Electronic commerce or e-purchasing is the procedure of selling and buying services or products with the help of electronic systems. Computer networks or the Internet is the common fundamentals of the electronic system. Over the last decade, this form of business has grown into a huge volume and has spread all over the world. There are different forms of electronic business starting from automated data collection systems to inventory management systems, electronic data interchange, online transaction processing, Internet marketing, supply chain management and electronic funds transfer. This form of business is able to reach a global market on a fast note, and the cost is considerably low.
E-purchasing and e-procurement
Business to Business, (B2B) Electronic Commerce (E-Commerce) has brought about a sea change in the way transactions are carried out between different entities in the business. B2B provides a way for manufacturers to develop products for clients, circumventing the traditional channels involved in doing business. In facilitating easy access, E-Commerce provides a cost-saving method for different parties to a business to develop maximum productivity. Specifically, E-Commerce integrates telecommunications, computers and streamlined work processes. Business to Customer (B2C) e-commerce enables customers to get in touch with manufacturers. B2B helps organizations communicate. The model is delivered through channels using information technology and information exchange.
Manufacturers principally use B2B processes to pass down to suppliers the requirements of their manufacturing program. (Hansen, 2005) The need for stocking inventory is negligible as information passes rapidly down the electronic corridor. One of the greatest advantages of an e-commerce platform is that information is exchanged between manufacturer and customer directly. B2B e-commerce may greatly impact the way B2B e-business exchange models (e-procurement) are handled by sharing information on production schedules and demand forecasts, and this is particularly effective for production companies. (Hansen, 2005)
A direct advantage of e-procurement can be illustrated. Entering the crowded car insurance marketplace, Tesco introduced an online price comparison site to compare motor insurance prices. This new service features best deals for about 30 products with comparisons to over 25 policy features. It is because of services like this and its constant innovation that the company managed to grow by over 30 per cent back to back and today contributes almost 3% to total sales in the UK. Its online profit also increased to about 57 million pounds. To manage this growth, a dedicated warehouse was opened. The retail powerhouse invests in people and systems and will continue to do so. It also wants to be strong in the non-food areas of business. The business is people dependent, and technology platforms developed can help to raise the mark and thus discourage competition. Tesco introduced inventory management in stores to ensure that products are always available. Hand held computers scan shelves to estimate significantly reduced or out of stock inventory and so that prompt backup response helps to put the product back in. Competitors have been hampered by a lack of stocks. (Frieden, 2006)
Advantages of E-purchasing
The greatest advantage of E-commerce, particularly for these Services, is the flexibility it provides to production to take advantage of information sharing along the production chain. A production unit can manipulate this information to great profit customer needs can be coordinated better with processes. In future, order processing, invoicing and transportation may increasingly share the resources of e-commerce. For example, a unit can introduce e-commerce as a forward and backward integration tool into the supply chain.
Simply speaking, this means the unit will be available 24 hours (electronically, of course) to its vendors and end customers. An e-mail connection can be the start of the electronic exchange of information. The most vital piece of information to any production set-up is the status of orders. When the next B2B e-business exchange model (e-procurement) will be coming in is important for the operations chief of an organization. The sooner he gets this information, the better position he will be in to predict cash flows and the availability of stocks. (Hansen, 2005)
On the managerial aspects, B2B e-commerce streamline operations as the need for paper data is done away with and reduce the need for clerical inputs. This facilitates system integration. Therefore, the unit is closely connected with vendors and customers through an appropriate information base, which can be changed to the situation. The business alignment reaps huge savings for the manufacturer owing to costs saved by timely information. E-Commerce also has an impact on tightening order time lags between a manufacturer and supplier. (Jones, 2002) The B2B electronic platform also enables the movement of goods directly between producers and suppliers, and customers. This removes an additional layer of intermediaries in the cost chain and truly realizes value along the chain. It will be interesting to watch if E-commerce can be adopted by larger units and corporations to realize even bigger gains. (Johnston, 2001)
On Boxing Day, shoppers queued up early hours for some of the biggest discounts offered by stores, where reductions up to 80% on purchases. The reason was simple. After sluggish December sales, well-known outlets were compelled to keep pace with Internet retailers who had begun to reduce prices much before the traditional Boxing Day rush. Over 3 million people looked online on Christmas day, aiding online stores to clock in approximately 50 million pounds of business.
The bricks and mortar retailers like Argos, Currys, PC World or Marks and Spencer would appear to have convinced shoppers to return to their stores through aggressive discounting, but the competition posed by online business is here to stay. It is reported that for every 6 pounds, one is spent on shopping online. The amount spent on the internet shopping in 2007 exceeded the previous year’s sales by 50%. More than 15 billion pounds was spent in a three month period starting October and making a rout of the markets by December. (Chan, 2008)
Reasons for successful E-purchasing and e-procurement
Consumer psychology has undergone a sea change, and trends point out that unless retailers join the Internet bandwagon, they will be lagging. But this, too, seems difficult now owing to the constantly evolving strategies of online retailers, which makes them highly sophisticated and always attuned to the increasing demands of customers. Broadband connectivity is now present in a very large number of households in the UK, and this has contributed greatly to the popularity of online retailers.
