Overview

Supply Chain Management (SCM) is described as an interlinked network of channels and

nodes of business for distribution options. The SCM involves functions such as design, planning
and execution, control and monitoring of supply chain activities. Example of such process is
procurement of material and transforming the material into finished products, and then
distribution of the final product to consumer. The major objective for the supply chain
management involves building competitive infrastructure, creating net value for the products,
leveraging worldwide logistics and synchronizing supply with demand measuring performance
globally.

The people working in supply chain management have major responsibility of

collaborating and organizing the goods movement with partners, which includes everyone
involved such as customer’s suppliers, third party service providers and mediators in the supply
chain. Supply chain activities are not restricted to one sectors whether it be manufacturing or
service sector SCM plays a major roles in the operations. However, the architecture of the supply
chain and the complexity may vary vastly from different industries. It also depends on the
constant logical improvements towards the understanding of business performance.

The most important challenge faced by organization is supply chain visibility and one of
the foremost aspect for improving productivity is to continuous enhancement of supply chain.
This is more relevant in the perception of food industry, consumer goods, retail and electronics
industries the sectors that are challenged by distributed operations in different countries, high
demand volatility and rapid product appraisal.

A typical example of supply chain operation is explained which involves a single

product. The process usually starts with procurement of raw material from vendors,
manufactured into finished goods, then transported to distribution centers and finally to
consumer. As discussed earlier supply chains are always complex which has many end products
with collective components, amenities and capacities. The flow of material does not follow
simple network, it involves various modes of transportation and the cost of end product may
become exorbitant
 The definition of SCM offered by Bernard J. (Bud) LaLonde, Professor emeritus of SCM
at Ohio State University. It states that "The delivery of enhanced customer and economic value
through synchronized management of the flow of physical goods and associated information
from sourcing to consumption.” The definition explains that SCM integrates not only entities
within the organization, it involves the involvement of external partners for reaching the desired
results. It also includes other players such as suppliers, transporters, distributors, customers and
finally the consumers.

Organizational setup for SCM related activities has wide range of functional areas, such
as production planning, material forecasting, procurement, contracts, scheduling orders, sales
order processing, customer service, warehouse management, inventory control, inbound and
outbound transportation. The above mentioned activities are monitored and controlled using the
information systems. In reference to the definition stated supply chain management comprises all
the complex activities that carries out goods movement for transforming the raw material to a
finished product for the end user.

The operations of the departments such as planning, procurement, manufacturing,

marketing and the transportation in an organization takes place independently having their own
process objective and mostly these are contradictory. Purchasing department responsible for
negotiating contracts with vendors perform negotiation without analyzing the historical purchase
data. Marketing department focuses on their target of high consumer service and reaching annual
sales target output, which contradicts with manufacturing and transportation departments.
Whereas manufacturing department in an organization is always intended to increase production
and reduce costs, which are done without considering the capabilities of transportation and
distribution department it also has effect on inventory control.

To overcome this void of non-coordination in the integrated plan of the organization,

SCM system acts as bridge between departments, where these different functions can be
coordinated and integrated. SCM strategy through which such integration is possible and data
between departments is transferred seamlessly. The business analyst and management experts
realized that managing information transfer among operations and handling relationships
between all stakeholders is the key to increase productivity. After globalization it was mandatory
for the management to devise a strategy that would work flawlessly for import and export of
material across borders. SCM integrates this process and the transfer of information between
organizations across countries increased the efficiency of the transportation system.

The customer satisfaction is the best analytical data for measuring the productivity and
performance of the organization. To achieve that status the company should be working to meet
their clients demand and supplies efficiently. To stay on top of the business company should
work towards customer satisfaction by optimizing the operations of the organization. That said
every employee in an organization is responsible for carrying out the operations flawless, to
achieve that a system is created which would enable the personnel to have the adequate source of
information for continued operations. And in addition to that business should be provided with
analytical data to find possible solutions to business challenges and work on the solution to
optimize the process. ERP provides solution for supply chain management, the process can be
standardized and helps the management to track all crucial information. With the ERP solution
the customer is given all the updates regarding their orders which helps them for planning their
operations which in turn helps the customer meeting their goals. Hence the customer and the
company will have a successful business collaboration. This also ensures that company has
positive relationship with the customer.

