e-Procurement in Motorola
Internet technology has offered different organization with the different opportunities to operate beyond their traditional physical boundaries (MacGregor & Vrazalic 2005). More particularly, the electronic (e)-procurement that had helped to offer firms with more efficient solutions which drive significant value to into the business (Neef 2001). With that, within the last years, the lowly, back-end procurement processes have been transformed into a strategic resource. Consequently, procurement is now seen not only as a strategic player in the value chain, but also as a major drive in the extended supply chain. There are different reasons behind this popularity, one is the trend of global sourcing, focusing on time the market, product quality based competition, customer uncertainty and the need to improve the bottom-line costs (Kalakota & Robinson 2001).
Currently, organizations are increasingly doing their e-business using information and communication technologies and the Internet. E-procurement is the use of information technologies in order to facilitate business-to-business (B2B) purchase transactions for different materials and services (Wu & Zsidisin 2007). Procurement commonly represents one of the largest items in the cost structure of a company (Attaran & Attaran 2002). According to Aberdeen Group (2001), indirect procurement or the purchase of maintenance, repair and operations (MRO) goods not directly involved in the production process including office suppliers, personal computers, non manufacturing items, etc., which constitutes 30% – 60% of the total expenditure of the company (Orr 2002). In addition, corporate buyers tend to waste time on non-value which add activities including entry, correcting errors in paperwork, expediting delivery, or solving quality problems (Turban & 2006). As a result, different companies are focusing on finding ways of cutting costs in the overall corporate environment, which include application of Information Technology (IT) in the procurement process.
This paper will focus on analyzing and evaluating the implementation of e-procurement in Motorola.
Motorola is one of the most popular companies and brands in the world, the company is known because of being innovator and visionary in the field of mobile communication. The company was first introduced as Galvin Manufacturing Corporation in 1928 by introducing the first battery eliminator.
Motorola has been at the forefront of communication inventions and innovations for more than 80 years. The company has already achieved some extraordinary accomplishments along the way – such making the equipment that carried the first words from the moon and the leading cellular communication revolution with the development of the first handheld cellular phone in the world, the DynaTAC 8000x. And more recently, the company has staked out a position at the forefront of 4G telecommunications. Thus, the company holds a market-leading position in WiMAX deployments around the world. In 2008, the company demonstrated the first WiMAX 802.16e mobile handoff and the first over-the-air data session in the 700 MHz spectrum, using the Long Term Evolution of mobile broadband in the industry (Motorola n.d.).
Today, Motorola's portfolio of technologies, solutions and services includes wireless handsets, wireless accessories, digital entertainment devices, wireless access systems, voice and data communications systems, and enterprise mobility products. The company operates in several countries around the globe, tapping the creativity of diverse cultures and individuals. And demonstrates each day, at every site, and in all that the company does, that doing business and acting responsibly are not mutually exclusive endeavors (Motorola n.d.).
Motorola is always connected to technology and innovation because of its consistent implementation of changes in order to come up with the changes in the environment. There are different factors that have pushed or drove e-procurement implementation inside the organization. First is the ever-advancing capabilities of technology that are considered as important aspect that pushed the implementation of e-procurement in the business. Furthermore, the company also saw that e-procurement will help in order to improve accuracy, reduced clerical work, reduced order-cycle time and increased productivity (Heywood & 2002). With this, the primary reason of the company upon implementing this technology is the realization of the potential benefits that may be achieved (Min & Galle 2003).
For Motorola, information technology (IT) projects represents a resource intensive strategy (Aldin & 2004). With this, e-procurement is considered as a boundary-spanning activity implicitly involves supply chain integration (Mohindroo 2003), which smooths the progress of pooling of resources amongst a range of organizations (Harris & Cohen 2003).
This is supported by the studies of Aberdeen Group (2001), Eyholzer & Hunziker (2000) and Arthur Andersen Business Consulting (2001) which showed that e-procurement enables companies to decentralize operational procurement processes and centralize strategic procurement processes as a result of the higher supply chain transparency offered by the e-procurement systems (cited from Puschmann & Alt 2005, p. 124).
Motorola faced different problems and foresee risks for their procurement and overall supply chain by using the manual process. Due to this, the company implemented a web-based e-procurement solution that will link the other two important parts of the business that will help to offer visibility throughout the process, at the same time; it can help in order to support the implementation of business-specific rules (Gebauer & Haacker n.d.).
Motorola has been using e-procurement software of Ariba since 1999. Furthermore, the company also conducted an e-RFPs for more than 5 years and e-auctions for more than a year. As of March 2002, there are total 697 internally hosted catalogs in the company, which include a total of 650,000 items (Hildebrand 2002).
