and the connectivity of the internet to accelerate and streamline the
processes of:
Identifying and selecting suppliers of goods and services
Placing, receiving and paying for orders;
Assuring compliance with procurement procedures
Consolidating purchases to achieve leverage
Providing visibility of information between collaborative partners.

In most e-procurement models there can be found the following key processes:
E-sourcing – for contractual processes. Tools include e-tendering, e-RFQs (request for
quotations) and e-auctions;
E-procurement – for transactional processes. Tools include marketplaces using techniques
such as e-catalogues;
E-payment – tools include virtual or embedded PC (procurement cards), e-invoicing and
self-billing
Drivers of E - procurement
Cost reduction e.g. administrative costs, etc.
Shortening the order fulfillment cycle time
Lowering inventory levels and the price paid for goods
Greater flexibility in ordering goods / services from different
suppliers.
Preparing firms for increased technological collaboration
and planning with business partners.
Give buyer more time on value adding activities e.g. Deal
with key supplier for delivery and costs improvements.
 Benefits of E-procurement
Reduced purchasing cost
Enhanced budgetary control (achieved through rules to limit spending and
improving report facilities)
Elimination of administrative errors (correcting errors is traditionally a major
part of buyer’s workload)
Increased buyer productivity (enabling them to concentrate on key value
adding/strategic purchasing activities
Improved information management (better access to price from alternative
suppliers and summaries of spending)
Improved payment process (comparison of invoice, purchase order copy and
receiving/delivery report is done quickly and fund transferred immediately);
Transparency and visibility across the process;
Lowers purchase costs;
 Cont………
Achieving compliance to contract and budget;
Improved communication and visibility;
Improved cycle time.
Better competition (barrier to entry reduction)
Corruption control
 benefits of e-procurement
• Reduced Costs; E-procurement saves you money by preventing duplicate
spending, leveraging volume buying, and saving you costs associated with
paper-based systems (for example, the cost of stamps to mail your
paperwork).
• Transparent Spending; Electronically conducting your procurement makes it
easier to write and analyze reports on your procurement systems, meaning
you can ensure that your procurement procedures conform to your policies.
• Increased Productivity; Once you’ve learned the system, e-procurement is
less time-consuming than traditional procurement. Having your records
stored electronically makes it easier to submit reusable tenders. Meanwhile,
use of templates means paperwork can be filled out more quickly.
• Eliminating Paperwork; Tired of finding new space to store all that
paperwork? With e-procurement, everything can be saved and stored
electronically. This not only saves you from needing more room, it also makes
the process of finding older tenders simpler.
 benefits of e-procurement
• Increased Transaction Speed; E-procurement is both time-saving and efficient. As the electronic
handling of tasks supports and simplifies the purchasing process, transaction speed is increased.
Also, because of e-enabled relationships with suppliers, procurement cycle times speed up. The e-
procurement process eliminates unnecessary activities, allowing you to focus on more valuable
tasks.
• Standardized Buying; When you have various departments making procurement decisions, there
can be differences in what and how they purchase. Conducting purchasing electronically makes it
easier for every department to conform to company procurement standards.
• Reduced Errors; Electronic paperwork is streamlined and thus easier to check for errors—there’s
no messy printing to get in the way either. Along with this, past orders are more easily referenced,
meaning there’s a greater chance that your company can compare orders to ensure new ones are
correct.
• Enhanced Adherence To Compliance; Electronic procurement improves monitoring capabilities,
and keeps you adherent to compliance rules. As compared to the manual procurement process,
automation provides a quicker and more transparent process. It allows you to keep track of your
procurement costs in real time at your fingertips. Besides this, technologically advanced
procurement systems easily adapt to any purchasing guidelines set by your company. It allows a
standardized approval process and workflows to ensure the right authorization level for each
transaction. Policy compliance is enhanced as users can quickly find desired products and services
from preferred suppliers and can’t create maverick purchases. You don’t need to worry about
compliance at all.
 Challenges of E-Procurement in Tanzania
Poor technological infrastructure
Inadequate funds for capital investment
Risks
Unsupportive legal framework
Shortage of technical knowhow
Incapable suppliers
Resistance to change
Unreliable power supply (electricity problem)
Rapid technological change
Cost of operation
 Challenges of e-procurement
• High cost of setup – ERP systems are very expensive to buy and maintain. Some
firms may not be able to buy and operate it. It needs also training of staff, buying
of computers to accommodate e-transaction and connection of them through the
internet. All of these need fund that may not be available to some firms hence
become its barriers to adopt e-procurement
• Security/Lack of Trust – Some firms fear to lose their fund and other key
information to other people/firms who can hack the information systems that will
be in use. They do not trust the other party and opt to remain without
automation of procurement activities
• No legal framework support e-transactions – E-procurement transactions are not
recognized by laws in some countries. So it becomes difficult for firms to
introduce e-procurement fearing of losing its goods or fund when they transact
with customers. E.g. Sales on credit, when customer fails to pay you cannot seek
the court to help.
 Challenges of e-procurement
• Staff redundancy - Staff fears to be laid off/lose jobs and resist to introduction of
e-procurement.
• Risk of return on investment – Some firm are not sure of getting projected
benefits to e-procurement. Due to that they decide to not to do procurement
through internet.
• Technology – ERP systems differs from firms to firms. Suppliers and buyers may
be using non-compatible systems that become difficult to integrate which then
hinder employment of e-procurement. Some firms also afraid to use ERP system
that would be outdated within near future and become reluctant to e-
procurement.
• Non-supportive Organizational/Management decisions – Introduction of e-
procurement need to be approved by senior management of the organization. If
management does not support the proposal, e-procurement becomes
impossible in the firm.
 The 6 Rights of E-procurement