SCM includes all those operations of the organization that is needed for the integrated
operations that brings product to the customer and increases the customer satisfaction. SCM
integrates purchasing, manufacturing process, transportation, and warehouse management into a
combined system. SCM links all the partners in the chain thereby creating a successful SCM
system to coordinate and integrate all the process into seamless process. The departments
integrated are not restricted within the organization it includes partners like third party
companies for transportation, vendors and IT system support.

Enterprise Resource Planning ERP

ERP system is a fully integrated software application that organizations uses to carry out
day-to-day business activity. The ERP system has a standardized business practices that are
customized for the business needs to perform the daily activities. The process includes project
management, accounting, procurement, manufacturing process and administration process. ERP
systems are designed in such a way that there is constant flow of data among the business
processes. Since the data is transferred to all stakeholders the process is streamlined and reduces
errors in operations. Business are following globalization that increases the complexity of the
critical data flow, to these companies, ERP is the appropriate solution for management. It’s
impossible to ignore the impact of ERP in today’s business world.

ERP software solutions is the integration that allows for more efficient processing and
eliminates redundant data entry and reconciliation tasks. The functionality of the ERP system
include financial accounting, payroll administration, procurement, logistics, human resources
and sales. And this ERP system also has modules which are used for the planning activities in the
organization such as production planning, material planning, budget planning and sales
forecasting. In addition to these features the system also include data analytics and automated
workflow for approvals, and development tools for customization of cross functional modules.

ERP system provides assured Data integrity for every transaction performed throughout
the organization, it can be quarterly finance statement to single order outstanding report. The
system provides error proof data reports in the form of spreadsheets. As enterprise data and
processes are corralled into ERP systems, businesses are able to align separate departments and
improve workflow, resulting in significant bottom-line savings.

ERP systems application are not limited to large firms with complex architecture but also
useful for smaller organization which use the most of the ERP modules for performing
operations of the company. According to the data provided by SAP (the largest vendor of ERP
systems worldwide), the company generated 90% of their revenues from large multinational
organizations but in late 90's & early 2000, 50% of their revenues came from smaller and mid-
size companies.
Background
The world due to the development of globalization the barriers have been removed which
paves way for movement of goods across borders and use human resources from different
countries. In today’s economy components for manufacturing are produced in one country
whereas assembling takes place in another country where the product is then sold worldwide. An
example of the above is manufacturing of mobile phones in that components of mobile phones
are manufactured in Asia, and assembled in America and then sold to the European market. For
this operations to be handled transportation by different modes of transport are to be handled
flawlessly to meet the demands of the market and stay ahead in the competition.

The food supply industry in India has challenges for management of supply chain
especially with the distribution of the materials to the customers and also the import process of
raw materials. Food supply Company operating here in India has to deal with the challenges such
as increasing cost of raw materials and the costs involving the transportation of materials. Due to
the increase in fuel price and improper planning for route results in increase in product price and
ensuring with timely and cost effective delivery of products is a challenge in India.

The challenges in supply chain are to attain global standards and coordination for
challenging objectives in the complex network of operations and also to reduce the variations in
the system. SCM system by its continuous development in the business process optimizes the
supply chain process and then develops new methods and tools to manage the same.

Major factor for SCM success in Supply chain is coordination, by effectively improving
the performance of organizations the process is streamlined. In this context coordination means
integrating different operations of an organization in supply chain, which are designed to
perform certain set of tasks. Most of the problems in supply chain arise within the departments of
procurement and distribution of the materials to the customers. The challenges in procurement
are duplication of purchase requisition creation, longer time for purchase order processing, end
user creating PO without referring to the contracts. To overcome and develop the constructive
business process between organization, and for decision making for the improvement of supply
chain is done by supply chain system experts.
 The major reason for lack of coordination arises in an organization is due to the
interdependency among different members of operations team. Even when every business
follows their own process that has unique challenges for each supply chain operations, yet the
issue arises in basic process remains the same. The major modules in supply chain which every
organization follows are 1. Materials Management, 2. Inventory Management, 3. Warehouse
Management, 4. Sales and Distribution, 5. Transportation Management and 6.Information
System