There is mutual growth as this rise in connectivity has matured the retail market and contributed to large scale changes in Internet technologies. Consumers can confidently surf between numerous sites to locate the best discounts or prices. (Kar, 2007) This unbounded growth also has its downside. Because of the easy access and the convenience, many consumers, mostly between 18 to 34 years, end up overbuying or even making useless purchases. Estimates are that almost one and half billion dollars worth of gifts brought on the Internet for Christmas were useless to consumers: some examples include ‘radio-controlled helicopters’, slippers or striped jumpers. (Chaudhury, 2002)
Internet shopping has contributed to fuelling obsessions among younger buyers, one of them being compulsive purchasing. A buyer under the influence of peer pressure, typically in the age bracket of the twenties, would go for those expensive shoes or that expensive electronic gizmo simply because it would make a statement. Most of the time, these buyers are not proactive to needs but reacting to the magic of high discounts and the fact of being able to visit any number of sites to choose items.
Most of these items end up being offloaded on the Internet as sale offers. Sites like E bay have made a fortune out of this trend. The compulsive need to buy is, of course, helped along by credit cards and every year, this habit pushes thousands into debt. Credit cards are convenient, and buyers can keep chipping away until they realize that they owe more than purchases made. Credit card frauds are on the rise as an increasing amount of buying is done over the net. (Johnston, 2001)
Future of purchasing
B2B e-business exchange model (e-procurement) has been an issue in developing countries where it is a relatively new tool for production enhancement. The model is delivered through channels using information technology and information exchange. For example, instead of having to send along inventory, a manufacturer can rely on the vendor managed inventory software for B2B, which relies on a certain level of information substituting actual inventory. Electronic trading improves productivity, greatly enhances customer satisfaction, and a major consequence of adopting it is reduced inventory lines due to just in time production methods.
The need for stocking inventory is negligible as information passes rapidly down the electronic corridor. One of the greatest advantages of an e-commerce platform is that information is exchanged between manufacturer and customer directly. Therefore, a product can be designed quickly and delivered. This motivates a shift to a more customer centric focus rather than a top-heavy inventory policy, which can lead to a build up of obsolete stock. The greatest advantage of E-commerce is the flexibility it provides to production to take advantage of information sharing along the production chain. A production unit can manipulate this information to great profit customer needs can be coordinated better with processes. In future, order processing, invoicing and transportation may increasingly share the resources of e-commerce. If such an eminent and important presence, it is obvious that more research is needed on this sector, particularly in the field of effective B2B e-business exchange model (e-procurement). (Jones, 2002)
Parts of South Asia do seem to be growing as far as connectivity is concerned. However, a comparable achievement on the lines of Tesco is yet a long time coming. Internet connectivity lags behind Europe and the USA. Less than 17% across Asia use the Internet. India expects to have 20 million broadband users by 2012, which is still an overoptimistic figure. Realistically, less than 10 million may have access to the Internet. In countries such as India, a small group of Internet users at all buys goods online. Their average spending is about 5,000 rupees (less than 150 dollars) per month. In this respect, too, consumer thinking differs from Europe. The buying is more need based compared to the UK, where the buyer is more on impulse. Online shopping in India is negligible. (Komiak, 2004)
The possibility of credit card fraud deters people from buying on the net. More frequent uses of the Internet are reported for downloading application forms, rail and air ticket booking or for obtaining information. (Nissanoff, 2006) Three out of four urban Indian households have computer and internet connectivity. This is the segment moving away from traditional grocery and food sectors into lifestyle categories on the net, delivering to taste and quality standards. The urban demographics are encouraging for future prospects in E-commerce here. Most families have double incomes. More than half the Indian population is young. (Seybold, 2001) The future of purchasing appears bright enough for E-purchasing and e-procurement.
In many parts of the world, resources are inadequate or stretched to produce mediocre goods, which do not find worldwide markets. Even those firms, which aspire to international reach for their products, are hampered by poor infrastructure and unnecessary problems on the way. Additionally, there are government regulations, which have not reacted to changing technological environments as rapidly as they should. Partly this may be due to political compulsions, especially in developing countries, which impede quick decisions and action. There are developing countries, which could be serious players in the B2B scenario but do not cost competitive enough as for now. But in the near future, e-purchasing would develop on a serious note once they formulated a method to make the market more cost-competitive. Thus, on a worldwide scale, E-purchasing and e-procurement would emerge as a dominant force in marketing products, and this would be the future of business in the next decade.
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