Electronic purchasing: determining the optimal roll-out strategy

Transcription

1 Elecronc purchasng: deernng he opal roll-ou sraegy Gover Hejboer and Jan Telgen Unversy of Twene Inave for Purchasng Sudes (UTIPS), Unversy of Twene Faculy of Technology and Manageen (BB-buldng) P.O. Box 27, 75 AE Enschede, The eherlands el.: fax: e-al: ; Absrac Elecronc purchasng (EP), also known as elecronc orderng hrough caalogs s he os esablshed for of e-procureen nowadays, ye sll n s nfancy. Theorecally, changng fro he "radonal" way of purchasng o EP can lead o huge cos savngs. However he pleenaon (roll-ou) of EP ncludng any coody groups and any deparens s a large and cosly ask. In addon, no uch experence on good roll-ou sraeges s avalable ye. Ths paper conrbues o he soluon of hs proble, by presenng a aheacal odel for deernng he opal EP roll-ou sraegy no an organsaon based on axsaon of he cos savngs. Resuls fro hs odel sugges ha he opal order of coody groups and deparens for whch EP s

2 pleened can conrbue consderably o he possble savngs ha can be realsed and s herefore an poran facor for a successful pleenaon sraegy of EP. Key words: elecronc purchasng, e-procureen, pleenaon, dynac prograng Inroducon Snce he 8s auoaon has found s way no he purchasng process. Tradonally, he operaonal purchasng process nvolves a lo of adnsrave repeve asks ha add lle value: processng purchase requsons, purchase orders, nvoces and all sors of repors. In he purchasng process copuers were frs anly used for daa sorage and sple spread shee analyses. Laer, Elecronc Daa Inerchange (EDI) eerged, auoang he nerchange of busness ransacons beween buyers and supplers and hereby reducng he ransacon coss per purchase consderably. Alhough a lo has been wren abou he advanages of EDI, EDI adapaon has been led unl now, anly because of he large pleenaon coss of hese dedcaed (and herefore no so flexble) neworks (see e.g. Bergeron and Rayond, 997; Segev e al, 997; Kaefer and Bendoly, 2; Angeles, 2). Wh he Inerne and Inerne relaed echnology has becoe possble o councae elecronc daa beween and whn copanes based on sandard global proocols. Ths has opened up a wde range of opporunes for busness n general, e-coerce, and 2

3 for purchasng n parcular, e-procureen (early ndcaons by Telgen, 997; also see e.g. Mn and Galle, 999; McIvor e al, 2; Long, 2). Wh hs background he defnon of e-procureen (or elecronc procureen) by De Boer e al (2) s approprae: "usng Inerne echnology n he purchasng process." In hs paper we focus on he os esablshed for of e-procureen nowadays: elecronc purchasng (EP). We defne EP as: he process of creang purchase requsons by an nernal cusoer by eans of an elecronc caalog and usng a sofware syse based on Inerne echnology for (a par of) he nforaon flow and verfcaons n he operaonal purchasng process. Ths defnon of EP s based on he defnon of e-mro by De Boer e al (2): "he process of creang and approvng purchasng requsons, placng purchase orders and recevng goods and servces ordered by usng a sofware syse based on Inerne echnology for MRO (Manenance, Repar and Operaons) supples." Ths paper as o address all purchases, hence he resrcon o MRO s lef ou. Oher coon ers for EP wh slar defnons are: e-caalogs (Padanabhan, 2), elecronc caalog syses (Harnk, 999), Inerne-EDI (Angeles, 2) and web-based procureen (Croo, 2). EP offers an opporuny o srealne adnsrave rounes n operaonal purchasng boh for produc relaed (drec) purchases and for non-produc relaed (PR) purchases (Croo, 2). Currenly any EP syses are avalable on he arke. Major vendors are: Arba, Baan, CoerceOne, PeopleSof and SAP. Despe of he opporunes, 3