The modules in supply chain acts in coordination for uninterrupted daily operations.
However the ERP modules are standardized which are customized for user needs but the system
does not provide flexibility to the users. The end user are to be trained to follow the process and
there are chances the framework does not support extending the feature. Supply chain
management also handles function which include
 Customer satisfaction monitoring
 Customer service and order processing
 Negotiation with vendors.
 Vendor Evaluation
 Vendor Management
Certain functions of supply chain that are used for connecting the company with other
organization which supports the supply chain team in their operations and coordinate the process.
They are third parties
 Third party distribution partner.
 Subcontracting company
 Third party invoice audit

The strategic addition to the ERP system not only focuses on supply chain but also is extended to
customer relationship management. One of the product from ERP system is E-procurement
application. Also called as self-service procurement which enables user to carry out purchasing
operations without hassle. The application for process of procurement has functionality to that
also performs tasks like vendor negotiation and evaluations.
Company Background
The case company is a multinational food and drink processing multinational corporation
from Europe. It is the largest food company in the world, measured by revenues and other
metrics, since 2014. The products line include baby food, medical food, bottled water, breakfast
cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and
snacks. They have 447 factories, operates in 189 countries, and employs around 339,000 people.
After more than a century-old association with the India, today, the company has presence across
India with 8 manufacturing facilities and 4 branch offices.

The company can’t leverage its worldwide buying power for the raw materials used in its
products, even though each factory uses the same global suppliers, because each facility
negotiates its own deals and prices. The optimization of business process throughout the entire
logistical chain, for the closer linking of international logistics were the goals of the organization.
The major challenge was ineffective integration of information among the departments which led
to the lack of increasing market share, improving services and reducing costs.

Management wanted system to standardize the process and speed up information flow to
improve comparability of results. The company selected SAP to run its order entry, purchasing,
invoicing and inventory control. The key benefits that materialized after implementing SAP were
process optimization, coordination and effective worldwide logistics, improved ability to meet
deadlines, shorter turnaround times from customer enquiries to delivery, and a shift away from
stock oriented to demand driven production.
Purpose of the Study
1. How does the Case Company organize the handling of Procurement process?
a) The process of procurement - How do they communicate with suppliers? Is the
procurement process mapped with the SAP ERP standards or customized according to
their needs.
b) What measures are taken to speed up the procurement process with minimal training to
the users? Does ERP system provide solution for the users to carry out these operations.
c) Strategic approach to types of suppliers. What strategies apply to the different types of
suppliers; marked-based or network-based.

2. Which methods are suitable to improve?

a) Can theoretical approaches to supply chain management and theories on customer-
supplier relationships presented in the theoretical foundation of this study provide
possible methods to improve relationships with their suppliers?
b) Can ERP implementation improve the process of supply chain management and optimize
the process of procurement and distribution

Business case:
 Process of Vendor negotiation which was not standardized and was carried out by
traditional contract method.
 Use of ERP system for strategic approach towards the supplier ensures the economic
advantage of the company in the long run.
 Users and Procurement Managers had challenges with tracking order from the internal
team’s and longer duration to process the same.
 Supply chain management one of major activity was executing transportation domestic
and internationally. In ERP system transportation management was independent structure
which was not in coordination with SCM Modules. Hence the introduction of central
transportation system which facilitated the users to optimize the import and domestic
transportation.
Research Hypotheses
To improve the process of the procurement and data transfer among different
stakeholders in the company
The scope of this thesis is to analyze the role of Enterprise Resource Planning (ERP)
solution for the enhancement of operations within the organization. Currently the procurement
process which has vendor negotiation as highest priority is challenging due to the non-
standardized traditional system. The study is to perform current state examination on
procurement process and material handling for the import of goods from different countries to
India. The transportation management is another challenge for supply chain management, which
are lack of coordination between the different departments which makes it hard for shipment
process
Objectives:
1. Analyzing the role of Enterprise Resource Planning (ERP) in the enhancement of
operations within the organization such as procurement process and material handling.
2. Analyzing the support of Enterprise Resource Planning (ERP) towards the Supply Chain
Management (SCM) operations.
3. To analyze the transportation related issue and to ensure the cost effective and reliable
transportation service.

The Expected Outcome of the thesis.

