e-procurement adoption in the southcoast smes
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Int. J. Production Economics
Int. J. Production Economics 122 (2009) 161–175
0925-52
doi:10.1
� Cor
E-m
journal homepage: www.elsevier.com/locate/ijpe
E-Procurement adoption in the Southcoast SMEs
Angappa Gunasekaran a,�, Ronald E. McGaughey b, Eric W.T. Ngai c, Bharatendra K. Rai a
a Department of Decision and Information Sciences, Charlton College of Business, University of Massachusetts – Dartmouth, 285 Old Westport Road,
North Dartmouth, MA 02747-2300, USAb Department of Management Information Systems, University of Central Arkansas, Conway, AR 72035-0001, USAc Department of Management and Marketing, The Hong Kong Polytechnic University, Hong Hum, Kowloon, Hong Kong, China
a r t i c l e i n f o
Available online 31 May 2009
Keywords:
E-Procurement adoption
E-Commerce
Purchasing
Benefits and barriers
Empirical analysis
Framework
73/$ - see front matter & 2009 Elsevier B.V. A
016/j.ijpe.2009.05.013
responding author. Tel.: +1508 999 9187; fax:
ail address: [email protected] (A. Gu
a b s t r a c t
E-Commerce is expected to play a major role in the 21st century global market. Of the
various E-commerce models (B2B, B2C, B2E and B2G), B2B has been particularly
successful, due to adoption of standardized processes for document exchange (like EDI),
shipping, tracking, delivery and payment among supply chain partners. One element of
B2B is E-procurement. E-procurement focuses on acquisition of resources, especially
MRO items, and increasingly materials and components. Some analysts believe that
enormous cost savings and increased effectiveness can be achieved through the
utilization of E-procurement. E-procurement utilizes electronic purchase procedures
implemented through Internet communication and Web based buying tools. Studies in
the literature report on the adoption of E-procurement in different countries and
industries. This study focuses on the current status of E-procurement in small and
medium sized enterprises (SMEs) located in the Southcoast of Massachusetts. The main
objective of this research is to understand the current state of E-procurement in SMEs
and to examine those things that influence E-procurement adoption. A questionnaire-
based survey was employed for data collection. A conceptual model was developed to
describe/explain the adoption of E-procurement and a framework is proposed for the
successful adoption of E-procurement on the Southcoast of Massachusetts.
& 2009 Elsevier B.V. All rights reserved.
1. Introduction
Global market opportunities have encouraged compa-nies to go global. In a global enterprise environment,companies have to utilize the various B2B informationtechnologies/systems such as EDI, Internet, WWW, ERPand E-procurement to standardize and automate businessprocesses. E-procurement has become an indispensabletool for automating procurement in a physically distrib-uted enterprise environment. E-procurement is importantnot only for global operations, but also for domesticoperations. E-procurement in small and medium enter-prises has not received much attention by researchers or
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nasekaran).
vendors; however, the technology is beginning to catch onwith some SMEs, largely because of the emphasis onsupply chain management in domestic and internationaloperations. This study focuses on the current state ofE-procurement in SMEs in order to identify opportunitiesand challenges.
According to Albrecht et al. (2005), companies haveadopted E-procurement systems to purchase indirectmaterials for operations, sales, maintenance and admin-istration, including things like office supplies, computerequipment, cleaning solvents, and office furniture.E-procurement systems facilitate direct links with suppli-ers of goods, thereby reducing the paperwork and over-head associated with the buying process and shorteningthe purchasing cycle. One of the major limitations ofproprietary E-procurement systems (a particular vendor’ssystem) is that they are closed systems and cannot
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support automated searches and comparisons across allvendors. Other systems, such as vertical and horizontalindustry portals, do support those capabilities.
Muffatto and Payaro (2004) define E-businessas a system wherein Internet technology is employedto streamline the business processes of a company toimprove productivity and efficiency. This communicationsystem is for better integration of suppliers, buyers andcustomers. Peleg et al. (2002) see the emergence ofE-procurement as a powerful vehicle for achieving costreduction and productivity improvement. According toRajkumar (2001), E-procurement is capable of integratingmultiple supplier catalogs into a single buyer-managedview of the catalog. This system will enable purchasingpersonnel to review product purchase profiles and in turnfacilitate supplier negotiations. Also, it will automate mostpurchasing processes (Kheng and Al-Hawamdeh, 2002).
Moon (2005) and Bendoly and Schoenherr (2005)discussed some of the major benefits of E-procurement.Those benefits include: (1) reduced transaction costs,(2) faster ordering, (3) wider range of vendor choices,(4) streamlined procurement processes, (5) better controlover procurement spending and employee compliance, (6)access to more alternative buyers, (7) less paperwork andduplication of tasks, and (8) reengineered procurementworkflows.
Gunasekaran and Ngai (2008) studied the adoption ofE-procurement in Hong Kong, and developed a model forthe adoption of E-procurement. They set forth a frame-work for E-procurement adoption/implementation. Hardyand Williams (2008) discuss the implications of social andtechnical actors on how E-procurement constitutes and isconstrained by a homogeneous network of human andtechnical actors in E-procurement policy implementa-tions. They also explain how actions are constrained andenabled through the use of E-procurement in diverseinstitutional contexts and how they evolve and changeover time and in different locations. The impact ofresource perceptions, electronic systems and enterprisesize on the involvement of small and medium sizedenterprises in public procurement is studied by Karjalainenand Kemppainen (2008). They found that perceived lack ofresources, especially in legal expertise and administration,and the lack of electronic systems in order processingand invoicing, are associated with low involvementof SMEs. Nurmilaakso (2008) explores how organiza-tional and technological factors explain the adoption ofE-business functions in 4570 European companies and themigration from EDI-based to XML-based E-businessframeworks in 329 European companies.