4 copanes sll hesae hough. Recen research ndcaes ha pleenaon of EP s sll n s nfancy. Many copanes are plannng o sar a projec n he near fuure, bu only a few are acually pleenng now (8-9% versus 8% of he 5 larges US copanes accordng o Aberdeen Group (2). Selecng and pleenng a new IT syse such as EP requres an enorous effor and he (aoun of) success depends on he way hs pleenaon projec s organsed (Aberdeen Group, 2; Sherrll e al, 2). Ths paper as o conrbue o he decson akng (seng prores) of deernng a good pleenaon sraegy for EP n an organsaon. A aheacal odel s presened for deernng he opal EP roll-ou sraegy no an organsaon based on axsaon of he oal cos savngs. The paper s srucured as follows. In he frs secon he effec of EP on he radonal operaonal purchasng process as descrbed n leraure s dscussed ore n deph. Secon wo focuses on he advanages of EP n ers of cos savngs. The hrd secon presens an overvew of he seup and proble areas of pleenng EP syses. The aheacal odel s presened n he fourh secon, descrbng he npu daa needed and descrbng he pleenaon process n a foral way. Secon fve deals wh ssues regardng he calculaon of he opal EP roll-ou sraegy. Also he odel s llusraed wh a nuercal exaple n hs secon. Fnally, conclusons are drawn n he las secon ogeher wh suggesons for furher research.. The effec of EP on orderng procedures 4

5 The procedure of orderng es s one of he basc procedures n purchasng and s he hear of he operaonal purchasng process. Therefore he orderng procedure always receved a lo of aenon: every general exbook on purchasng descrbes a way how hs procedure should be arranged and hs descrpon does no dffer a lo beween he. Adaped fro several exbooks (Leenders and Fearon, 993; Dobler and Bur, 996; Lysons, 996) below he necessary seps for he orderng procedure are gven:. purchase requson fro nernal cusoer: hs could be an acual reques fro a person whn he copany, bu also could be an auoaed reques fro an ERP syse. 2. auhorsaon of purchase: checkng wh copany regulaon and / or obanng he auhorsaon fro he approprae person(s) 3. sendng he purchase order o he suppler (and reanng a copy for adnsraon) suppler: delvery ogeher wh good delvered noe 4. nspecon of goods, checkng wh he goods delvered noe (and sendng a copy o adnsraon) suppler: sendng nvoce (could also arrve before he delvery) 5. clearng nvoce: checkng nvoce wh copes of he purchase order and goods delvered noe, checkng coplance wh conrac ers 6. payen o suppler The descrpon above only apples o repeve purchases. I s assued ha he specfcaons are clear and ha here s a conrac wh a suppler, so exra seps 5

6 regardng hose ssues can be lef ou of he procedure. The purchasng deparen only akes care of he orderng and oher adnsrave uns ake care of he regsraon of orders, noes and nvoces. The adnsrave organsaon could have slghly dfferen arrangeens n pracce hough, for nsance a separae un for carryng ou he acual payens. The ajory of he repeve purchases followng hs orderng procedure have lle value. They are locaed n he roune and boleneck quadrans of he Kraljc arx (Kraljc, 983). Reducng hs adnsrave burden would free ore e o be spen on value addng acves such as accal and sraegc purchasng especally relaed o he sraegc and leverage quadrans. Alhough he procedure above can be perfored anually whou any auoaon, he advanages of usng copuers and he auoaed flow of nforaon are also ndcaed n he exbooks on purchasng enoned earler (Leenders and Fearon, 993; Dobler and Bur, 996; Lysons, 996). These advanages can be suarsed no wo aspecs: auoaon of daa sorage (ananng records, sandardsed fors, ec) and auoac councaon (EDI wh supplers, auoac achng and oher possble nforaon flows whn he organsaon). Boh aspecs help o reduce he adnsrave asks, hence reducng labour coss and srealnng and speedng up he process. Wh he defnon of EP n he prevous secon he changes resulng fro usng EP n he orderng procedure above can be derved. In sep hs eans ha he purchase 6

7 requson by he nernal cusoer wll be done by usng an elecronc caalog and he requson wll auoacally be sen o he purchasng deparen. Havng only hs change n place, can already be consdered as havng an EP syse. In hs case he ncong requsons would be prned ou by he purchasng deparen and he oher seps of he orderng procedure would be perfored n he radonal way. Exendng he EP syse hen eans ha oher seps are also handled elecroncally. For seps 2,3,5 and 6 hs could be done, only nspecon of goods (sep 4) wll be dffcul o do elecroncally. Wh hs one can speak of he dfferen funconaly levels of an EP syse. The syse could nclude only sep, or for nsance sep,2 and 3 or sep,3 and 6. oe ha when auhorsaon and he purchase order are done auoacally, bascally he purchasng deparen s crcuvened and s no nvolved n he order anyore. If all seps for whch s possble are fully auoaed, here s no huan nerference n he purchasng deparen and he adnsrave un blocks. Huan nvolveen wll sll be necessary hough, no as adnsraor n he process, bu as conroller of he process: o handle excepons and npu daa such as: conen anageen, seng auhorsaon levels and conrac daa. 2. Poenal cos savngs of EP Usng he descrpon of he dfferences beween he "radonal" orderng procedure and EP he advanages of EP wh respec o he radonal orderng procedure relaed o 7