Buying goods of the right quality

Buying goods of the right quantity
Buying goods from the right supplier( Source)
Buying goods at the right price
Goods should be bought and delivered at the right time.
Goods should be delivered at the right place
 TOPIC TWO: E-PROCUREMENT
TOOLS
Describe e-procurement tools;
EDI, E-hubs, e-exchanges, e-marketplaces, e-
catalogues, e-auctions, e-tendering, Internet tools (e-
sourcing, e-tendering, e-auctioning, e-ordering and web
based ERP, e-information), e-mails, www, ERP
outline benefits of e-procurement tools
 E-PROCUREMENT TOOLS
Some E-procurement tools and applications includes:
• Electronic systems to support traditional procurement
These includes
 Mainframes and Personal Computers
 Electronic Data Interchange (EDI)
Enterprise Resource Planning (ERP)
• Internet as a support or complement to traditional procurement
These are various type of internet based applications that serve
different purpose some well know application that use the internet
are as follow
Electronic mail (e-mail) Extensible Markup Language (XML)
Web enabled EDI World Wide Web (WWW)
• Internet tools and platforms that replace traditional procurement
Some internet tools and platforms that replace traditional
procurement includes:
E-sourcing
E-tendering
E-auctioning
E-ordering and Web-based ERP
E-information
These e-procurement tools are described as follows
• Electronic Data Interchange (EDI) is an application where by electronic
messages can be exchanged between computer programs two
separate organization.EDI is mostly used for order transmission, order
confirmation, logistic information and order invoicing.
E-procurement tools cont………..
EDI; It refers to the technique based on agreed standards, which
facilitates business transactions in standardized electronic form in an
automated manner directly from a computer application in one
organization to an application in another.
HOW EDI WORKS
• Company A creates a purchase order using its internal business
software.
• EDI software translates the order.
• Company A sends the purchase order to company B over third party
value added network internet in EDI standard format.
• Then company B receives the order document and will translate it
from EDI to its proprietary format and, typically, company B will send
an acknowledgement intervention.
EDI Cont…..
• For instance, EDI at the supermarket, when a product is
purchased, the checkout operator scans bar code on its label,
which automatically registers the price on the cash till.
• The same signal also triggers a computer process that re-
orders the item from the manufacturer, set off a production
cycle, and arranges invoicing, payment, and transportation of
the new order.
• EDI effectively puts the product back on shelf with no
paperwork and a minimum of human involvement .
How does EDI work
E-procurement tools cont…….
• ERP(Enterprise Resource Planning) is a process whereby an
enterprise, often a manufacturer, manages and integrates
the important parts of its business. An ERP management
information system integrates many areas such as planning,
purchasing, inventory, sales, marketing, finance, and human
resources. OR Enterprise resource planning (ERP) is business
process management software that allows an organization to
use a system of integrated applications to manage the
business and automate many back office functions related to
technology, services and human resources.
• E-mail is an internet based application through which
electronic messages are exchanged between people. OR is a
method of exchanging messages from one author in an
• Web enabled EDI is like traditional EDI (see above), but run on the
internet
• XML is used to allow for the easy interchange of document on the
World Wide Web
• World Wide Web (WWW) is a major service on the internet. It is
made up of Web servers that stores and disseminate Web pages
which are rich documents that contain text, graphics, animations,
and videos to anyone with an internet connection.
• E-sourcing is using internet to make decisions and form strategies
regarding how and where services or products are obtained. OR is
the process of finding and selecting a supplier electronically.
• E-tendering: Sending requests for information and prices to
