February 26, 2022

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It is the process where the company uses their own workers (in-house team) to develop ot implement an IT system that fits the specific needs of the company. This process allows for the creation of a more customized system that can have an exact fit in the company due to the direct contact between the software developer team and the people that could be using the system. This approach requires that the company possess a group or a team of programmers and business analysts that can work together within the company with a common reporting line which makes it easier to coordinate between the teams. The individuals in these teams should be experienced in developing and implementing IT systems and have a thorough understanding of the company’s business processes and once it is implemented, it should be able to maintain as well as to improve the system to adapt the changing business requirement. Advantages of in-house development 1. Company has full ownership of the final product as well as its source code and knowledge gained when developing it. 2. Fits exactly to the business requirements of the company. 3. Gives you full control over the system and its functionality. 4. Creates a relationship between the development and users base which help in communication and expectation delivery. 5. Can provide the business with a competitive advantage over a purchased solution. Disadvantages of in-house development 1. Its time consuming to develop an in-house business software as opposed to buying it. 2. There is high maintenance and development cost- though it may seem less expensive, in-house development can actually become more expensive as time goes by, as there are a lot of things that go into the process such as analyzing requirements and perfecting the system. 3. Requires more IT personnel which leads to high overhead costs 4. If the organisation decides to sell the system it may suffer from lack of profitability as the system may be too tightly build into the identity of the company. 5. High switching costs – It’s more expensive to change. Factors to consider when purchasing e-procurement systems 1. Cost – implementation and maintenance 2. User friendly interactions 3. Performance- meet user requirements 4. Compatibility- compatible with existing system requirements 5. Flexibility- can change in regard with market environment.

Outsourcing it is the use of external service providers to effectively deliver IT enabled business process, application services and infrastructure solutions for business outcomes. There are 3 types of outsourcing: Bodyshop outsourcing- it is a situation where management uses outsourcing as a means of meeting short term requirements e.g. short term requirement e.g. shortage of in-house skills to meet a temporary demand e.g. installing IT infrastructure lie CCTV  Project management outsourcing– it is employed for all or part of a particular project such as developing a new IT project or management consultancy. Total outsourcing- it is where the outsourcing supplier is given full responsibility of a selected area e.g. cleaning Drivers of outsourcing When there is no enough a skill or resources to perform a specific task To concentrate on core activities of the organisation. When cost of outsourcing is less than that of in-house development. If you want to use new technology in an organisation Advantages of outsourcing 1. To concentrate on core activities of the organisation 2. It enhances accuracy- outsourcing will improve work accuracy in terms of given deadline on a project and also the selected potential supplier would deliver accurate results in a given time schedule 3. Access to new resources. Companies outsource because they don’t have access to the required resources within the organisation e.g. if an organisation is viable and important alternative to building the needed capability from the ground upwards. 4. Access to world class capabilities- by the nature of their specialization, outsourcing providers brings extensive worldwide class resources to meeting the needs of their customers. 5. Shared/Shifted risks- There are risks associated with the investment in an organisation. When companies outsource, they can shift the risk to the suppliers since suppliers are specializes and can manage risks. 6. There is flexibility- when you outsource you don’t have to spend time recruiting and training employees for a short term period. 7. Reduced operational and recruitment costs. 8. Time saving- software development takes less time when people are working on it around the clock hence the customer is getting his product on time and be able to compete with his or her competitors. Disadvantages of outsourcing 1. Loss of control of operations by management. 2. Information may leak to competitors. 3. Bad for employee’s morale- Outsourcing sometimes often results in layoffs or transfer of existing employees. Such displacement can set a bad morale to employees and can even cause staff to fear for their employment opportunities.

Sourcing is finding or obtaining a potential supplier for goods and services. Strategic sourcing is a complicated process involving a number of interrelated tasks e.g.: 1. Identify or re-evaluate needs- in some instances, needs must be re-evaluated because they have changed. 2. Decide to make or buy- this is whereby an organisation may see whether they can generate the product or services or choose to buy. 3. Identify type of purchase- there are 3 types of purchase starting from the least amount of time and complexity to the most amount of time and complexity e.g. straight rebuy or routine purchase, modified rebuy(change of existing supplier), new buy(developed from new user needs) 4. Conduct market analysis- a source of supply can operate in purely competitive market(many suppliers), an oligopolistic market(few suppliers) or monopolistic market(one supplier) 5. Identify possible suppliers- these may include suppliers that the purchaser has previously used or new suppliers. 6. Prescreen possible suppliers– This is the process that is used to reduce the number of supplier to those that can meet the purchaser’s demands. 7. Choose supplier- the choice of supplier determines the relationship that will exist between the purchaser and supplier organisation and how the relationship will be structured and implemented. 8. Deliver product/ Perform service. The completion of this activity also generates the generation of performance data to be used for the next activity