8 cos savngs can be explaned. Two advanages are he os poran: reducng ransacon coss and reducng averck buyng. The ransacon coss of a purchase are he oal nernal coss o coplee a purchase fro requson o payen. Reducng ransacon coss s acheved by reducon n he average e spend by (adnsrave) personnel on a ransacon, reducng clercal errors and herefore also reducng he average lead e. A survey by CAPS aong 69 US organsaons showed ha for MRO purchases he coss for an average ransacon s sll ore han US $75, whch s ore han he average MRO nvoce (Kolchn and Tren, 999). Quoes fro Harnk (999) and he Aberdeen Group (2) ndcae ha ransacon coss wh EP can ypcally be reduced fro on average ore han US $ o abou US $3 or less per purchase order. Clearly he reducon of he ransacon coss wll depend on he funconaly level of he EP syse: he ore seps are done elecroncally, he ore reducon here wll be. The second ajor advanage s he reducon of averck buyng (purchases done whou usng avalable copany conracs). Research ndcaes ha averck buyng could be ore han 5% for ceran coody groups resulng n an average hgher prce (ypcally -2%, Sherrll e al, 2). IBM repored n her Annual Repor 2 a reducon n he averck buyng on average fro 45% o less han % fro 994 o 999 usng e-procureen. Ipleenng an elecronc caalog syse can only be done wh a very led nuber of supplers per caegory (because of he coss), hence when an nernal cusoer uses he elecronc caalog averck buyng s prevened 8

9 auoacally. Ths advanage s already obaned wh he basc funconaly of he EP syse: only he elecronc caalog. A hgher funconaly level of he EP syse bascally wll no affec averck buyng drecly as hs s no perceved by he nernal cusoer. Bu could have an ndrec effec hrough e.g. reduced lead es (resulng fro a hgher funconaly level of he EP syse). Besdes he wo an advanages enoned above here are also oher posve sde effecs. Frs, wh an EP syse nforaon abou he purchase volue, frequency, ec can be ore easly exraced. Beer nforaon on he purchase volue per suppler gves he opporuny o negoae beer conracs. Also reducng he averck buyng wll ncrease he purchase volue per suppler, akng he opporuny even beer (reducons of 5-2% n he spend hrough EP accordng o Sherrll e al, 2). Secondly, as already enoned, pleenng an EP syse s only done wh a led nuber of supplers, because of he pleenaon coss. Thus nroducng EP wll auoacally reduce he nuber of supplers. For he sae reason he nuber of arcles wll also be reduced as only he arcles of he supplers conneced o he EP syse wll be avalable. These arcles wll sll have o cover he funconal needs of he nernal cusoers as uch as possble o preven averck buyng. Fnally, nroducng an EP syse (especally for several seps of he orderng procedure) eans ha here has o be a clear undersandng of he asks o be perfored n ha sep n order o be able o auoae. For nsance n he auhorsaon sep all auhorsaon levels for a purchase for all personnel have o be defned. Beng forced o hnk abou 9

10 he exsng orderng process can lead o a reorgansaon of ha process whch would be ore effcen even whou usng an EP syse. 3. Ipleenaon of EP For os purchases s possble o realse cos savngs wh an EP syse based on he advanages n he prevous secon. However hese savngs should ouwegh he effor and coss of pleenng an EP syse. Decdng o go ahead wh he pleenaon of an EP syse wll be based on he analyss of he reurn on nvesen (ROI) and ofen a coparson akes place beween he dfferen possble IT nvesens (K e al, 2). We focus on hs ROI analyss. Before gong no he deals of hs analyss, noe ha selecng he proper EP syse s also no sraghforward. The syse has o be able o handle he copany-specfc nforaon flows, he densons of he syse and also good copably wh he exsng IT syses of boh he copany and os of he supplers would be an advanage. Aaran (2) recognses a nuber of hese pfalls or aenon areas o be addressed before he sar of he pleenaon: he conen anageen, he necessary experse and he organsaonal change. The las wo apply o pleenng IT syses n general, conen anageen s specfc for EP: anenance and updaes of he elecronc caalog (new es, obsolee e, new prces, ec). Padanabhan (2) defnes hree approaches o hs ssue: conen anageen can be done by he buyng organsaon, he supplers or by a hrd-pary. The bes soluon wll depend on he n-