suppliers and receiving responses of suppliers using internet
technology
• e-reverse auctioning: Using internet technology to buy goods and
services from a number of known and unknown suppliers.
• E-ordering and Web-based ERP (Enterprise Resource Planning): is the
process of creating and approving purchasing requisitions, placing
purchase orders and receiving goods and services by using a software
system based on Internet technology.
• e-informing: Gathering and distributing purchasing information both
from and to internal and external parties using internet technology.
• Electronic exchange (e-exchange) is a business to business (B2B)
website where purchasers and suppliers meet to transact business. We
have private and public exchanges.
• Electronic hubs (e-hubs) is a device that connects several networks
together. Normally, it is a control computer (server) that holds
databases and program for many personal computer workstations or
terminals, which are called client.
• Electronic marketplace (e-marketplace) is website that enables
purchasers to select from many suppliers. With e-marketplaces, the
buyer is in control as open marketplaces enable purchasers to
evaluate all potential suppliers for a particular product or service and
make informed decisions regarding what and where to buy.
• E-catalogues It is a web page that provides information on products
and services offered and sold by a vendor/supplier and supports
online ordering and payment capabilities.
• E-auction is an electronic market where sellers offer goods or
services to buyers through a website with a structured process
for price setting and fulfillment. They operate with upward or
downward price mechanism e.g. e-auctioning with upward price
mechanism is for the selling organization and e-reverse
auctioning with downward price mechanism is for the buying
organization.
Cont….
• A reverse auction is a type of auction in which sellers bid for
the prices at which they are willing to sell their goods and
services. In a regular auction, a seller puts up an item and
buyers place bids until the close of the auction, at which time
the item goes to the highest bidder. In a reverse auction, the
buyer puts up a request for a required good or service.
Sellers then place bids for the amount they are willing to be
paid for the good or service, and at the end of the auction
the seller with the lowest amount wins.
 Web-Based ERP
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purchasingrequisitions, placing
requisitions, purchase
placing purchase
orders andInternet
oased on receiving goods and services by using a software system
technology.
based on Internet technology.
Creating and approving purchasing requisitions, placing
Product Vendors – SAP, Oracle, The SAGE Group
purchase
Product Vendors – SAP, Oracle, The SAGE Group
orders and receiving goods and services by using a software
system
based on Internet technology.

Product Vendors – SAP, Oracle, The SAGE Group

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 E-Sourcing
Identifying new suppliers for a specific category of
purchasing
requirements using Internet technology.
 E-Reverse Auctioning
Using Internet technology to buy goods and services from a
number
of known or unknown suppliers.
 E-Tendering
Sending requests for information and prices to
suppliers and
receiving the responses of suppliers using Internet
•technology.
Indent
• To Tender Tender Tender Bidder Bid Contract
• Request Preparation Publishing Response Evaluation Award

e-Tendering Solution

An e-Tendering solution primarily facilitates the ‘Tendering Process’

and may cover from Indenting of Requirements to the placing of
contract/PO
 E-Tendering
• Benefits to Buyers
 Cost Reduction
 New Supplier Discovery
 Close Monitoring of Activities/ Vendor
Performance
 Rich MIS and Analytics
 Standardized formats and Uniform tendering
practices Benefits to Suppliers
 Increased visibility/ Less artificial barriers
 Increased business opportunities,
 Greater degree of transparency
 Cycle time reduction in participation and award of
Contract
 Supplier Enablement and Ease of Participation
 E-Market sites/places
 Expands on Web-based ERP to open up value
chains.
 Buying communities can perform the following:

Access preferred suppliers'

Add to shopping carts
products and services

Create requisition Seek approval

 E-hubs
• Electronic hubs (e-hubs) is a device that connects several networks together.
Normally, it is a control computer (server) that holds databases and program for
many personal computer workstations or terminals, which are called client.
• The client of the information hub may be internal customers or external
organizations, such as suppliers.
• So by means of this server, all the players get real information at any time whether
suppliers, buyers, production or finance guys regarding department related
transactions.
 E-exchange
• Electronic exchange (e-exchange) is a business to business (B2B) website
where purchasers and suppliers meet to transact business. We have
private and public exchanges.
• Private exchange can be either one-to-one (1T1) or one-to-many
connections (1TM). 1T1 is direct connections while 1TM connect all actors
through the central Internet hub.
• Private exchanges are normally specified by a single operation and
available by invitation only to the organizations' suppliers and trading
partners.
• Public exchanges - often referred as a portal - extend outside the
boundaries of the company and involve many-to-many (MTM) interactions.
• Public exchanges may be run either by a consortium of big players within a
specific industry (consortium portals) or by an independent entity starting
up its business as an intermediary (independent portals).
 E-market place
• Electronic marketplace (e-marketplace) is website that enables
purchasers to select from many suppliers. With e-marketplaces, the
buyer is in control as open marketplaces enable purchasers to
evaluate all potential suppliers for a particular product or service and
make informed decisions regarding what and where to buy.
Government marketplace exchanges
E-marketplace are particularly applicable where;

• Markets are large and the search costs to find suppliers are high because of the
large number of potential suppliers;
• Product specifications and information are subject to rapid change;
• Buyers have difficult in comparing similar products from different vendors
because of an excess of features and characteristics that may not be clearly
indicated, and
• Internal costs of such process as locating, appraising and evaluating the
performance of suppliers are high.
In summary, it may be said that e-marketplaces offer greater functionality than
exchanges, which in turn, offer more functionality than hubs.
 E-catalogues
• It is a web page that provides information on products and services offered and
sold by a vendor/supplier and supports online ordering and payment capabilities.
• Catalogues provide current information about products in an electronic form.
Online catalogues supports cost comparisons and incorporate voice and video
clips, making the process efficient for both buyers and sellers.
 Types of e-catalogues

1-Sell side catalogues which provide potentials purchasers with access to online
purchasing facility. These catalogues provide purchaser with access to information
and ease of ordering.
2-Buy side catalogues which are created by purchasing organisations. These
catalogues are confined to goods covered by prior negotiated prices, specifications
and terms and run by a program that is integrated into the purchasing
organisation’s intranet.
3-Third-party catalogues are those catalogues that are administered by an
external independent organisation. It is normally done by linking in-house e-
procurement catalogue to a master catalogue controlled by the marketplace.
Electronic auctions (e-auctions)

• E-auction is an electronic market where sellers offer goods or services to buyers

