Academic journal article Journal of Supply Chain Management

The Impact of Web-Based Procurement on the Management of Operating Resources Supply

Academic journal article Journal of Supply Chain Management

The Impact of Web-Based Procurement on the Management of Operating Resources Supply

Article excerpt

SUMMARY

The focus of this article is on the impact of Web-based order processing systems for procurement strategy in the management of maintenance, repair, and operating (MRO) supply. The management of MRO supplies has been little discussed in the literature, and in many organizations is undertaken in a devolved, decentralized, and uncoordinated fashion. Consequently, MRO procurement is often a poorly managed and non-value-added activity, yet MRO purchases may account for many millions of dollars of expenditure for organizations across most, if not all, industries. To explore the impact of Web-based procurement systems on MRO purchasing, a Delphi study was conducted providing access and analysis of commercially sensitive data. [1]

In this article, it is contended that greater information processing capability achieved through the use of electronic commerce, specifically Web-based procurement, will enable significant cost improvements and strategic leverage to be obtained through a more strategic approach to management of the typically low-value, high-variety goods and services that constitute the main category of MRO items. E-procurement of MRO items may be a so-called "killer application" on the basis of potential efficiency gains.

INTRODUCTION

Further, an important consequence of the reengineering of the MRO procurement process will be to raise the professional profile of the purchasing function through enhanced internal customer service and significant total cost improvements.

The growing use of the Internet for conducting business transactions is widely regarded as a major revolution in business practice. This article is founded on a research project about the adoption and development of Web-based electronic commerce in business-to-business markets (Croom 1998). The focus of the study was the management of the procurement of non-core products and services, variously known as operating, nonproduction, or MRO (maintenance, repair, and operating) resources. This paper is thus concerned with the implications of the adoption of electronic procurement for MRO items on purchasing management. This is an area of purchasing practice that has received little relative attention in the literature, as by far the dominant focus of the purchasing literature has been the management of production item procurement.

This article initially examines the literature relating to electronic commerce in order to establish some of the main implications for purchasing management of the growth in Internet-based trading. Second, analysis from an exploratory study into the nature and use of electronic procurement (e-procurement) systems is presented. This study involved purchasing and IS managers who have direct involvement and responsibility for the study, development, or implementation of Web-based procurement systems for MRO procurement. The final section of the article discusses the implications of the study findings for the management of MRO procurement.

THE IMPACT OF ELECTRONIC COMMERCE ON GOVERNANCE STRUCTURES

During the past decade, organizational theorists, business consultants, and telecommunications managers and vendors have directed our attention to the strategic role that information can play in the competitive strategy of firms (Bradley, Hausman, and Nolan 1993; Keen 1988; Porter and Millar 1985). Throughout the 1980s, widely discussed case examples demonstrated how the use of telecommunications networks to link firms to their suppliers and distribution chains conveyed important first-mover advantages. The firms cited in the literature are as diverse as Microsoft, Chrysler, Ford, General Electric, BT, Nortel, Siemens, American Hospital Supply, and McKesson. The benefits to the firms deploying such inter-organizational networks included: increased efficiency of order processing, reduced costs due to just-in-time inventory management, locking in trading partners because of the difficulties competitors faced once a network is in place, and greater ability to customize products and services based upon information arising from the transactions carried by the network (Cash and Konsynski 1985; Johnston and Vitale 1988). …

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