11 house experse, he coss and expecaon regardng conrol, response e and secury, n case he second or hrd opon s chosen. For he ROI analyss has o be denfed for whch coody groups and for whch supplers of hose coodes s profable o do he pleenaon and also for whch pars of he organsaon (for whch eployees or on a hgher level for whch deparens / dvsons / busness uns). The coss and he benefs of pleenng EP also depend on he funconaly level of he EP syse. The funconaly level of he EP syse s defned as he asks o be perfored by he EP syse, e.g. does allow for searchng a caalog only, or orderng oo, auhorsaon degree, level of neracon wh fnancal syses a he suppler and he buyer's sde, payen ec. The pleenaon coss have o be assessed per coody group, per deparen and per funconaly level and he sae holds for he cos savngs. The pleenaon coss of addng a suppler caalog can dffer a lo beween supplers dependng on he experence wh Inerne echnology a suppler has and he copably of hs curren IT syses o he EP syse of he buyer. Furherore akng caalogs eans akng clear specfcaons of each e n he caalog, whch wll gve ore or less dffcules dependng on he coody group. Also, he nuber of supplers requred o cover all es n a coody group dffers. Coss relaed o addng eployees (deparens) o he EP syse nclude deernng busness rules (auhorsaon ls), ranng of eployees and copably ssues

12 regardng IT syses whch could dffer beween deparens. Las bu no leas, for all pleenaon coss apar fro he one-e pleenaon coss updae or anenance coss can occur. Cos savngs wll only occur f boh he coody group and he deparen have been added o he EP syse (wh a ceran funconaly level). To gan ore dealed knowledge abou he sze of he cos savngs of all coody-deparen cobnaons nforaon has o be colleced on he followng: Spend per coody per deparen. uber of ransacons per coody per deparen. Average averck buyng percenages per coody (before and afer pleenaon). Average hgher prce when averck buyng. Average ransacon coss (before and afer pleenaon). Wh he dealed nforaon on he coss and possble cos savngs an ROI can be calculaed. Then for he EP syse he (os) profable cobnaon of: coody groups and supplers; deparens / dvson / busness uns o be gven access; funconaly level of he EP syse; can be deerned. 2

13 As pleenng EP s a huge ask and sll relavely new, coon pracce s o sar wh a plo, ypcally pleenng EP for one coody group (a few supplers) only avalable for a sall nuber of eployees (for exaple one deparen). The reason s o becoe falar wh he echnology, o see f he prosed benefs acually occur and o recognse possble pfalls for successful pleenaon. Afer successfully fnshng he plo he nex sep s a ajor one: rollng ou he EP syse no he enre organsaon. Gven he densons of he EP syse, prores need o be se on he coody groups, deparens and funconaly level. For nsance gven a basc EP syse wh he coody group and deparen wh whch he plo sared, should frs ore coodes be added or ore deparens or should he funconaly be exended? Experence wh EP roll-ou sraeges s sll lackng, agan because he frs EP pleenaons jus sared very recenly. To answer hs queson n he nex secon a aheacal odel s presened o deerne he os cos-effcen way o roll-ou EP no an organsaon, hence seng prores by calculang he opal order of pleenaon. 4. Modellng he EP roll-ou To ake a aheacal odel of he elecronc purchasng roll-ou, npu daa has o be defned and he pleenaon process has o be srucured. An explanaon of he 3

14 aheacal odel follows below, n Appendx A all noaon used s lsed for reference. 4. Inpu daa We assue ha here are jax coody groups j and ha here are kax deparens (dvsons, busness uns) k for whch EP has o be pleened. Also n hs frs odellng aep we assue here s only one level of funconaly n he EP syse. For he pleenaon coss we assue ha hey can be deerned beforehand. We assue fxed coss and varable coss. The fxed coss I are he coss of he EP syse self whou any cusosaon. There are wo ypes of varable coss: CC j are he pleenaon coss for addng coody group j o he EP syse and slarly DC k are he pleenaon coss for deparen k. We use one fxed aoun for he pleenaon coss. For calculang hs aoun one could nclude several coponens: he nal pleenaon coss and updae coss lasng for (and perhaps dscouned over) several years. We assue ha hese coponens are no dependen on anyhng else excep for he specfc pleenaon, hence hey can be aggregaed no one aoun. As ndcaed n secon 3 addng a coody group o he syse eans he es of ha group are avalable for all deparens ha already have been added. Also, addng a deparen eans ha all coody groups ha already have been added becoe avalable o ha deparen. Oher npu daa needed are he coss savngs or revenues of he pleenaon. 4