Traditional procurement systems have long sufferedfrom inefficient processes, lack of prompt information,and excessive complexity resulting in wasted time andmoney. E-procurement can possibly solve these problemsby streamlining processes, providing timely information,and improving coordination and collaboration, thusleading to cost savings and reduced procurement cycletimes (Tatsis et al., 2006). For SMEs’ the potential benefitsof E-procurement should be an important motivator in theadoption of E-procurement, but setting up an E-procure-ment system can require capital expenditures and skill.
Moreover, it requires the understanding—costs andbenefits in particular—and support of all, particularlytop management and owners. Reunis et al. (2004) focuson the inter-organizational spread of EP adoption fromone actor to another. Based on an exploratory study withlarge Dutch purchasing organizations, they have identifiednine types of influences on actor-to-actor dissemination:perceived advantage, communication, demonstration, en-forcement, training, involvement, risk reduction, reward,and disposition.
Recently a number of empirical studies on E-procure-ment adoption have been published. For example, Baten-burg (2007) explores country differences in adoptionof E-procurement. Based on an empirical study ofE-procurement adoption among European firms, thisauthor observes that firms from countries with lowuncertainty avoidance such as Germany and the UK arethe early adopters of E-procurement, while countriesmore reluctant to change, such as Spain and France, havelower adoption rates. Garrido et al. (2008) analyze howthe intensity of Internet use in the procurement processimpacts firms from organizational and economical pointsof view. The organizational perspectives include firm size,participation, number of hierarchical levels and functionalareas, and the economic consequences include efficiencyand effectiveness in the purchasing function. Vaidya-nathan and Devaraj (2008) studied the impact of orderprocedures of buyers and information flow betweensuppliers and buyers on the quality of supplier logisticsfulfillment process. These studies are not focused onE-procurement adoption in SMEs.
The current state of E-procurement in SMEs has beenstudied very little, yet SMEs play an important role in theglobal economy and in supply chains. We have examinedthe status of E-procurement in SMEs operating on theSouthcoast of Massachusetts, and report our findings inthis manuscript. The organization of this manuscript is asfollows: section one provided an introduction. Section 2presents various definitions of E-procurement. E-procure-ment readiness, adoption, and use issues of are discussedin Section 3. Section 4 discusses the research objectivesand methodology. The data analysis and empirical find-ings are reported in Section 5. Section 6 synthesizesfindings and presents a framework for the adoption ofE-commerce in SMEs. Finally, Section 7 concludes thepaper.
2. What is E-procurement<
E-procurement refers to the use of integrated informa-tion technology systems for procurement functions,including sourcing, negotiation, ordering, receipt andpost-purchase review (Croom and Brandon-Jones, 2007).Increasingly firms are keen on using online E-auctions fortheir purchases. The major reasons for this are: (i) costcutting, (ii) real-time bidding and response, (iii) transpar-ency of the process, (iv) reduced cycle time, and(v) increased geographical outreach (Yu et al., 2008).E-procurement provides opportunities to access purchas-ing networks for suppliers and buyers, expands the
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selection of products, and makes information more easilyobtainable. E-procurement links a vast network ofbusinesses, and makes searching and contacting muchmore convenient. Companies use E-procurement toreduce original procurement cost through relativelyrecent developments like the reverse auction. E-procure-ment can help firms increase efficiency, improve contractcompliance, reduce cycle time, minimize human error,and achieve better supply chain management (Yu et al.,2008). Lo et al. (2008) integrated a typical managementinformation system development procedure with that ofan E-fashion multi-agent system. The proposed systemintegrates different information technologies to make itsbehavior more intelligent and to catch more usefulinformation from customers. Ganeshan et al. (2009)provide an exploratory model that helps a procurementmanager determine the right combination of options andspot markets that will minimize the total expected cost ofprocurement over two time periods.
Almost all of the E-procurement definitions in theliterature suggest that it is an automated purchasingprocess, employing information technologies such as EDI,the Internet and WWW. More definitions follow. Tatsiset al. (2006) define E-procurement as, ‘‘the integration,management, automation, optimization and enablementof an organization’s procurement process, using electronictools and technologies, and web-based applications’’.According to Alaniz and Roberts (1999), ‘‘E-procurementrefers to Internet solutions that facilitate corporatepurchasing’’. According to Morris et al. (2000),‘‘E-procurement is a series of steps—from the formula-tion of the corporate purchasing strategy to the actualimplementation of an Internet-based purchasing system’’.The Aberdeen Group (2001) defines E-procurement as,‘‘the creation of private web-based procurement marketsthat automate communications, transactions, and colla-boration between supply chain partners. It is aboutenhancing collaboration, streamlining processes, control-
Adoption oProcureme
SMEs
Perceived FuOrganizatio
Performance wProcureme
Current Status and Readiness of
Company for E-Procurement
Perceived Barriers toE-Procurement Implementation
Fig. 1. Theoretical framework for the ad
ling costs, and enhancing information exchange withinand across organization boundaries’’.
3. A theoretical framework for the adoption of E-procurement in SMEs
E-procurement adoption poses a great many challengesfor small to medium sized companies. One seriousimpediment to adoption is the lack of awareness ofE-procurement and its implications for organizationalperformance. A theoretical framework for E-procurementadoption suggested by Gunasekaran and Ngai (2008) wasbased on an empirical study conducted in Hong Kong.That framework has been modified herein to fit SMEs(see Fig. 1), based on the literature, and on this study of aregional sample of SMEs. The original framework high-lighted the importance of E-procurement, E-procurementadoption issues, and critical success factors for E-procure-ment adoption, including: financial support, systeminteroperability, communication system standards, topmanagement support and commitment, understandingcompany priorities, and suitable security systems.The model proposed herein highlights what are believedto be major influences (based on the literature anddata collected) on E-procurement adoption, and servesas a basis for identifying areas for future researchas well as areas that should be of interest to SMEmanagers and owners considering, implementing, orusing E-procurement.