through a website with a structured process for price setting and fulfillment.
• Web auctions may follow English, Dutch, sealed-bid and reverse-bid process.
• In English bid process, bids are successively replaced by higher bids to obtain
the highest price for a given items.
 In Dutch auction process, the auctioneer starts at a high price and then descends
by steps until a bid is received. The successful bidder then decides whether to
buy the whole or a portion of the items on offer at that price. The auctioneer
increases the offer price for any items remaining in the current lot and then again
descends by steps and continues in this manner until either all the items
comprising the lot are sold or a reserve price is reached.
Cont…
Sealed-bid process - A potential buyer issues a request for bids to be submitted
by a prescribed date and time according to a sealed format. At a specified time and
date, the purchaser’s representatives will evaluate and compare the bids according
to a rating grid. The winning bid is the one that achieves the maximum score.
Should several bids obtain the same score, the bid offering the best price is the
winner. 
Reverse-bid process - In reverse auction, buying organisations post the item(s)
they wish to buy and price they are willing to pay while suppliers compete to offer
the best price for the item(s) over a prescribed time period. The buying
organisation posts all the required things like dimensions, quality, performance,
and delivery requirements. Normally the bids prices are visible to all competitors,
but the origin of bids is, of course, confidential.
Cont….
• A variation is the ranked auction, where bidders are told of
their relative position, but are not informed of the actual
amount submitted by their competitors. The winner will be the
one offered the best lowest price or most advantageous
tender but it will depend on the auction rules agreed.
• Suppliers can bid more than once in the prescribed time. At
the conclusion of the auction, both purchaser and supplier are
bound by the sale. If a reserve price is set but not met, the
buying organisation decides the winning bid. 
• However, buying by reverse auction might be appropriate
where the items, materials or services to be acquired are
available from wider range of potential suppliers who are
willing to compete with each other in this way.
Cont….
• The items should be identical or interchangeable with each
other, in other words, ideally the only important variable
must be price, or perhaps delivered cost. If there are other
variable to be considered then these must be readily of being
quantified and compared objectively.
• In employing this approach to acquisition, purchasers will
need to make it clear to potential bidders on the rules of the
auction and the criteria for bid analysis.
 ERP SYSTEM
• An ERP meaning Enterprise Resource Planning is a process
whereby an enterprise, often a manufacturer, manages and
integrates the important parts of its business. An ERP
management information system integrates many areas such as
planning, purchasing, inventory, sales, marketing, finance,
and human resources.
• Enterprise resource planning (ERP) is business process
management software that allows an organization to use a
system of integrated applications to manage the business and
automate many back office functions related to technology,
services and human resources.
 Benefits/Advantages of ERP systems
• Better organizational control, especially in large companies,
where the volume of information is more than in a small
company.
• Duplication of information is avoided.
• Improved communication, both internally and externally.
• Company profitability analysis can be carried out to analyse
where costs are higher and where there are more sales.
• Improved decision-making process within the company.
• The company is able to react better to any unforeseen problem
or situation.
• Better use of time.
 Disadvantages of ERP
• The high cost of implementation and maintenance. (High initial
investment)
• Adaptation to the hardware in the company.
• It is necessary to train all employees in the company so that the
system is used efficiently.  This is a cost for the company as well
as the time and effort needed for it.
• Integration with other applications in the enterprise needed.
• Inflexibility of the system, because this is a generic system.
• There are few experts in this system.
• If the system is not applied correctly, it can be very detrimental
to the company.
 GROUP WORK/ACTIVITY
1. Prepare Slides on the Topic of E-procurement procedures/Cycle by using Ms
Power Point
Instructions:
• font type: calibri (body) size: 32
• line spacing : 1.5
• Make sure you put your work on a CD
2. Prepare notes about TANEPs(definition, benefits and chalenges e.t.c) by Ms
Word
Instructions;
• Font type: Times New roman size: 12
• line spacing: 1.5
• Make sure you print your work
• Deadline: 17/05/2021 on Monday 08:00 AM
• To be presented in the class on Monday.
TOPIC THREE: E-PROCUREMENT
IMPLEMENTATION
• E-procurement requirements;
• Specialized software/systems for different department
• Departmental system integration(ERP)
• Integration of company system with that of suppliers
IMPLEMENTATION E-PROCUREMENT
(ERP)
• Stock control system
• CD/Web-based catalogue
• E-mail/workflow system
• Order-entry on web site
• Accounting systems
• ERP systems/integrated e-procurement system
Different types of information system cover different parts of the
procurement cycle
• Stock control system-this relate mainly to production-related
procurement systems highlights when reordering is required when
the number in stock falls below reorder threshold.
• CD/web-based catalogue- paper catalogue have been replaced by
electronic form that make it quicker to find suppliers.
• E-mail-or database-based workflow systems integrate the entry of
order by originator, approval by manager and placement by buyer.
The order is routed from one person to the next and will wait in their
inbox for actioning.
• Order-entry on web site -the buyer often has the opportunity to
order directly on the supplier`s website.
Different types of system cont……
• Accounting systems -networked accounting system enable staff in the
buying department to enter order which can then be used by
accounting staff to make payment when the invoice arrives.
• Integrated e-procurement or ERP system - these aim to integrate all
the facilities above and will also include integration with supplier`s
system.
Assessment of the procurement model alternatives for
buyer
INTERNAL SYSTEMS INTEGRATION