15 oe ha cos savngs wll only occur for a coody group n a deparen f boh he coody group and he deparen have been added o he EP syse. We denoe wh R jk he coss savngs per coody group j per deparen k. Agan for he cos savngs we ake one fxed aoun usng he sae reasonng as for he pleenaon coss. Coponens of hese coss savngs wll nclude savngs hrough reduced averck buyng and hrough reduced ransacon coss. Furherore, hese savngs are srucural. To be able o relae he o he pleenaon coss one has o ake no accoun he savngs for a nuber of years. Ths can be done n several ways lke: ulplyng by a fxed nuber of years, dscounng he savngs over e wh or whou a e horzon. 4.2 Modellng he roll-ou A he sar of he pleenaon projec we assue for splcy bu whou loss of generaly ha nohng has been pleened ye. We could also have sared wh an EP syse where already soe coody groups and / or deparens have already been added. The pleenaon process s hen odelled as follows: The process consss of perods. The coody groups and deparens are added o he EP syse one by one. In oher words, n each perod (...) EP s pleened for one coody group or deparen, hence = jax + kax. In perod he pleenaon coss beng eher CC j or DC k have o be pad. The fxed coss I are pad a he sar of he pleenaon. The revenues (cos savngs) n perod are he new revenues generaed by he coody or deparen added n perod. Hence hese revenues are dependen on wha already has been conneced o he EP-syse. 5

16 Coss and revenues are dscouned (deprecaed) wh facor (<<) beween each perod. By gvng coss and revenues ha occur earler n e a hgher value, prores can be deerned n he order of pleenaon. Also s assued consan for now, by whch we plcly assue ha he pleenaon perod s he sae for all coody groups and deparens. For noaon purposes we nroduce he varables c j and d k wh values eher or, ndcang f coody group j and deparen k respecvely has or has no been added o he EP syse. So all c j and d k are a he sar of he pleenaon and a he end. ow he bes EP roll-ou sraegy can be reforulaed as he sraegy (he order of pleenaon) for pleenng all coody groups and deparens ha axses he oal prof (he oal revenues nus he oal coss) gven he deprecaon of he revenues and coss n e. Defnng de oal prof as v he objecve can be forulaed as: ax v I P, z () Wh he followng defnons of he varables: s he sae of he EP syse a he end of perod. Ths sae consss of he values of c j and d k n perod and depends on he sae a he end of he prevous perod - and decson ade n perod. Furherore, s he nal sae (all c j and d k are ). 6

17 z s he decson wha o add o he EP syse n perod. Of course only coodes or deparens for whch c j or d k are sll n sae - can be added. Thus he decson z s o urn one of hose fro o, hence changng he sae. oe ha a e = here are sll jax + kax decson opons, whereas for = - only one opon s lef. P ( -,z ) s he drec prof ha s generaed n perod. Lke depends on - and he decson n perod. oe ha he prof can be negave. The drec prof s calculaed n he followng way dependng on wheher a coody or a deparen s added o he EP syse: k ax d k R CC z : c : j k j j k P, z j ax (2) c j R DC z : d : jk k k j oe ha he fxed coss I s jus a consan subraced fro he prof and herefore I has no nfluence on he opal roll-ou sraegy. 4.3 Usng dynac prograng The nuber of possble pleenaon sequences s!, akng he calculaon of all values of v nearly possble ask already for sall values of. However he proble () can be rewren no a fne deernsc dynac prograng (DP) proble wh backwards recurson. We defne v ( ) as he axu oal revenues ha can be obaned n sae a he end of perod. v ( ) can be calculaed recursvely: v ax P z v, z (3) 7