3.1. Current status and readiness of companies for E-
procurement
The success of E-procurement adoption depends upontechnological, behavioral and organizational factors.Moon (2005) argues that organizations that are large,managerially innovative, and have strong centralized
f E-nt in
Critical Success Factors in E-Procurement
ture nal ith E-
nt
Perceived Benefits ofE-Procurement
option of E-procurement in SMEs.
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offices are more likely to adopt E-procurement systems.He also highlights two important areas that influencesuccessful E-procurement adoption: (1) behavioral issuesand (2) the procurement process. Thus, one can reason-ably conclude that an organization’s readiness in termsof its people, its procurement process, and its technologywill influence the E-procurement adoption success (Knudsen,2003).
3.2. Perceived benefits of E-procurement
The level of understanding of the benefits ofE-procurement in a company will influence adoption.For example, if no one is aware of the benefits ofE-procurement (not only financial, but also non-financial),there is little incentive to adopt E-procurement. Anunderstanding of the benefits of E-procurement indicatesthe level of managerial and technological expertise andawareness of new technologies, including E-procurement.Roche (2001) suggested that real-time information, aseamless procurement process, and supply chain integra-tion are benefits of adopting E-procurement. Some of thebenefits that could be derived from the implementationof E-procurement include improved relationships withvendors, effective and timely order fulfillment, improvedpurchasing effectiveness, improved service, better pricesfrom key suppliers, reduced inventory-carrying costs, andshorter order cycle time (Panayiotou et al., 2004). Manycompanies see E-procurement simply as the use of IT forexchanging information with suppliers, but fail to seeother strategic and tactical benefits. This lack of under-standing could discourage the adoption of E-procurement.According to Attaran (2001) the benefits can be groupedunder three categories: (1) strategic, including organiza-tional changes and market advantage; (2) high leverageopportunities, such as improved relationships with existingsuppliers and exploring relationships with new suppliers;and (3) operational advantages, like more efficient purchas-ing. It should be noted that perceived benefits would likelyinfluence management expectations regarding future per-formance attributable to E-procurement. Boyle et al. (2008)argue that E-intermediation will reduce the supply chainenvironmental uncertainty.
3.3. Perceived barriers to E-procurement
Barriers such as the lack of capital, lack of expertiseand technical skills, lack of technologies and tools,resistance to change, and lack of top management supportwill delay adoption of E-procurement, and influenceE-procurement performance post implementation. Hawkinget al. (2004) identified barriers to the adoption ofE-procurement as follows: (a) security of transactions,(b) lack of supplier E-procurement solutions, (c) high costof technology, (d) lack of a legal framework, (e) lack oftechnical expertise, (f) lack of E-procurement knowledge,(g) no real business benefits identified, (h) lack of dataexchange standards, and (i) lack of business relationshipswith suppliers. The importance of E-procurement toolssuch as E-sourcing, E-tendering, E-informing, E-reverse
auctions, E-MRO, Web-based enterprise resource plan-ning, and E-collaboration were highlighted in their work.Liao et al. (2003) highlight behavioral and infrastructurebarriers to the implementation of E-procurement. Besideslack of top management support, behavioral barriersinclude purchasing personnel receiving improper benefitsfrom favored companies, false floor prices, and informa-tion leaks, while infrastructure barriers include lack ofexpertise and the necessary technology.
3.4. Critical success factors for E-procurement in SMEs
E-procurement critical success factors are those thingsthat are essential to successful adoption and use of E-procurement in SMEs. While SMEs tend to be flexible andinnovative, they often have limited capital and limitedexpertise with new methods and technologies. Consider-ing these characteristics, appropriate strategies, tacticsand operational policies need to be developed for theadoption of E-procurement in SMEs. The business scope ofSMEs in terms of volume of business, product-mix, natureof the products manufactured/services provided, andtheir role in supply chains will influence the need forE-procurement as well as critical success factors. Fu et al.(2004) highlighted some of the general critical successfactors for the adoption of E-procurement including:feasible measures, step-by-step transformation, promo-tion incentives, government support, commitment of topmanagement, and system operation and maintenancemechanisms. Reddick (2004) proposed an E-governmentgrowth model as a way of modeling the developmentof E-procurement. He highlighted the importance of goodprocurement management and IT capability in successfulE-procurement adoption.
3.5. Perceived organizational performance
and E-procurement
The successful adoption of E-procurement in SMEsdepends upon the understanding and support of the topmanagement. Attaran (2001) noted that strategic, tacticaland operational advantages can accrue from E-procure-ment. The extent to which SME owners and managersactually believe E-procurement can positively impactfuture performance will influence their predispositiontoward adoption. It is thus important that they be awareof the potential impact of E-procurement on theirorganizations short- and long-term performance in areassuch as cost of production/services and competitiveness.They must also recognize the role of E-procurement instrategic alliances with buyers and suppliers. SMEs tend tobe focused on short-term financial performance measures,but not long-term strategic performance measures. Suchan orientation is not desirable given the current businessenvironment characterized by virtual supply chains, out-sourcing, Internet-enabled supply chain management, andenterprise resource planning. Non-financial performanceand performance measures are likewise important at alllevels. Wamba et al. (2008) provide some insights intoradio frequency identification (RFID) technology and the
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Fig. 3. Respondent company’s profile—location.
A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175 165
electronic product code (EPC) network and investigatetheir impacts on B2B E-commerce. RFID has a huge impacton market share, return on investment, innovation,inventory turnover, cost and quality.