MRP/
PRODUCTION

FINANCE STOCK SYSTEM

ERP
SALES &
E- MARKETING
SOURCING
E-
PROCUREMENT
ERP MODELS
THE INTEGRATION PROBLEM
INTERNAL ISSUES TECHNICAL ISSUES

DIFFICULT TO JUSTIFY ROI TOO COMPLEX TO

HIGH INITIAL INVESTMENT IMPLEMENT
LACK OF SENIOR LACK OF EMPLOYEE SKILLS
MANAGEMENT SUPPORT

POOR APPLICATION
INTERFACE
LACK OF TECHNICAL
STANDARDS
ITY
CORCERNS OVER SECUR

MARKET ISSUES
 E-PROCUREMENT CYCLE /
PROCEDURES
E-procurement processes; e-requisition, e-sourcing (e-tendering, e-
auction, etc.), e-evaluation, e-ordering, e-receiving, e-payment.
E-Procurement Cycle
E-procurement cycle means an execution of the traditional procurement cycle though ICT
application. Since procurement function is undertaken in a multi-staged way as:-
1. Initiation of need/Recognition
2. Request for quotation
3. Receiving and analyzing quotations
4. Identify and select potential supplier
5. Issue local purchase order
6. Expediting/Order follow up
7. Receiving and inspection
8. Payment etc….

“Request – Source – Order – Receive – Pay”

Key Activities in procurement process
CONT…….
• Electronic Procurement Cycle means an “e” implementation of the
procurement cycle which previously was undertaken manually.
• E-procurement Cycle essentially involves the automation of the non-
strategic and transactional activities that consumes the majority of
the buyer’s time but in addition comes with increased enterprise level
of visibility of all purchases.
Cont……
E-procurement Cycle involves a number of activities that may be
minimized to:-
1. Requirement Definition
2. Sourcing
3. Solicitation
4. Evaluation
5. Contracting
6. Contract Management
Note; These activities with the e-procurement cycle will be facilitated
by various tools such as E-tendering, E-sourcing, E-reverse auction, E-
ordering and Web based ERP
E-Procurement Process
E-Tools replacing Traditional Purchasing
Cycle
Each of these forms can be explained as follows:
• E-sourcing supports the specification phase; it identifies suppliers that can be
used in the selection phase.
• E-tendering supports the selection phase; usually including support for the
analysis and assessment activities.
• E-reverse auctioning supports the contract phase; it enables closing a deal with
a supplier.
• E-ordering and web-based ERP is the process of creating and approving
procurement requisitions, placing purchase orders, as well as receiving goods
and services ordered, by using a software system based on the Internet.
• E-informing is not directly associated with a phase in the procurement process;
it is the process of gathering and distributing procurement information both
from and to internal and external parties using Internet technology.
 E-PROCUREMENT PROCESS
• E-procurement processes includes the following:
E-requisition
E-sourcing (e-tendering, e-auction, etc,)
E-evaluation
E-ordering
E-receiving
E-payment
Cont……
Cont….
How to undertake e-procurement cycle
• Needs Analysis; A buyer recognizes a need and places a request for
goods or services directly to the approver through computerized
systems designed within the organization.
• Authorization; Each requisition made by a Buyer gets routed to an
appropriate approval agent. The approver verifies that the goods or
services are needed and gives the permission for further procurement
processes
• Sourcing; The procurement sourcing process covers the business
activities related to search, qualification and selection of suitable
suppliers for requested goods and services.
Cont…..
• Purchase Order; Once a requisition is approved, a purchase order is created
and automatically delivered to the supplier (s).
• Receipt of the goods; Once the goods are received, the buyer issues or
confirms a receipt of such goods to the supplier.
• Invoice; After the supplier prepares the goods for shipment, an invoice is
created that denotes the individual goods ordered by SKU and the amounts
being charged.
• Reconciliation; After the goods are received, the invoice needs to be
reconciled to the purchase order and goods receipts (GRN) before payment is
made.
• Payment; Once the goods have been received and the invoice reconciled with
the order and contract, payment is scheduled and made using an appropriate
payment method, which could be p-card, electronic fund transfer or other
form of electronic payment.
E-WAREHOUSING AND STORAGE (WMS)
• Warehouse Management Systems;
• Bar coding and RFIDs and their uses;
• E-receipt, automated unloading, sorting, data capture and
transmission, stock handling and retrieval (AS/RSs),
• E-issuing (Customer order/Stores requisition generation, Order
receipt and picking slip document generation-e-picking (voice
directed picking, pick to light, etc), e-transfer of picking order to
storage point, e-labelling, e-kitting, e-loading, e-invoicing and
dispatch).
Warehouse Management System (WMS)