18 A he end of perod here s only one possble sae (all c j and d k equal o ) and no decson opons are lef, hence: v (4) There s also only one nal sae and wh he recursve relaon above v ( )-I wll be he axu oal prof and he decsons z ha gve rse o hs axu value deerne he opal order of pleenaon. The nuber of saes a he end of perod s and here are decson opons lef. Thus for deernng he axu prof ade, an expresson ha can be splfed: 2 2 calculaons have o be (usng and 2 ) (5) Above he resrcon s used ha all coodes and deparens have o be pleened. Ipleenng ceran coodes and deparens could be nonprofable hough, hence excludng he would ncrease he overall prof. Obvously hs would be he case, when he pleenaon coss for a coody j or a deparen k are larger han he revenues ganed by addng j or k o he EP syse: k ax R j k k CC j j ax or R DC (6) jk k j 8

19 All non-profable pleenaons are found a he end of he opal pleenaon order. Because of he dscoun facor losses are posponed. Hence, he prof s axsed when recursvely all coodes and deparens are excluded ha are pleened fro perod unl. Ths perod s deerned by sarng fro v ( ) and gong backwards n he opal order unl v becoes negave. Ths leads o he opal roll-ou sraegy whou he resrcon ha all coodes and deparens have o be pleened. 5. Calculang he opal roll-ou sraegy Usng he DP forulaon of he prevous secon opal EP roll-ou sraeges can only be calculaed on a copuer whn reasonable e ls for values of up o 25 or so. Ths eans for probles wh larger, heurscs are requred o deerne a good approxaon of he opal sraegy. 5. Heurscs As an approxaon we defned a "greedy -sep" heursc: lookng seps ahead. In hs heursc a he end of each perod he decson z + wll be aken ha axses he prof w over seps: w ax P 2 2 z z 2 z 2 z 2, z ax P, z ax... ax P, z (7) The oal prof v wll be: 9

20 z P I v, (8) oe ha for he greedy -sep heursc (7) and (8) can be aken ogeher: z z P I v, ax (9) Ths greedy -sep heursc s sply akng he bes avalable opon a every sep, whou lookng a s consequences for furher seps aurally, should hold ha. In Appendx B s proven ha below a ceran hreshold value T of he dscoun facor he greedy -sep heursc provdes he opal soluon. The nuber of calculaons needed for he heursc n each perod s: 2 () For he oal nuber of calculaons has been proven n Appendx C ha: () For he -sep heursc hs bols down o 2 calculaons and for he 2-sep heursc o 3 calculaons. oe ha for large calculang he DP proble could be faser. 2

21 The -sep heursc has an obvous flaw, as n he frs perod no cos savngs wll occur (only havng eher a deparen or a coody conneced o he EP syse), hence he coody or deparen wh he lowes pleenaon coss would be chosen. Here a large proveen can be ade by lookng wo seps ahead, as n he second perod he frs savngs occur. Consderng reasonable calculaon e he 2-sep heursc can be used for even larger han, akng applcable for os praccal suaons. If no all coodes and deparens have o be pleened, he non-profable pars can be reoved a he end of he pleenaon order found by he heursc (as descrbed a he end of secon 4), hence ncreasng he axu prof. 5.2 A nuercal exaple To llusrae how he odel can be used for praccal calculaons a sall scale exaple s gven below wh seven coody groups and sx deparens o be conneced o he EP syse. The daa n he exaples s based on realsc values. Fxed coss of US $.6 Mllon are assued. Furherore, he coss per coody group are assued o be n he order of US $, and he coss per deparen around US $ 3,. These aouns nclude dscouned anenance coss for fve years. The varable coss are shown n Table. For he sx coody groups we assue around 5, ransacons per year and a spend of US $25 Mllon. Also, we assue around US $5 can be saved on average per ransacon, whch eans around US $.75 Mllon per year. Wh an average of 25% averck buyng ha wll decrease o 5% wh he EP syse and assung % hgher prces wh averck purchases, he savngs per year are around US $.5 Mllon. Wh dscouned suaon over fve years hs leads o an esae of 2