4. Research methodology
The study employed a cross-sectional field studysurvey method, using self-administered questionnairesmailed to key informants in 250 randomly selectedcompanies operating on the Southcoast of Massachusetts.The respondents were promised anonymity and informedthat only aggregate information on participants wouldbe made public. A self-addressed, stamped envelopewas provided for return of questionnaires directly to theauthors. It was not the authors’ intention in this study toconcentrate on any particular industry. Thirty-nine usablesurveys, 15.6%, were returned. Data analysis was carriedout using Excel.
Basic demographic data was gathered on respondentswho are involved with purchasing activities in theircompanies. The following is a summary of that demo-graphic data. None of the respondents were under25 years of age, 88% were over 40, and 12% were between25 and 40. 47.5% of the respondents had bachelor’sdegrees, 22.5% had graduate degrees, and 30% hada Post-Secondary Certificate/Diploma. Some 77.5% of therespondents had over 14 years of work experience, 7.5%had 11–14 years of experience, 10% had 7–10 yearsof experience, 5% had 3–6 years of experience, and nonehad o3 years of experience. These statistics suggest thatthe respondents were generally well-educated, experi-enced, procurement professionals, and the age datasuggest of a relatively high level of maturity.
5. Survey results
In this section, the survey data and subsequent analysisare discussed with the objective of examining thereadiness of the targeted SMEs for E-procurement in thecontext of the proposed framework. First, some basicdemographics are explored; then, data relating to themodel are examined.
Fig. 2 shows that 23 companies, had o50 employees,12 companies had between 50 and 199 employees, and4 companies had between 200 and 499 employees.
Fig. 2. Respondent company’s profile—number of employees.
The companies certainly would be considered SMEs, byall accepted definitions of SME.
Fig. 3 shows that 57% of the companies restricted theirbusiness to Massachusetts, 35% had operations in Massa-chusetts as well as in other states, and only 8% wereinternational in scope. Most, one could say, were localbusinesses, a characteristic common among SMEs.
Fig. 4 describes the sample in terms of industry andhighlights the diversity of the respondents. Most weremanufacturing firms, but many other industries wererepresented. It is noteworthy that the service sector is wellrepresented.
Fig. 5 shows that 95% of the companies currently usethe Internet. This, as other statistics will show, does notnecessarily mean that they are using it for E-procurement.It does, however, demonstrate a potential for Internet usein E-procurement.
5.1. Current status and readiness of companies
for E-procurement implementation
In this section, we examine indicants of E-procurementstatus and preparedness among the SMEs studied.
Fig. 6 indicates that 72.5% of the total respondents havetheir own websites, but provides no details about howthey are used. That is addressed in Fig. 7.
Fig. 7 provides important information about how thecompanies use their Websites. Most use their Websites toprovide information about their companies (39.4%) andtheir products and services (36.6%). Only 15.5% supportonline ordering of their products by customers, and veryfew support online payment (1.4%). An examination of theremaining uses, and their associated percentages, showsin essence that these companies do very little more withtheir Websites than they could do with a hard-copycatalog. In short, the Websites are used primarily todisseminate information, but not nearly so much so fortransactions—actually selling online.
Fig. 8 provides information about the numberof employees involved in procurement. Note that 88%of the companies have a very small staff involved inprocurement (1–5 people). Only 6% have staffs of 6–10
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Fig. 4. Respondent company’s profile—industry sector.
Fig. 5. Use of the Internet.
Fig. 6. Company’s website.
Fig. 7. Information on website.
Fig. 8. Employees in Procurement and Purchasing Department.
A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175166
people, and similarly 6% of the companies between 10 and15 people working in the procurement. None had morethan 15 employees involved in procurement. In hindsight,it would have been helpful to know the dollar volumeof their annual purchases, in order to ascribe some level ofimportance to purchasing/procurement. Staff size pro-vides only a partial view of the significance of procure-ment in these companies.
Fig. 9 highlights the perceived importance of theInternet in procurement. Only 33% of respondents per-ceive it to be important (extremely important or im-
portant). Most regard it as unimportant or simply do notknow if it is important or not. These statistics would seemto suggest that many of these companies, or at least therespondents who filled out the surveys, may not be awareof the potential value of the Internet in procurement, orcurrent trends among larger companies—it is hot!
Fig. 10 shows a solid understanding of the importanceof procurement and the extent to which procurementpractices and policies are formalized, but that most of the
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responding SMEs did not have a purchasing/procurementdepartment. The person, or persons, who handle procure-ment, likely have other duties also. It is not unusual insmaller companies for employees to ‘‘wear many hats’’(fill more than one organizational role).
Fig. 9. Importance of the Internet in procurement.
Table 1Implementing E-procurement system—benefits realized.
Benefits from implementing E-
procurement system
Have not been
realized 1
Some what
realized 2
Better utilization of staff 9 7
Efficiencies increment 10 6
Help to achieve SCM 10 4
Improved existing markets 10 4
Improved relationships with
partners and suppliers
6 6
Increased customer service
levels
7 4
Increased customer satisfaction 7 8
Increases market share 10 7
Reduction in inventory levels 14 4
Reduction in non-contractual
buying
12 6
Reduction in operational tasks 11 7
Reduction in processing time 9 7
Reduction in transactional
costs
9 5
Support environmental issues 13 5
Fig. 10. Procurement/Purc
5.2. Perceived benefits of E-procurement
This section reports on the perceived benefits ofimplementing E-procurement. Survey respondents wereasked to rate the extent to which the various E-procure-ment benefits reported in the literature have been realizedin their companies.