• This is the computerization of all of the activities involved in the storage

of goods through designated software.
• The WMS normally interfaces with the company’s main transaction
system (such as an ERP) to access information such as purchase order,
customer orders, etc. WMS in turn, provides feedback into ERP on
information such as goods received and dispatched.
• The WMS is used to control all the operations in the warehouse and
issues to subsidiary systems, for example equipment control systems.
• Thus, a WMS will issue an instruction to an Automated Storage and
Retrieval Systems (AS/RS) control systems for a crane to move a specific
pallets from a pick-up and deposit station at the end of aisle to a
particular location in the racking.
Cont…..
• The equipment control system will then direct
the crane and provide feedback and diagnostics
if the crane cannot fulfill this operation (e.g.
owing to mechanical failure).
 Key Elements of WMS
• Use of Portable Computer Terminals connected to
server; and
• Bar Codes that are used to reduce amount of
information to be entered directly into terminals
through scanning.
• RFID
 WMS Benefits
• Can manage complex Warehouse structure;
• Optimize warehouse activity;
• Increase in tracing and tracking ability of materials inside the
warehouse;
• Mobile Data Entry;
• Increase in Efficiency;
• Increase in accuracy;
• Reduce Customer complaints.
COMMON CAPABILITIES OF A WMS
• Receiving Inventory;
• Locating Inventory (Referred to as Putaway);
• Inventory allocation;
• Picking inventory;
• Replenishment;
• Shipping confirmation;
• Cycle counting and physical inventory.
Bar Code

 A barcode is an optical machine-

readable representation of data, which
shows certain data on certain
products.
 Barcodes are available on
1Dimensional or 2D.
Cont……

1D Barcodes
Barcodes representing data in the widths
(lines) and the spacing of parallel lines such
as Code128, Code 39, and UPC, are referred
to as Linear or 1D (one-dimensional)
barcode symbologies.
Cont…….
 2D Barcodes
 Two-dimensional (2D) barcodes, such as Data Matrix,
PDF417, and QR Code, may have patterns of squares,
dots, hexagons and other geometric patterns. While
maintaining a fairly small size, these barcode types hold
much more data than linear barcodes. 2D barcodes can
hold hundreds of characters.
Cont…
 Bar codes are the most common form of capturing data by
automation. It comprises of a number of vertical or horizontal bars
of varying thickness which represent a letter or number. The bar
codes are read by scanners for direct input into computer system.
 Bar codes assist to check location and confirm products location
when picking and reading labels automatically on sorters in the
store.
 Bar codes to be used must be recognized internationally to aid
product tracking within the distribution chain.
RFID
 RFID is an acronym for “Radio-Frequency Identification” which
refers to a technology whereby digital data encoded in RFID tags or
smart labels are captured by a reader via radio waves.
 RFID is similar to bar coding in that data from a tag or label are
captured by a device that stores the data in a database. RFID, however,
has several advantages over systems that use barcode asset tracking
software.
 The most notable is that RFID tag data can be read outside the line-of-
sight, whereas barcodes must be aligned with an optical scanner.
RFID-How its work
Cont…
 This technology enables automatic identification
through the use of radio frequency tags data
readers and integrating software.
 A tag has a microchip and an antenna that can
store and transmit data and it can be fixed to an
individual product or unit load. It can be active
(send a signal) or passive (respond to a signal).
Benefits of RFID
It is used in tracking of goods in
manufacturing, DCs, shops, customers. This
reduces labour time and cost through
automated check in, order shipment
verification, and stock checking.
It is used in tracking re-usable assets such as
pallets, roll cages. This enable good asset
management.
Cont…..
 It is also used to track the movement of human
beings like prisoners or patients under special care
where tags are put on clothes.
 Provides accurate and timely information required
e.g. stock balance on hand, etc
 It allows rapid checking of stocks in the warehouse
as the receiver and transmitter do not need to be in
same sight of one another
RFID Application