This thesis analysis the import supply chain of the company and factors which have an
influence on the performance of the supply chain. At present, the thesis defines the current
practices within the purchasing department and transportation management of the supply chain.
After the analysis of the current state and with existing knowledge, the thesis study suggests a
proposal of how ERP system proposed for the improvement of supply chain management and to
improve the efficiency within the import process.

The aforementioned business case was addressed with the following solutions to
streamline the process of SCM in the organization.
 With Introduction of ERP system SAP Ariba Vendor Negotiation was carried out with
standard questionnaires and process was streamlined based.
 The ERP system introduced a provision of self-service procurement which made the end
users to make purchases without difficulties
 Hence the introduction of central transportation system which facilitated the users to
optimize the import and domestic transportation.
Literature Review
The purpose of the chapter is explain the theoretical framework related to research. The research
needed some review of some secondary sources to gain perception about current ideas and
knowledge about research work. These theoretical topics contribute to experiments and
methodologies for gathering information from the users.

According to the journal of business logistics (2001), supply chain management was defined as a
strategic coordination of all business functions within a particular PROCUREMENT PROCESS
DESIGN 12 company and across the business within the supply chain with the sole aim of
improving the performance of the companies involved. It can also be defined as a set of approach
utilized to efficiently integrate the suppliers, manufacturers, warehouses and stores so that goods
and services are produced and distributed at the right time, quantity and location to satisfy
customer’s requirement. Also, the global supply chain forum defined supply chain management
as the amalgamation of the main business process from the end users through the original
suppliers that make provision for products, services and information which add value for
customer and all the stakeholder involve (Lambert, Martha&Janus2001). Hence, the supply chain
management has been identified to constitute of key main eight processes. These include;
Customer Relationship Management, Customer Service Management, Demand Management,
Supplier relation management, Order Fulfillment, Manufacturing Flow Management, Product
Development and Commercialization and Return management.(Cooper, Douglas& Janus 1997.)
• Customer Relationship Management (CRM): Is the process that uses Product and Service
Agreements (PSAs) to structure how the relationship with targeted customer is built and
maintained in order to improve production processes and meet the customers demand and need
(Cooper et al.1997). • Customer Service Management (CSM): is the process of designing how
firms provides vital information like products availability, order status and many more to their
customers (Cooper et al.1997). • Demand Management: Is the process that is structured to
balance the customers demand and the company’s supply capacity (Cooper et al.1997). •
Supplier Relationship Management (SPM): is the process that uses PSAs between companies and
suppliers to build and maintain relationship between them (Cooper et al.1997). • Order
Fulfillment: it is the process that implements all necessary activities like manufacturing, logistics
and marketing planto identify customer requirements and then design a strategy to meet the
requirement (Cooper, Douglas& Janus1997). • Manufacturing Flow Management: is the process
that involves all the necessary activities required to establish manufacturing flexibility in a firm
in order to satisfy the targeted markets (Cooperet al.1997). • Product Development and
Commercialization: is the process that is structured to integrate the joint contribution of the
suppliers and customers in the development and introduction of new products to market (Cooper
et al.1997). • Return Management: is the process that involves disposal and recycling of products
(Cooper et al.1997).
Procurement Procurement is one of the key functional areas in an organization. It is a major cost
center through which all materials are been channeled into the company. It is the organizational
center that handles the buying of all materials, exchange of materials with financial resources for
further processing. This processgenerates additional revenue to the company without
compromising the values and integrity of the company before its customers. Procurement
process has several definitions which are based on the act of buying goods and services and its
preparation and processing based on demand. Turner (2011) described procurement as a system
or process that supports organization’s total needs for the supply of goods,services and processes
that is required to achieve the goals and task established by the organization. Procurement is also
defined as the process of getting the goods and services a company needs to fulfill its model
through various tasks such as quality standards development, financing, price negotiation,
purchasing, value analysis, supplier research and selection, inventory control and disposal of
waste products like material packages.(Kolenko & Kolenko 2014.) Also, procurement is the act
of finding, acquiring and buying of the appropriate goods,services or work from external source