1. The software should be secure and not vulnerable. It should be virus free and able to combat a threat through active scanning and elimination of detected threats. 2. The system should be scalable. The capacity of a system to handle a growing amount of work or its potentially being able to be a growing amount in order to accommodate a growth. 3. Contract management– the system should have the feature to customize access and views for each department based on the function and contract type. 4. Digital negotiation- buyers and sellers should have a collaborative workspace to work on negotiation. It enables transition to a fully digital environment with improved security, efficiency and visibility while reducing the contracting life cycle. 5. E-signature integration- e-signature integration is important for any contract life cycle management and it provides one agreement, one vendor, one point of contact with access to two dynamic systems for buyers and sellers. 6. Purchase request- the system should be able to create a purchase request in order to reduce time and enhance business activity. 7. Spend analysis- in addition to improving compliance and reducing cycle times, performing detailed spend analysis helps companies to find new areas of saving that previously went unexploited and hold on to past areas of saving that they have already negotiated. 8. Supplier registration- potential suppliers should have a provision to self-register with your company along with necessary details which can be used later during decision making.

1. OFF-THE-SHELF APPLICATIONS It is short form for commercial off the shelf (COTS) It’s software that is ready made and available for sale to the general public e.g. Microsoft Office is a COTS product that is packaged as a business solution. COTS product are designed to be implemented easily into existing system without the need for customization. Advantages of COTS 1. Applications are provided at reduced costs. 2. The application is more reliable when compared to custom built software. 3. COTS is more maintainable because the system documentation is provided with the application. 4. They are readily available in the market. 5. The application is of higher quality since competitors strive to produce better softwares. Disadvantages of COTS 1. Slow to adapt or change to industry’s needs. Your feature request may get ignored if it doesn’t benefit the larger customer base. 2. It may require you to change infrastructure e.g. processing power, memory 3. It may require you to change your process to fit the software. 4. They are readily available in the market. 5. It cannot entirely fulfill customer requirements. 2. CUSTOM SOFTWARE A computer program or web application that is specifically designed for a particular purpose, department or company. The software is owned by the customer and can incorporate features from other software programs. Customized softwares are written and designed to meet client’s specific business processes. Since custom software is developed per single customer, it can accommodate the customer’s particular preferences and expectations. They may be designed in a stage by stage processes allowing all the possible hidden dangers to be undertaken into account including issues which were not mentioned in the specification especially during the first phase of software development process may involve many departments including marketing, engineering, research & development and general management. Large companies, commonly use customs softwares for critical functions including content management, inventory management, customer management, human resource management or just to fill the gaps present in the existing software. Advantages of custom software 1. You can start with the minimum necessary requirements and add on later. 2. It can be tailored to your exact business needs and processes. 3. Changes can be made quickly as compared to the COTS software. 4. Can be made to suit your infrastructure i.e. no need to upgrade the computer central processing unit and memory requirement Disadvantages of custom software 1. There is very high initial and implementation cost. 2. All changes in features requested are billable. 3. You may incur additional cost in any case a new developer is called in for upgrade 4. It’s less reliable

Technological developments have a range of impacts on business and purchasing activity; 1. Automation and computerization raises productivity by allowing faster, more accurate, more consistent work than human beings can achieve alone. A supplier with access to advanced design, manufacturing, goods handling and transport technology should be able to fulfill orders faster, more cheaply and with more consistent (though not necessarily higher) quality. 2. Technology opens up new product markets through the potential for product innovation; think of the relatively new markets for digital cameras, MP3 players, music and book downloads plasma TVs and so on. These new markets impact on purchasing by creating new sourcing requirements. 3. Technology opens up new supply markets, e.g. by giving purchasers access to information on international suppliers via the internet, and facilitating communication and transaction processing. Technology may also be a differentiating or cost saving factor, lowering barriers to entry and allowing small new producers access to established markets. 4. Technology changes business processes. It may be used to perform operational functions more safely (e.g. automated production and materials handling) or easily (e.g. recording and tracking stock movements using barcoding or RFID). In recent decades, it has changed both production processes and supply and distribution processes. Production processes-with an emphasis on labor-saving equipment and machinery impacting purchasing through the need for investment appraisal and capital purchases. Examples include the increasing use of automated (or robotic) production, computer aided design and manufacture, computerized monitoring of quality and process and so on. Supply and distribution processes-Examples include: access to new global supply and product markets through e-commerce and faster transport; electronic sourcing and procurement systems; and new methods of service delivery (such as ATM machines, online entertainment ticketing and online banking). 5. Technology changes the amount of labor and types of skills required by businesses (e.g. through the use of labor saving automation) and how they can be organized and managed (e.g. the use of ICT to facilitate off-site and mobile working, and virtual team working). This may in turn support the use of out- sourcing and sub-contracting, which may be driven and managed by the procurement function. It may also create a changing skill profile for procurement staff (e.g. the use of e-procurement tools). 6. ICT can also be used to develop supply chain relationships for example by: • Providing real-time information for transaction processing, delivering tracking and other value-adding services • Streamlining procurement and delivery processes for higher levels of customer services • Supporting the customization of products and services and the personalization of contacts for supplier or customer relationship management. • Creating knowledge communities- e.g. sharing information via extranets • Facilitating coordination of collaborative activities.