 Inventory management
 Asset tracking
 Personnel tracking
 Controlling access to restricted areas
 ID badging
 Supply chain management
Barcodes and RFID facilitates the following;
• Issuance of E-invoice and E-receipt;
• Automated unloading;
• Sorting and identification of items;
• Data capture and transmission;
• Stock handling and retrieval (i.e. Automated Storage
and Retrieval Systems - AS/RSs).
Cont….
• E- issuing (Customer order/Stores requisition generation,
Order receipt and picking slip document generation-e-
picking (voice directed picking, pick to light, etc),
• E-transfer of picking order to storage point,
• E-labelling,
• E-kitting/unitization,
• E-loading,
• E-invoicing and dispatch.
NB: The listed above are known as E-Warehousing & storage
Operations
Warehouse Management System
WMS functionality covers all the activities of the warehouse like the
following;
 Receiving
 Put-away
 Replenishment
 Picking
 Added value services
 Packing Sorting
 Dispatch
 Stock counting
 Automated handling
Warehouse Management System Cycle
 WMS Operations
• E-receiving: Once goods arrive at the storage units, their information is taken
and captured into the WMS.
• Capturing of data into the system is done by scanning the bar codes on
products for those that have these numbers.
• It depends on the technology on hand because others may use RFIDs and
information automatically transmitted into the system once goods pass the
area with that network.
• E-issuing: This involves receipt of demand, picking required goods and handing
over to users.
• Users will fill stores requisition in the system and route it to storage units.
• Stores staff will then identify what is required from the requisition and instruct
picking machines to move inside the store to pick and bring the items at the
dispatching bay. The picked items will be sorted, packaged, labeled and
consolidated by a machine. Then handover or dispatch will be carried out to
the customers.
 Picking Methods
• Voice Directed Picking (VDP) – refers item selection system where by
the person to pick goods is informed through voice from the system
telling him where the product located, quantity needed.
• After picking, staff tell the VDP device what items picked, quantity
and task performed. Then the speech is transformed into data which
is then sent to VDP server for verification.
• Each user wears a device that he has been taught to recognize his
speech patterns. To each device is attached earphone and
microphone. The main ERP system transmit to the VDP server data
about each order ready to pick and the server stores the data.
Cont….
• Pick to Light (PTL) – It works as follows, LCD display device is located
next to the pick slot for each item. The main ERP system transmit to the
PTL server data about each order ready to pick, and the server stores
this data. When a picker want to pick items, he press the button on LCD
device to indicate that his readiness.
• The PTL server turn on light on the display on each item involved in the
order and in that picker’s zone, the quantity to pick is displayed on each
LCD.
 Once the picking exercise completed, the picker confirm to the device
by pressing special button and turn off light. There is a room for the
picker to indicate actual quantity performed if the quantity differed
from the quantity displayed first.
 This is the fastest and accurate way of picking items in the store
especially with populous stocks.
Cont…
• ERP system: Therefore, with this system, warehouse or
distribution manager is able to see the stock balances,
sales, in transit delivery (both inbound & outbound),
allocated stocks and to whom (customer), truck and driver
details moving the orders, in any of their facility locations in
any geographical area.
The Way the System works