22 US $6 Mllon n oal cos savngs and hese savngs have been dvded over he savngs per coody group per deparen n Table 2. Fnally, a dscoun facor per year of.8 was aken. Assung projecs of 3 onhs hs leads o =.946. Table 3 shows he opal roll-ou sraegy. The las wo perods are pu beween brackes, as hey are non-profable and herefore should be excluded fro he pleenaon. Table 4 gves a coparson of fve roll-ou sraeges regardng: he prof, pleenaon order and he oal pleenaon coss. They vary beween he sraeges as he coss are dsrbued dfferenly over he oal pleenaon perod. The wors case was found by nsng nsead of axsng he oal prof. In hs case he axu prof s 49% hgher han he nu prof. Furherore, he greedy heurscs approxae he opal soluon que well. One can see he value of lookng wo seps ahead nsead of one by he prof dfference beween he 2-sep and - sep heurscs. The 3-sep heursc already provdes he opal soluon here. 6. Conclusons The advanages of EP see undspued regardng coss savngs and adnsrave process auoaon. As pleenaon coss are lowerng, EP s expeced o be wdely adoped by copanes. A he oen EP s sll n s nfancy hough. Plo projecs are under way, bu copanes sll hesae wh he full roll-ou of EP no her 22

23 organsaon, because he echnology s new and no uch experence exss ye abou pleenaon sraegy. The aheacal EP roll-ou odel s a fraework for provdng a good roll-ou sraegy based on expeced coss and cos savngs. I deernes he opal order of pleenaon for coody groups and deparens, ogeher wh oal cos savngs and how hese savngs wll occur over e. For larger praccal cases greedy heurscs can be used o calculae (near) opal sraeges. Usng sall scale exaples wh realsc values of he coss and cos savngs he odel shows ha here can be a large dfference n he oal savngs beween he opal roll-ou sraegy and oher (rando) sraeges. A good roll-ou sraegy s herefore an poran facor n he successful pleenaon of EP. Alhough any aspecs already have been ncorporaed n he odel, s possble o ake soe exensons. Dfferen funconaly levels of EP syses, dfferen lenghs of pleenaon perods can be ncorporaed easly. One could also hnk of learnng curves for pleenng EP syses. Sochascy could also be ncluded, as npu values ay no be easy o esae n pracce. The applcably of he odel wh possble exensons sll has o be verfed wh eprcal evdence n he near fuure. For praccal purposes s good o ephasse ha only fnancal aspecs of EP pleenaons are opsed n he odel. To pleen EP successfully also oher organsaonal facors ay need o be consdered. These 23

24 facors could nfluence he preferred pleenaon sequence. However wh he odel a leas he fnancal consequences of oher roll-ou sraeges can be calculaed. References Aberdeen group, 2. e-procureen: fnally ready for pre e, Aberdeen group 4(2). Angeles, R., 2. Revsng he role of Inerne-EDI n he curren elecronc coerce scene, Logscs Inforaon Manageen 3(), Aaran, M., 2. The cong age of onlne procureen, Indusral Manageen & Daa Syses (4), Bergeron, F. and Rayond, L., 997. Managng EDI for corporae advanage: A longudnal sudy, Inforaon & Manageen 3, Boer, L. de, Harnk, J.H.A. and Hejboer, G.J., 2. A concepual odel for assessng he pac of elecronc procureen, acceped for publcaon n he European Journal of Purchasng & Supply Manageen. Croo, S.R., 2. The pac of web-based procureen on he anageen of operang resources supply, Journal of Supply Chan Manageen, Wner, 4-3. Dobler, D.W. and Bur, D.., 996. Purchasng and supply anageen: ex and cases, sxh edon, McGraw-Hll. Harnk, J.H.A., 999. Excellng wh e-procureen, PrceWaerhouseCoopers, eherlands. 24

25 Kaefer, F. and Bendoly, E., 2. The adopon of elecronc daa nerchange: a odel and praccal ool for anagers, Decson Suppor Syses 3, K, S.H., Jang, D.H., Lee, D.H. and Cho, S.H., 2. A ehodology of consrucng a decson pah for IT nvesen, Journal of Sraegc Inforaon Syses 9, Kolchn, M.G. and Tren, R.J Reducng he ransacons coss of purchasng lowvalue goods and servces, CAPS focus sudy (hp:// Kraljc, P., 983. Purchasng us becoe supply anageen. Harvard Busness Revew, Sepeber-Ocober, 9-7. Leenders, M.R. and Fearon, H.E., 993. Purchasng and aerals anageen, Tenh edon, Irwn, Boson. Long, B.G., 2. Ten E-Coerce Quesons All Purchasng Managers Mus Answer, proceedngs of he 86h Annual Inernaonal Purchasng Conference. Lysons, K., 996. Purchasng, Fourh edon, Pan Publshng, London. McIvor, R., Huphreys, P. and Huang, G., 2. Elecronc coerce: re-engneerng he buyer-suppler nerface, Busness Process Manageen Journal 6(2), Mn, H. and Galle, W.P., 999. Elecronc coerce usage n busness-o-busness purchasng, Inernaonal Journal of Operaons & Producon Manageen 9(9), Padanabhan, S., 2. Elecronc caalog anageen, Purchasng Today, June, p. 6. Segev, A., Porra, J. and Roldan, M., 997. Inerne-based EDI sraegy, Decson Suppor Syses 2,

