The Impact of Electronic Commerce on Procurement

Abstract

Internet technology has been increasingly used to enhance the global competitiveness of various business applications through the widespread electronic commerce (EC) functions. Many Internet-based systems have been designed and developed for supply chain management (SCM) in various areas such as computer, garment, and publishing industries, which mainly center on communication infrastructure, coordination between production and distribution, and procurement functions with security mechanisms. However, EC is not a panacea. On many occasions, participants (including buyers, sellers, and enablers) face various risks and overhead during the deployment of a new technology. In this article, we present the impact of EC on procurement processes in supply chains, highlighting the issues of buyers, sellers, and the transaction processes involved. The procurement processes are classified into preprocurement (sourcing), procurement (quotation, negotiation, order placement, and transaction), and postprocurement (delivery). Moreover, a four-phase migration model of procurement onto the Internet is introduced to illustrate the technical, security, and financial requirements in the deployment process of EC. The migration model not only gives a development guideline of procurement functions, but also provides an evaluation framework of e-procurement. An industrial example is used to illustrate the corresponding evolution as a result of EC deployment. The paper concludes with a summary of EC impact and future research directions.