Other data presented shows that E-procurement is notparticularly prevalent among survey participants, andTable 1 shows that the companies, by and large, are notreaping the benefits of E-procurement. It may be thatthey simply have not recognized the potential benefitsand moved to take full advantage of E-procurement. It isnoteworthy that benefits have been realized to thegreatest extent in relationships with partners and suppli-ers, in customer service levels and satisfaction, and inutilization of staff. Given the growing importance of
Just begun to be
realized 3
Realized 4 Fully 5 Average
rating
5 5 3 2.5
6 5 1 2.3
8 4 2 2.4
10 3 0 2.2
9 4 3 2.7
9 3 3 2.7
6 3 3 2.5
5 2 2 2.2
3 3 3 2.1
6 3 1 2.1
7 2 1 2.1
9 1 2 2.3
9 4 1 2.4
8 1 0 1.9
hasing Department.
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supply chain management, this is encouraging, and mayactually provide further incentive to implement and useE-procurement.
5.3. Barriers to E-procurement implementation
This section examines perceived barriers E-procure-ment implementation. Respondents were asked to in-dicate the extent to which they agreed or disagreed (on a5 point scale—from strongly agree to strongly disagree)that the items were barriers to E-procurement implemen-tation. Table 2 summarizes responses.
The most important barrier to E-procurement imple-mentation was that E-procurement ‘‘was not the topinitiative or priority of the company’’. Fear of change, andimmature technology, tied for second, and securityconcerns and insufficient financial support were tied forthird. All of these five items rated higher than 3, but thehighest was only 3.3. No other item had a ranking as highas uncertain (3.0), suggesting that they are not perceivedto be particularly important barriers by most respondents.
Table 2Implementing E-procurement system—barriers.
Barriers Strongly d
1
Fear to change into a new system 4
Immaturity of technology 4
Incompatibility with ERP systems 5
Insufficient financial support 2
Lack of interoperability and standards with traditional
communication
5
Lack of skill and knowledge in E-procurement 5
Lack of top management support and commitment 7
Not the top initiative or priority of the company 3
Security concerns 5
Fig. 11. Reasons for not implemen
Since in the aggregate, none of the barriers were ratedvery highly, it leads one to wonder if maybe the reasonwhy many of the companies chose not to implementE-procurement was more the lack of understanding ofwhat it can do for them—one must remember that thebenefits have yet to be realized to a great extent in mostof these companies (see Table 1)—rather than barrierspreventing them from utilizing E-procurement.
Responses to a question regarding the desirabilityof implementing E-procurement indicated that 83% ofthe respondents did not believe it was desirable. Fig. 11shows the reasons respondents were not very keen onE-procurement, and the items contained therein reinforcethe barriers in Table 2. In essence, a reason for notimplementing E-procurement is a barrier. One is temptedto call these ‘‘excuses’’ for not implementing E-procure-ment, and some were quite popular, like customers aresatisfied with the current practices (23%), no perceivedadvantages (21%), and inadequate knowledge (19%).There were other reasons, but they were popular toa lesser extent. The data obtained from responses toanother survey question indicated that only 29% of the
isagree Disagree
2
Uncertain
3
Agree
4
Strongly agree
5
Average
rating
2 9 6 5 3.2
4 7 9 4 3.2
6 9 3 5 2.9
3 14 7 1 3.1
5 8 6 3 2.9
4 4 8 6 3.2
8 6 6 0 2.4
6 6 5 8 3.3
2 9 7 4 3.1
ting E-procurement system.
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respondents were planning to setup an E-procurementsystem whereas 71% were not. Given the growing numberof Websites (horizontal and vertical portals in particular)that have evolved to support B2B E-commerce, thereappears to be some need for better educating SME ownersand managers about E-procurement and what it can do forthem.
5.4. Critical success factors for implementing E-procurement
system
Survey respondents were asked to rate the extent towhich they perceived numerous items to be criticalsuccess factors for the implementation of E-procurement.Table 3 summarizes the responses.
The ratings suggests that the most important factor inE-procurement implementation is top management in-volvement and support (rating of 3.7), which is notsurprising because many studies have arrived at the sameconclusion—technology initiatives must have top man-agement involvement and support. Second in importancewas streamlined approvals and workflow (3.5). Third wasclose collaboration with suppliers (3.4), which certainlymakes sense since they are on the other end of theprocurement process. Clear accountability for buying in
Table 3Implementing E-procurement system—success factors.
Success factors Strongly dis
Centralized control and management of E-procurement initiatives 3
Communication between participants 4
Clear and achievable implementation phase 6
Clear accountability for buying in organizational structure 3
Close collaboration with suppliers 3
Content management 4
Information systems specialists with internet skills 4
Involvement of stakeholders 5
Streamlined approvals and workflow 2
The use of prototype 3
Top management involvement and support 2
Table 4Performance with successful E-procurement implementation.
Performance with successful E-procurement implementation Strongly disagre
Short-term organizational performance 5
Long-term organizational performance 4
Improve cost performance in organization 3
Organizational competitiveness 3
Strategic alliance and networking 5
Table 5Opinion after E-procurement implementation.
Opinion after E-procurement implementation Strongly disagree 1
Organization achieved process efficiency 3
Organization achieved process effectiveness 3
Organization’s revenue increases after E-proc. adoption 2
the organizational structure was fourth (3.3), and fourwere tied for a rating of fifth, including: centralizedcontrol and management of E-procurement initiative,communication between participants, content manage-ment, and information system specialists with Internetskills. No other item had a rating above the thresholdrating of 3.0 (uncertain).
5.5. Perceived future organizational performance with
E-procurement implementation
Respondents were asked to provide their perspectiveon what the impact of E-procurement would be on anorganization if implemented—anticipated results. Theirresponses were recorded, again using a 5-point scale.Those responses and are summarized in Table 4.