at the best possible cost to meet the need of the acquirer in terms of quality and quantity, time
and location(Weele 2010). Chartered institute of procurement and supply(2013) also described
procurement as the business management function that ensures identification, sourcing access
and management of the external resources that an organization needs to fulfill its strategic
objectives Procurement is a natural process in which one production step is taking before the
other in such a way that each stages requirement needs to be fulfilled in order to achieve the
desired result. It is a process that explores supply market opportunities and implements
resourcing strategies to give optimum supply outcome to the company, its stakeholders and
customers simultaneously. However, procurement efficiency is determined by its value and on
the success of the organization. (Turner 2011.) Procurement activities or process can be divided
into two categories; Direct and Indirect procurement activity. Direct procurement is the focus on
the supply chain management which is related to production activities that directly affect the
production process of a manufacturing companies or firms. Indirect procurement activities focus
on the operating resources a company purchases to enable it’s operations such as equipment,
maintenance,repair,consulting services and outsourcing services. (Cadwell & Davies, 2009;
Lewis & Roehrich 2009.) In the business environment, the term procurement can also be referred
to as supply management. Some organizations prefer to use the term supply chain management
as both words are synonymous and have similar key characteristics. According to
PROCUREMENT PROCESS DESIGN 7 Turner (2001), supply management as a concept and
procurement are synonyms. However from the academic point of view, supply management
seems to be broader as it encompasses procurement itself in its entirety. Supply management can
be defined as a concept that uses specialized tools,focus on specific techniques and processes to
maximize the effectiveness and add value to an organization’s procurement services. (Turner,
2011.)But, the primary aim of the two activities is to manage the external resources for the
benefit of the company and customers, to generate income for the company and add value to
their customers in general. 2.2.1 Essence of procurement Turner (2011) proclaims procurement
process as a cost centre. In a company, procurement delivers a wide range of benefits by
supporting the strategic organizational objectives. Seven core benefits of procurement have been
identified. These include; supply security in terms of raw materials and end products, lower cost
of production, risk reduction, improved quality of products, greater added value, increased
efficiency and innovation (CIPS 2013). Procurement creates higher profit margin and prevalence
over other competitors through managing the ordering, receipt, review and approval of the
inflow of items into the organization through the suppliers. Procurement will be effective and
profitable if less efficient organization can integrate its philosophy and culture into their system.
(Turner 2011, p. 2.) Morledge and Smith (2013) reported that it is possible to reduce a project
capital cost by an average of 5% if the appropriate procurement method is adopted. However, the
benefit of procurement is attained or guaranteed when a strategic procurement management is
employed into an organizational system. 2.2.2 Typesof procurement Procurement basically
includes two inter-related elements: purchasing and supplying of goods (Heiserich, Helbeig&
Ulmann2011). There are six types of procurement and these include; 1. Single procurement: this
is a type of procurement in which specific customers order initiates and triggers the supplier’s
process of production (Heiserich et al., 2011). 2. Stock procurement: in this procurement type,
goods are restocked basedon threshold level. There is a minimum level of stock that must be
available in storage after the completion of a production until the next order is received from
customers. This procurement is beneficial because customers demand can be anticipated.
However, its drawback is that the procurement cost may be higher. (Heiserich et al., 2011.) 3.
Vendor managed inventory (VMI): this is a procurement method in which customers or end
users have close network with the supplier, the supplier are responsible for stock at their
customer’s company. This procurement type is beneficial because it create an avenue for
optimized production process, lower costs and it also gives room for flexibility. (Arnold, 2009.)
PROCUREMENT PROCESS DESIGN 8 4. Just in time procurement: it is a procurement type
based on supply of goods when the stock level of the company is low. This procurement types is
helpful because it reduces cost and balanced process. (Toyota company n.d.) 5. Just in sequence
procurement: it is a procurement type based on the successivesupply of required goods to a
company at a specific time. 6. Ship to line: is a procurement type that requires less logistical
steps, goods or raw materials are dispatched from the last added value of the supplier to the first
added process of the customer (Heiserich et al., 2011). 2.2.3 Procurement process/strategy
Procurement strategy can be defined as the planned approach used by a company in purchasing
their required goods, raw materials or services based on factors like procurement timeline,
funding and budget, projected risks and opportunities and many more (Procurement academy