26 Sherrll, F., Anhony, T., Dansh, S. and Chrs, K., 2. eprocureen: he prose and realy, PeopleSof whe paper seres (hp:// Telgen, J., 997. Revoluon hrough elecronc purchasng. Workng Paper, Unversy of Twene, eherlands. Appendx A The noaon used : Indces: j k : denong he coody group (...jax) : denong he deparen (...kax) : denong he perod (...) Here jax and kax s he respecvely he nuber of coody groups and he nuber of deparens o be added o he EP syse. s he nuber of pleenaon perods and herefore equal o jax + kax. Inpu daa: I : Coss of he uncusosed EP syse self. CC j : Ipleenaon coss of EP for coody group j ( ). DC k : Ipleenaon coss of EP for deparen / dvson k ( ). R jk : Coss savngs (revenues) obaned when coody group j and deparen k have been added o he EP syse ( ). : Dscoun / deprecaon facor (<<). 26

27 Varables: c j : Value or f coody group j respecvely has or has no been added o he EP syse. d k : Value or f deparen / dvson k respecvely has or has no been added o he EP syse. : The sae of he EP-syse a he end of perod, conssng of he values of c j and d k a he end of perod. z : Decson wha o add o he EP-syse n perod (urnng one c j or d k fro o ). P : Drec prof n perod. v ( ) : Maxu prof n perod for sae. Appendx B Theore Below a ceran hreshold value T of he dscoun facor he greedy -sep heursc gves he opal soluon. Proof Suppose he greedy -sep heursc does no gve he opal soluon, hen for a leas one perod holds ha he opal decson z +,op gves a lower prof n he nex seps han he decson based on he heursc z +,gr : 27

28 ,,,, gr op z P z P (B.) whle sll he value of v ( ) s hgher han when he greedy decson s chosen:,, gr op v v gr gr op op v z P v z P,,,,,, gr k op op gr v v z P z P,,,,,, (B.2) As can be chosen arbrarly close o, choosng below a ceran hreshold value T wll lead o a conradcon. Appendx C Theore For =,2,3,... and =, 2,..., holds ha (C.) Proof Rewrng he ndces of he l.h.s. leads o: (C.2) ow we prove wh nducon ha: (C.3) 28

29 For = (C.3) holds as =. Supposng (C.3) holds ha reans o be shown ha: 2 (C.4) Sarng wh he l.h.s. we ge: (C.5) 29

30 Table : Ipleenaon coss of he coody groups an deparens (n US dollars) Coody (j) CC j Deparen (k) DC k C 85 D 25 C2 D2 95 C3 95 D3 2 C4 45 D4 36 C5 92 D5 2 C6 6 D6 77 C7 45 3

31 Table 2: Expeced cos savngs R jk per coody per deparen (n US dollars) Deparen (k) Coody (j) D D2 D3 D4 D5 D6 C C C C C C C

32 Table 3: Opal roll-ou sraegy ogeher wh he revenues assocaed wh each pleenaon perod (n US Dollars) Perod Opal soluon Drec prof Drec prof (dscouned) Cuulave prof D C D C D C D C D C C (2) (C7) (-3) (-7) (335) (3) (D6) (8) (9) (344) 32

33 Table 4: Resuls regardng he expeced prof (n US dollars) usng varous roll-ou sraeges Mehod Prof Toal Ipleenaon order nvesen Opal D2,C,D,C4,D3,C2,D4,C3,D5,C5,C6 Greedy -sep D5,C6,C2,D,C5,D3,C4,D2,C,D4,C3 Greedy 2-sep D4,C3,D2,C,C4,D3,D,C2,D5,C5,C6 Greedy 3-sep D2,C,D,C4,D3,C2,D4,C3,D5,C5,C6 Wors case C,C4,C7,C2,C3,C5,C6,D6,D3,D5,D4,D,D2 33