Many respondents seem to believe that E-procurementcould have a positive impact on their organizations. Thetwo impacts they thought most likely were improvementsin long-term organizational performance and costs (bothhad ratings of 3.6). Next, they expected organizationalcompetitiveness to be improved (3.5) and last, theyexpected benefits to accrue in short-term organizationalperformance, and in strategic alliances and networking(each with a rating of 3.3). Taken together, ratings of these
agree 1 Disagree 2 Uncertain 3 Agree 4 Strongly agree 5 Average rating
1 11 5 3 3.2
1 7 10 2 3.2
1 9 7 1 2.8
2 6 10 3 3.3
1 8 7 5 3.4
0 10 6 3 3.2
1 9 5 4 3.2
4 6 6 2 2.8
4 3 13 4 3.5
5 12 3 0 2.7
0 8 9 6 3.7
e 1 Disagree 2 Uncertain 3 Agree 4 Strongly agree 5 Average rating
2 6 14 3 3.3
0 5 14 6 3.6
2 5 14 5 3.6
0 8 13 4 3.5
0 11 7 5 3.3
Disagree 2 Uncertain 3 Agree 4 Strongly agree 5 Average rating
2 8 10 2 3.2
2 9 9 2 3.2
4 12 4 2 3.0
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performance improvements suggest that most respon-dents recognize that E-procurement has strategic value(long term, cost, and competitiveness benefits), but not bya wide margin (note that the average rating on each wasless than 4 which represents ‘‘agreement’’ that the item isimportant). In sum, one can hardly assert that respon-dents see a strong link between E-procurement andsuccess in the areas of interest.
When asked about the improvements or benefitsexperienced in their own companies from E-procurementimplementation, survey respondents provided these re-sponses (see Table 5). Ratings suggest that efficiency andeffectiveness were improved (tied with rating of 3.2), andthat revenue increased (ranked only a 3.0). None of theseratings are very high, and it stands to reason, giventhe level of E-procurement use indicated by the survey(see Tables 1 and 2). These low ratings may simply be areflection on the extent to which the companies are usingE-procurement. Note the high number of uncertainresponses on all three items. Note also the fairly highnumber of Agree responses for the efficiency and effec-tiveness items. The affirmative responses may be fromcompanies using it to a greater extent. The uncertainresponses, and the few disagrees and strongly disagreeslikely come from respondents representing companiesthat were using E-procurement very little.
5.6. E-procurement use
This section reports user responses to questionsregarding E-procurement use in their respective compa-nies. The responses paint a reasonable picture of theextent to which the companies were involved inE-procurement at the time of the study.
Table 6 reveals much about the use of computer relatedtechnology for E-procurement. While we did not ask
Table 6Technologies to support E-procurement (supplier).
Technologies Never 1 To a little extent 2 To some exte
E-Commerce 8 8 11
E-mail 7 4 10
EDI 16 5 3
ERP 13 5 3
FAX 8 4 4
Internet 10 5 8
Intranet 18 5 6
Table 7Technologies to support E-procurement (customer).
Technologies Never 1 To a little extent 2 To some exte
E-Commerce 15 6 6
E-mail 8 4 8
EDI 17 3 4
ERP 15 3 5
FAX 9 2 5
Internet 11 6 6
Intranet 21 1 5
about the extent to which the telephone (or cell phone)was used, the authors own experience suggests that it isprobably used more than other electronic means. Thatsaid, we can glean from Table 7 that FAX and E-mail aremost often-used electronic procurement technology (evenfor them, not that much—4 denotes ‘‘to a great extent,’’and both were rated o4), with the Internet/E-commerceplaying a less significant role, and the remaining itemsused infrequently. E-mail and FAX have been around forquite some time, though not as long as the telephoneand they are simple to use—familiarity and convenienceare likely the reasons why they are more often used thanthe others vehicles for procurement. None of the respon-dents were under 25 and most, 88% of them, were over 40.That could help explain the tendency to FAX, and whymore used FAX to a great extent or used it always. FAX isthe oldest, cheapest (in terms of initial investment asit requires no computer), and most easily accessible of theE-procurement technologies mentioned.
Table 7 shows that the same seven E-procurementtools did not support sales to customers to a very greatextent. The same two, FAX and E-mail were most used,with all others used even less to interact with customersthan with suppliers. In short, these SMEs are not utilizing21st century electronic commerce technologies nearly asmuch as their larger competitors.
Survey questions were asked to quantify respondentsE-procurement practices more precisely than the scalesdenoting frequency of use of E-procurement technology.Fig. 12 shows the relative importance of various modelsfor E-commerce. The B2B procurement portal was mostpopular with 41% of respondents using it, while 25% usedEDI. Nearly two-thirds of respondents used these two,while the other 5 were used to a much lesser extent.
When describing their E-procurement system (seeFig. 13) almost half the companies say that they developed
nt 3 To a great extent 4 Always 5 Average rating
7 3 2.7
10 8 3.2
3 2 2.0
6 0 2.1
14 6 3.2
6 5 2.7
4 1 2.0
nt 3 To a great extent 4 Always 5 Average rating
5 3 2.3
6 9 3.1
3 1 1.9
1 2 1.9
13 6 3.1
7 5 2.7
2 2 1.8
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Fig. 12. E-commerce model used for E-procurement.
Fig. 13. Using E-procurement system.
A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175 171
their E-procurement capability in-house, while a thirdoutsource their E-procurement needs. A few (6%) usedboth in-house solutions and outsourcing. Touchnet andE-procurement solution systems were used by very few ofthe companies.
Respondents were asked about their E-business prac-tices (includes E-commerce and more) (Fig. 14) and amyriad of E-business practices were noted. Electronicordering actually played a relatively small role comparedto other practices that involved electronic informationexchange of some sort.
According to BuyIT Best Practice Network, October2002 edition ‘Indirect’ goods and services spendingpresents a huge opportunity. Benchmarks show that onaverage 36% of organizations’ external spending is onindirect goods and services, including office equipment,stationery, printing, repair and maintenance supplies, ITresources, travel, contract staff, consultants and contrac-tors. Fig. 15 shows the kinds of products survey respon-dents purchased via the Internet. Office supplies andmaintenance items accounted for nearly 80% of Internetpurchases. Raw materials accounted for 14% of Internetpurchases, and other assorted purchases accounted for thebalance, each accounting for a very small percent ofInternet purchases. These findings seem consistent with
the purchasing practices reported by the BuyIT BestPractice Network.