n.d.). Five main key performance drivers have been identified for procurement process, these
include; time, cost, quality, reliability and technology (Turner, 2011). 1. Cost: There is no doubt
that the search for lower costs of material has been the greatest driver for procurement strategy.
In order to win the preference of consumers, business enterprises are striving to produce cheaper
and more distinct product to their potential customers. (Kotabe 1998.) Because the raw materials
or products supplied by a particular supplier may be too expensive, and the same materials are
obtainable at cheaper price from other merchants elsewhere has brought about the integration of
procurement strategy to reduce the cost of acquiring goods. 2. Time: Due to some difficulties
like availability of capital and locations, some supplier may be unavailable to supply a required
material or probably they are incapable of meeting the required delivery time. This has motivated
the developments of procurement strategy in order to source for the best candidate that could
meet up with the company’s need at the appropriate time. 3. Quality: For some products, buyers
usually empahasise on the quality. Because the quality of raw materials or products obtained
from a supplier is unsatisfactory or insufficient for a manufacturers to sell their product to their
potential consumers where higher standards is demanded. For a company to maintain it
competitive advantage ahead others, they may adopt the procurement strategy to source for raw
material that meet their specifications. 4. Technology: Because some supplier do not have access
to first class level of technology, which has in turn affected their reliability in terms of providing
raw material based on agreement. This has made some manufacturer to develop procurement
process to identify reliable suppliers. Procurement process is handled by a professional who
oversees and manage the inflow of external resources into the company. Procurement process is
quite a challenging and critical task depending on the kind of project a company is executing.
Each company has its own characteristics, divergence in strategy, size, product range and market
coverage. For instance, a multinational company like United Trading Company (UTC) in Nigeria
with several multiple products will employ all the stages of procurement process than any other
small or medium scale enterprise manufacturing same product. As a PROCUREMENT
PROCESS DESIGN 9 result, suppliers, logistics and customers vary according toeach industry.
However, despite these variations, procurement process usually follows same procedure but its
application is determined by the intricacy of the project. A manufacturing company has different
sections, each section or sector follows a process which serves as a frame work or blue print for
better business results. These processes are mechanism that strategically direct resources and
activities toward achieving the aim of the organization. (Richardson 2007.) 2.2.4 Stages of
procurement process Figure 2: Flow chart illustrating the high level stages of a typical
procurement process (dsfire.gov.uk). Business process strategies are weapons that can be
optimized to be ahead competitors. Figure 2 above shows the stages that is required to procure a
projector business. 1. Identifying business or project requirement: This procurement stage
involves the identification of a business need, consultation of stakeholders, risk assessment,
scope and communication system for the manufacturing of product and service. The required
materials for abusiness may include; equipment, components, finished products and raw
materials. While service requirements include computer programmers, hazardous waste handlers,
transportation carriers, and maintenance service provider. (Robert, 2011.) The main objective of
this procurement stage is to embrace the entire requirement of the business and to obtain full
support from all the stake holders involve. Business stakeholders are divided into two; internal
and external business stakeholders. The internal stakeholders are the business owner, staffs and
customers while the external stakeholders are suppliers, government agency etc. Hence, when
taking business strategies decisions, the three main stakeholders involve are the major
competitors, primary customer groups or targeted groups and the major suppliers.(Van
&Walee2010.) 2. Requirement advert: this is a stage of developing procurement strategy, and it
is also known as call for tenders. Different business requires different approach, and this depends
on the scale of the project or business. This stage involves team formation, market research and
precise definition of target, objective or purpose. (Purchasinginsight n.d.) In business
organization, the aim of the procurement strategy cannot be achieved without the support of the
suppliers or tenders (Reportof dsfire n.d.). The call for PROCUREMENT PROCESS DESIGN
10 tenders can either be open where all suppliers are invited, or the request for business need can
be a restricted call for tenders, which are open to only the selective merchants, vendors or
suppliers. Business requirement is advertised through different means, like internet such as
bluelight e- tendering portal. The main objective of this procurement stage is basically to
generate competing offers from different bidders, demonstrate value for money and to put the
entire procurement into a reasonable time scale. 3. Expression of interest: Here all supplier,