For e-RFOS, about 60 percent to 70 percent of the sourcing spending is being performed online. For e-auctions, about 10 percent to 15 percent are spreading online. On the other hand, more than 80% of e-requisition is all done online. As an initial result of implementing the system, the company enabled to save $126 million by using e-requisitioning. According to the director of Internet Negotiations of Motorola, the said system had helped the company. which is 50 times more than the cost of the project (Hildebrand 2002).
In 2001, the company use Ariba in order to process more than 160,000 purchase order. For the e-requisitioning program, Motorola runs a Ariba’s Buyer software with Web-based interface from Emptoris. On the other hand, the system uses Weblogic of BEA for middleware and Oracle databases, together with the Sun Solaris servers and Verisign for security (Hildebrand 2002).
One of the important aspects of e-procurement of Motorola is its e-auction. It consists of auction and reverse Internet auctions. The company believes that the Internet is an efficient way in order to dispose excess and obsolete equipment as well as inventory by enabling seller to efficiently reach thousands of potential buyers which include via auctions. Reverse auctions was implemented by the company in order to reduce the purchase prices. This is different from the regular auctions because, the buyers initiate the auction, rather than the seller and the objective of the auction is to motivate lower price than higher (Trent 2007). Motorola uses e-reverse auction to purchase practices and lower component costs. The company has an online system which solicits requests for quotes from suppliers that are expected to aim at a target low price. The suppliers, regulars and first timers will submit their bids and counter bids until the company chooses the vendor that have meets its price and after-purchase support requirements (EMS Now 2007).
With the use of the Internet and applicable Information System (IS), the company enables to monitor and retrieved information that are related with the suppliers or bidders. This is because, the management can easily track the performance of the suppliers in the database, and use this as one of the deciding factors in choosing the suppliers. With this, Motorola maintain their quality standard because it help to ensure that the decision will not just focus on the price of the bid.
In connection to e-auction, the company is also implementing its e-RFP. A Request for Proposal (RFP) is a document that is used in order to compare different products which include detailed information about the needs of the practice in order for the proposal to be tailored in appropriate manner. The intent of RFP is to specify exactly what the practice is looking for in a product, including hardware, software, maintenance and training. The response of the vendor will indicate whether the desired features are all available in their current product, and if not, whether the desired features are in development. This enables Motorola to meet planners to do more with less and work with in efficient manner.
The entire system enables the company to use a computerized system that will handle many steps in the sourcing process. Due to this, the company, or the employees of the company, the middle level management, will no longer have to handle the process of manually communicating with the suppliers or interested parties to join a meeting regarding the needs of the company. Rather, an online system will help in order to communicate with this people in group in order to present what they can offer to Motorola, at the same time, it can help in order for those new organizations to join the activities.
e-procurement created a value via the combined effect of more efficient procurement processes and more effective supplier relationships. It helped to leverages global electronic networks in order to integrate buyer and seller processes in order to offer a real-time platform in conducting a business (Gattorna & Ogulin 2003, p. 336).
e-requisitioning enables the Motorola to have a system that introduced self-service purchasing to casual buyers. It enables the users to select pre-specified items from electronic catalogue at better contracted rates than individuals could attain, as well as to process those orders with suppliers in electronic manners in as efficient and cost-effective manner as possible (Gattorna & Ogulin 2003, p. 336).
With the help of e-procurement, particularly e-requisitioning, Motorola had been able to experience reduced of administrative cost because it had helped the company to buy efficiently, remove non-value-adding steps in the procurement process and eliminate the usual order and invoice error processing. Furthermore, it also had helped the company to rollout and maintain sourcing deals because it helps to embed the new arrangements in electronic catalogs or just provide easy reference contracts databases for those items or services which cannot be e-requisitioned. Due to this, terms become effective as soon as a new catalog is in place which ensures that the benefits are all achieved in immediate manner (Gattorna & Ogulin 2003, p. 336).
Above all, it helped to improve and maintain good relationship and connection with the suppliers. e-requisitioning enables to support this with the ability to order in accurate manner, deliver expected spend volumes and pay on time, which can help in order to delivery financial benefits through shared savings (Gattorna & Ogulin 2003, p. 336).
Suppliers are one of the most important stakeholders of companies, because they are the one that supplies the raw materials and services that are needed in order to create or produce the finished goods or products. With this, it can be said that suppliers are directly connected to the productivity of companies. Based on this, it is vital to focus on proper management of procurement process, because it focuses on connecting with the suppliers.
With this, Motorola is considered as one of the most successful companies of all time. It had been able to maintain its operation for a long time and improved its performance as time goes by. The company is also among the first companies that have applied IT and the Internet in their operations. One of which is the application of e-procurement. With e-procurement, the company has been able to focus on the different transactions with the suppliers from bidding and proposals. In connection, the said system, also enables the company to create a database records of their suppliers, together with their performance in previous transactions, which enables the company in the decision-making. With this, the company will not just considered the price of bid, but also consider the quality of service.
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