6. The current state of E-procurement in SMEs studied
In this section, the results of the surveys are used in thecontext of the proposed E-procurement implementationsuccess framework to assess the state of/potential forsuccessful E-procurement implementation in the SMEsstudied.
6.1. The current status and readiness of companies
for E-procurement adoption
In terms of technology, the majority of the companieshave Internet access, but for the most part, the Internet isused for acquiring or providing information much more sothan for actual support of transactions. This falls within thedomain of what we call E-business (electronic support ofbusiness processes), but not more narrowly within thedomain of E-commerce. Most respondents indicated thatthey understood the purchasing and supply strategy of theirorganizations, and that their companies had organizationalconventions, like structured and documented purchasingand order handling procedures, in place to formalize theprocurement processes. It is noteworthy that few hadpurchasing/procurement departments per se, and that thevast majority of the companies had only 1 to 5 employeesinvolved in procurement/purchasing. Given their small size,that seemed reasonable and is probably not a ‘‘readiness’’concern. Respondents were pretty evenly split on Internetimportance to procurement, with about a third perceiving itto be important, slightly less than a third perceiving it to beunimportant, and a slightly more than a third undecidedabout its importance. In terms of readiness, it would seemas though organizations had what they needed to engagein E-procurement, on a basic level, since not much moreis required than Internet access. A readiness concern isnoteworthy in that, while Internet access was available inmost companies, only about a third of the respondents feltit was important in procurement.
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Fig. 14. Use of E-procurement system.
Fig. 15. Products purchase through Internet.
A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175172
6.2. The perceived benefits of E-procurement
Survey responses showed that the companies wereapparently just starting to realize the benefits ofE-procurement. The average ratings showed that somebenefits were realized to a greater extent than others, andin particular the greatest benefits had been realized inimproved relations with suppliers, increased customerservice, increased customer satisfaction, better staffutilization, reduced costs, greater efficiency, and improvedsupply chain management. Other benefits were achievedto a lesser extent. Given that the highest rating of all wasonly 2.7, somewhere between ‘‘somewhat realized’’ (2)and ‘‘just begun to be realized’’ (3), it is safe to say that thesurveyed companies were not reaping significant benefitsfrom E-procurement, and as other tables and figures inSection 5.6 show, it is likely because they simply are notusing E-procurement to a great extent. It seems reason-able to conclude that the respondents do not perceive thebenefits to E-procurement to be great, because of theirreported experience with E-procurement.
6.3. Barriers to E-procurement implementation
Respondents rated numerous barriers to E-procure-ment implementation. Those rated most important in-
cluded the following (listed by importance ranking): not atop management initiative or priority, fear of change to anew system, immaturity of the technology, lack of skillsand knowledge in E-procurement, insufficient financialsupport, and security concerns. These were the only itemswith a rank higher than 3 which represents ‘‘uncertainty’’regarding the extent to which item is a barrier. While thebenefits were not perceived to be great (section 6.2),neither do respondents ascribe much importance tobarriers, suggesting that the barriers may not be the mostimportant reason for not adopting E-procurement. As withperceived benefits, the lack of certainty about barrierscould be attributable to the lack of experience withE-procurement. Recall that 83% did not perceive imple-mentation of E-procurement as necessary, largely becausecustomers were satisfied with current practices, they didnot see significant advantages in E-procurement, and theylacked adequate knowledge, resources, and funds forE-procurement implementation. It would seem then thatperhaps the greatest barrier to implementation is a lack ofenthusiasm!
6.4. CSFs of E-procurement system implementation
The possible critical success factors for E-procurementimplementation were synthesized from case studies and
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empirical findings from studies of E-procurement adop-tion in different regions and countries. Respondentsranked them and the following were the most important(based on their ranking and above minimum thresholdof 3—means uncertain): top management involvementand support, streamlined approvals and workflow, closecollaboration with suppliers, clear accountability forbuying in the organizational structure, centralized controland management of E-procurement initiatives, commu-nication between participants, content management, andIS specialists with Internet skills. Note that things that aremanagerial in nature, like leadership, organization, andcontrol, and things that are behavioral like communica-tions, were rated higher in importance than technologyrelated concerns. This suggests that good management isperceived to be more important than technical issues tosuccessful E-procurement implementation.
6.5. Perceived likely and actual impact on organizational
performance
Performance improvements in process efficiency andeffectiveness are indicants of successful adoption of E-procurement in SMEs (Chang et al., 2004). Respondentsranked expected future improvements and improvementstheir organizations had realized from E-procurement. Interms of future performance, long term organizationperformance and improved cost were ranked first (tied),organizational competitiveness ranked second, and stra-tegic alliance/ networking and short term performanceimprovement ranked last. Regarding realized benefits,respondents rated improved process efficiency and effec-tiveness first (tied for first), and increased revenues wasrated last. Recognizing that the rating scale used 3 foruncertain, 4 for agree and 5 for strongly agree, and thatno perceived future benefit ranked 43.6 or o3.3, and norealized benefit ranked 43.2 or o3.0, it does put therankings in perspective. Perhaps, since perceived futurebenefits were ranked generally higher than benefitsrealized, it demonstrates a guarded optimism amongrespondents about E-procurements impact on futureperformance.