vendorsor contractors who can guarantee performance clearly express their interest in tendering.
The aim of this is to generate shortlist of suitable suppliers or vendors. (Urizar 2013.) 4.
Preparation of tender document: In this procurement stage, a document that adopts a specialized
procurement approach is produced and made available on the blueprint e-portal. This document
address whether the suppliers or vendors take into account the environmental, sustainability,
ethical and social issues. (Report of dsfire n.d.). 5. Suppliers or tenderers evaluation and
selection: This involves the development of strategy to grade, screen and notify prequalified
tenderer. The aim of this procurement stage is to evaluate, assess and choose the most
economically advantageous tender (MEAT) that conforms the user’s specifications and
requirements based on factors like; price, quality, service and delivery. (Robert2011.) 6. Contract
awarding and negotiation: This entails the negotiation and allocationof the contract to the best
tenderer. The step involves in this process is entering a detailed undertaken based on the entire
purchase to pay process (P2P) to ensure the cost and risk in the business is reduced
(purchasinginsight n.d.). 7. Contract implementation and management is the last stage of
procurement process. In this step, after awarding the contract to the suppliers based on the
evaluation results, company would undergo regular review to monitor the cost and to ensure that
the level of services mutually agreed by the users and the suppliers are maintained
(Purchasinginsight n.d.). 2.2.5 Procurement tools There are five key main drivers of supply
management and procurement that are essential to enhancea successful business, and must be
taken into account when making decision in a business organization. These are; cost, quality,
time, reliability and technology. (Turner 2011.) Turner (2011) further explained that inan
outstanding and successful strategic supply management, concept, tools and resources used
include; 1. Price analysis: This involves the comparison of prices between suppliers and against
external benchmarks with no direct knowledge of supplier costs 2. Total cost analysis: it includes
additional cost of a part (mean time before failure) like transportation, tariffs, special package,
warehousing (inventory), and quality control. 3. Total cost of ownership analysis: it includes the
total cost value associated with an item over the life span of that item.These costs include but are
not limited to: • Purchasing price: amount of money paid for the item • Acquisition cost: all costs
invested to acquire the item like employee time, Heat, electricity, fuel, telephone, building rent
or cost, PROCUREMENT PROCESS DESIGN 11 Internet and online procurement platforms
and services, engineering and /or implementation costs, transportation costs, taxes, tariffs etc. •
Usage cost analysis: this is a cost associated with modifying or using the item of service such as
receiving, stocking, storage, requisition, picking and shipping cost, removal and repair cost. •
End of life cost analysis: this includes of cost associated with end of life and disposal of product
4. Financial analysis: This includes the analysis of the supplier’s or bidder’s financial proficiency
and capacity using Dun and Bradstreet report (D&B) that shows; credits, delinquency history and
risk of failure or inadequacy by the industry. The analysis also includes investigating the annual
report that shows the cash inflow and outflow, and as well as fiscal reports of the previous year
and the plan for the fourth coming year. 5. Technical analysis: This includes the analysis of the
physical characteristicsof theitem or service to increase reliability, lead time and as well meet the
minimum organizational specifications. 2.2.6 Procurement policy Procurement policy is the rules
and regulations an organization set in place to efficiently govern the process of acquiring goods
and services needed the organization (wisegeek.com). Procurement policy varies in different
organizations. Companies, non-profitable organizations and as well as governmental
organizations all have their own business procurement policies. However, business size,
availability of vendors or supplierto make the required goods and services attainable, cash inflow
are the factors that influence the formation of policy that govern purchasing procurement of a
company. (Wisegreek.com.). For instance, European Union has some business policies based on
the financial regulation (EU EURATOM) No 966/2012 of the European parliament and council,
which is applicable to general budget of the union. Some of the policies are as follows: 1.
Bankrupted suppliers or tenderers that have suspended business activities cannot be awarded
contracts. 2. A supplying company whose authorized decision maker has being convicted or
attainted of an offence based on their professional conduct cannot be awarded a business
contract. 3. Tenderers that are not in conformitywith their obligations relating to payment of
social security contributions or taxes in accordance to legal provision of the country where they
are established or entrenched cannot be awarded a contract. 4. A supplier, vendor tenderer that
have been subjected to administrative amercement cannot participate in the procurement
activities. (Eurojust.europa.eu.)
Bibliography

 International Journal of Advanced Education and Research, Issue 4; July 2017, Role of ERP in e-
commerce supply chain management system by Dr. Jagbir Ahlawat
 Konicki, Steve. Nestle Taps SAP for E-Business.