An e-contracting process or life cycle consists of a number of phases where each phase constitutes activities confined to that phase. At a broad level, we classify e-contracting processes into three phases: 1.E-contract formation. The following steps take place during the formation of e-contracts. 1. Information. General contract preparations are made, information for a request or offer of services is provided and contracting parties are identified. 2. Pre-contract. Preparatory contracting process is performed where several contract negotiations are administered and managed. 3. Contract Negotiation. Contract negotiations are performed, preliminary agreements are made regulating the steps on the proceedings of negotiations and a draft agreement serving as an example of the final contract is established. 4. Enactment. The contract is finalized and work can commence or goods shipped. The enactment process is executed with signatures of all the participating parties. 2. E-contract management. Contracting parties may have to apply changes to the e-contracts signed in the enactment phase. The e-contracting management system incorporates any variations (updates) of the e-contracts formed among the contracting parties. 3. E-contract archiving. The finalized e-contracts along with other related contractual communications among the business parties are archived for future evidential purposes.

An extranet in an intranet that has been extended to give selected external partners (such as suppliers) authorized access to particular areas or levels of the organizations website or information network, for exchanging data applications, and sharing information. E.g. the registered-user-only pages of corporate websites and the member only pages of professional bodies. Supplier access to a buyer’s extranet system is generally protected, requiring defined verification of identity (e.g. via user ID), supplier codes and passwords. Extranets are particularly useful tools for relationship management, inter organizational partnerships and direct e-procurement transactions (which might have previously been carried out by EDI protocols). An extranet may be used to: Publish news updates and technical briefings which may be of use to supply chain partners Publish requirements and/or conduct e-tenders or e-auctions ( via a market exchange portal) Exchange transaction data for electronic P2P processes (orders, payments, and delivery tracking) Share training and development resources (e.g. as part of a collaborative quality or sustainability management). Procurement –focused extranets usually provide suppliers with • Real time access to inventory and demand information, enabling them to proactively manage the buyer’s needs rather than merely reacting to spot orders. • Authorized report information e.g. their vendor rating analysis-enabling them to be proactive in managing and improving their performance and competitiveness. Extranet systems provide potential for removing process costs and increasing supply chain communication, real-time information sharing, co-ordination and responsiveness (e.g. for improved demand management and just in time supply). They support the automation of procurement tasks, and therefore support the increasing focus of procurement professionals on strategic-value adding roles rather than transactional and communication tasks. Suppliers can similarly become more focused on developing innovative, competitive and continuously improving supply solutions. Business Link lists the following potential benefits that can be gained from using extranet systems. • Assists in improved supply chain integration via the use of online ordering, order tracking and inventory management. • Reduces operational costs, for example by making manuals and technical documentation available online. This reduces cost and increases the speed of inter-business communication • Improved collaboration and relationship potential by enabling involved parties to work online using common documentation; again this accelerates the business process as well as saving cost by reducing the need to hold expensive meetings. • Suppliers can directly access authorized business information which often enables them resolve their own queries. • Provides a single user interface between business partners. • Improved security of communications since exchanges take place under a controlled secure environment Integrating supply chain processes via extranets still poses challenges and risks. Common reasons for failure include: Inadequate planning and preparation Unrealistic expectations Lack of clear business case for how the extranet will support organizational objectives Extranet security is another critical design consideration. Hackers increasingly probe connected computers for weaknesses in their security, and data corruption, loss or theft – e.g. though the use of malware.