6.6. E-Procurement use
The most commonly used E-procurement tools are FAXand E-mail—tools that have been around for quite sometime. This is true not only for transactions with suppliers,but also in selling to customers. When the surveyedcompanies do use more sophisticated network E-procure-ment models (Internet technology for the most part), theymost often use B2B procurement portals or EDI networks.These two models were used by approximately 2/3 s of therespondents. Other Internet based E-procurement modelsare used to a much lesser extent. Respondent procure-ment related electronic interactions tended more often tobe for information exchange/information gathering, thanfor electronic ordering (only 20% reported the use ofelectronic ordering). Furthermore their purchases tendedto be MRO items, office supplies and such (total to 88%),
and to a much lesser extent raw materials (14%). This isconsistent with trends reported in the literature, regard-ing the nature of purchases. With regard to E-procure-ment use, findings suggest that the respondents in thissurvey are using E-procurement much less than wasexpected.
7. Concluding remarks
Given current trends in industry, we expected toobserve a higher level of E-procurement use among theSMEs studied. Study findings were surprising, in thatSMEs, at least this sample of SMEs on the Southcoast ofMassachusetts, were not embracing E-procurement, eventhough a substantial number of them seem to realize itsstrategic value and appreciate the potential impact onorganizational performance. Readiness did not seem to bethe primary issue thwarting adoption, as they had thebasic infrastructure and organizational conventions inplace to engage in E-procurement. It is noteworthy thatonly about a third of the respondents thought E-procure-ment was important. Respondents do not perceive thebenefits of E-procurement to be significant, most likelybecause of their inexperience with it. Were they using it toa greater extent, then they might experience greaterbenefits from its use, but the question is how do you getthem to use it< Recall that 88% of the respondents did notperceive E-procurement implementation to be necessary,and that the most important barrier was that E-procure-ment was not a top management initiative or priority, andother barriers like fear of change, lack of financial support,insufficient skills and knowledge, immature technologyand security concerns were mentioned. Respondentsseemed to understand the factors that would influenceadoption, but they come into play in planning for andduring adoption.
In terms of the model, E-procurement use was lowamong study participants. Why were the firms studied notadopting E-procurement to a greater extent< First, studyparticipants did not see great promise in the advantagesoffered, because they have little experience withE-procurement, and thus had realized few of its advan-tages. Barriers did not seem really to be thwartingE-procurement per se, but instead seemed better toexplain why there was only lukewarm support forE-procurement. Readiness was not an issue from atangible perspective, but was from a behavioral perspec-tive, in that respondents just did not seem that keen onadopting E-procurement. While participants did seem torecognize potential performance improvements that couldresult from E-procurement, those improvements seemednot to be important enough to respondents to make themreally want to adopt E-procurement.
Were top managers or owners to recognize the value ofE-procurement, and make it a priority, it seems likely thatothers in their companies would be inclined to make it apriority. Additional education for organizational personnelon the advantages of E-procurement, and how to proceedwith E-procurement could strengthen support. Of courseadequate funding of E-procurement initiatives would in
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Table 8Recommendations to encourage SME E-procurement adoption.
Influences on E-
procurement adoption in
SMEs
Action agenda
Current status and readiness
of organizations
Analyze/examine: the nature of the
business, need for E-procurement, size of
the company, nature of the market,
technology levels and skills available for E-
procurement implementation, nature of
Internet and WWW access, leadership
needed/available, business growth goals,
extent of/need for globalization, logistics
support systems
Perceived benefits Promote understanding of: the strategic
impact of E-procurement on organizational
performance, potential for reduction in
costs and prices, impact on business
growth, global market access, wider pool of
potential suppliers, enhanced collaboration
with suppliers, improved communication
and information flow, better control of
material flow along the supply chain,
increased customer service and satisfaction
and in turn business growth and new
opportunities
Perceived barriers Provide financial support through strategic
alliances and consortiums; increase the
awareness of top management in order to
obtain support and commitment for the
adoption of E-procurement; provide
technological support through
consortiums, supply chain partners and
government; ensure access to the fast
Internet; promote training and education
for E-procurement; streamline
procurement processes; make E-
procurement a top priority of the
company; increase confidence in the
security of the electronic procurement by
demonstrating security effectiveness;
develop suitable reward schemes;
encourage government support for
companies implementing E-procurement
systems
Critical success factors Employ business process reengineering
where appropriate; train and educate IT
personnel and hire skilled IT people;
ensure top management support and
progressive leadership for business
growth; encourage ‘‘greening’’ of
operations; aim to achieve flexibility and
responsiveness; promote strategic
alliances among buyers and suppliers;
centralize management of the
procurement initiative; encourage
communication among participants,
adoption by clients, and close collaboration
with suppliers; streamline work flow and
approval processes; establish/adopt data
exchange and legal standards
Organizational performance Establish/adopt suitable performance
measures (tangible, intangible, financial
and non-financial) and metrics of E-
procurement success for strategic, tactical
and operational levels of
management—the focus should be
balanced to encourage short-term
performance that leads to long term
success; employ metrics that assess
success of interaction with supply chain
partners
A. Gunasekaran et al. / Int. J. Production Economics 122 (2009) 161–175174
essence amount to management demonstrating supportfor E-procurement in a tangible way. With greater use ofE-procurement, the advantages might be realized to agreater extent, building support for expanded use ofE-procurement and positive impacts on organizationalperformance. Specific recommendations for increasingE-procurement adoption can be seen in Table 8.
If the companies on the Southcoast of Massachusettsare representative of SMEs in the United States, then muchwork remains to be done in bringing about greater use of21st century technology in every-day business practices.This is a fruitful area for future research, and an areaimportant to the global competiveness of American SMEs.The increasingly global economy of the 21st centurydemands that companies adopt technology that stream-lines business processes and secures for them a place in,not just local, but global supply chains. E-procurement isnot a luxury, but rather a necessity for SME competitive-ness and survival in the 21st century.
Acknowledgments
The authors are most grateful to two anonymousreviewers for their constructive and helpful commentsthat helped to improve the presentation of the paperconsiderably.
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