Model Of E-Procurement Adoption
Sharon Purchase – University of Western Australia
Ken Dooley – Central Queensland University
Abstract
This paper considers factors influencing the adoption of e-procurement systems
within Australian organisations. A model of buyer perceptions on the factors that
influence e-procurement adoption. Overall supplier relationships and the buyers
perceptions of job improvements are critical to e-procurement adoption while other
factors have an indirect influence.
Introduction
Electronic procurement was touted as revolutionizing the supply chain and offering
organisations a vast number of advantages. Such hype has caused business to focus on
the supply function to a greater extent than previously. The savings promised were too
good not to consider and many organisations needed to make these savings to stay
competitive. Yet for all the advantages promised the adoption of electronic
procurement systems is not happening as quickly as predicted. Some of the reasons
given are that organisations are adopting a ‘wait and see’ approach (Davila, Gupta and
Palmer, 2003), the complexity of the decision due to the variety of software programs
(Osmonbekov, Bello and Gilliland, 2002); business processes require adopting a
number of different business models (Subramanian and Shaw, 2002), and complexity
in knowing how the market is going to pan out with high predications on the number
of players that are likely to be bought out or go into liquidation. Also different
industries have adopted online systems to a greater or lesser extent than other
industries making industry characteristics an important component when considering
the adoption process (Bartels, Hudson and Pohlmann, 2003). Due to the above issues
most research concentrates on the barriers to e-procurement adoption. Very few
studies have considered positive influences in the adoption process (Min and Galle,
2003; Dooley and Purchase, 2004). This study builds on those previous studies of
positive influences and develops a model of e-procurement adoption.
Literature Review
Previous literature has highlighted a number of factors affecting the adoption of eprocurement. The factors highlighted for this research are: perception of task
improvements and cost savings; influence of suppliers through relationship factors,
incentive schemes and pressure tactics; integration of electronic systems; and internal
organizational support. Table 1 gives a brief outline of the main literature sources
used for the development of these constructs. They will be discussed in more detail
within the literature review.
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Table 1 Factors affecting e-procurement adoption
Factors
Task improvements and
convenience
Cost savings
Supplier Relationships/
Incentives
Supplier Relationships/
Pressure
Supplier Relationships /
Closeness
Infrastructure Issues and extent
of intergration
Internal Support Structures and
Mechanisms
Literature
Kauffman and Mohtadi 2004; Croom and Brandon-Jones 2004; Min
and Galle 2003; Osmonbekov et al 2002; Panayiotou, Gaylialis and
Tatsiopoulos 2004; Ellram and Zsidisin 2002; Subramanian and
Shaw 2002; Turban et al 2004; Dooley and Purchase 2004
Kauffman and Mohtadi 2004; Croom and Brandon-Jones 2004;
Ellram and Zsidisin 2002; Subramanian and Shaw 2002
Kauffman and Mohtadi 2004; Dooley and Purchase 2004; DeeterSchmelz, Bizzari, Graham, and Howdyshell 2001
Joo and Kim 2001; Dooley and Purchase 2004
Croom and Brandon-Jones 2004; Ellram and Zsidisin 2002; Zahay
and Handfield 2004; Subramanian and Shaw 2002; Carr and
Smeltzer 2002; Dooley and Purchase 2004
Min and Galle 2003; Osmonobekov et al 2002; Subramanian and
Shaw 2002; Dooley and Purchase 2004
Kennedy and Deeter-Schmelz 2001; Osmonbekov et al 2002; Zahay
and Handfield 2004; Panayiotou et al 2004; Subramanian and Shaw
2004; Joo and Kim 2004; Dooley and Purchase 2004’ Lancioni,
Schau, and Smith 2003
Perception of task improvements and cost savings
E-procurement systems benefit both the buyer and supplier side (Kauffman and
Mohtadi, 2004) improving tasks for all involved in the procurement process. Cost
savings occur through improvement in efficiencies and effectiveness of procurement
tasks, lowering of purchase prices and the lowering of administrative functions
(Croom and Brandon-Jones, 2004). Reducing the administrative aspects of the
procurement process allows purchasing professionals to spend more time on the
strategic aspects of procurement such as developing supplier development programs,
improved supplier relationships, and improved communication processes. Perceptions
of these improvements can have a positive influence on the motivation of purchasing
professionals to adopt electronic technologies. This construct is similar to the
acceptance factors from the technology acceptance model (TAM) in particular the
perceived ease and perceived usefulness of the technology (Davis et al., 1989).
Influence of suppliers
Incentive schemes positively promote the adoption of new behaviours and are not a
new strategy within supply chain management practices. This is particular important
within e-procurement systems as a lack of user adoption has inhibited uptake (Croom
and Brandon-Jones 2004). In the case of electronic procurement systems incentive
schemes encourage partners to adopt and use newer technologies (Kauffman and
Mohtadi, 2004). Supplier incentives include aspects such as: improved payment
terms, better communication and information flows, greater co-ordination and
improved negotiating terms. Previous research has shown that supplier incentives do
have a positive impact on the buyers adoption of e-procurement (Deeter-Schmelz et
al., 2001).
Suppliers can also pressurise buyers to adopt e-procurement systems through noncoersive means such as “we won’t supply” and “disadvantaged contract terms” as
examples (Joo and Kim 2004; Dooley and Purchase, 2004). Supplier pressure is
particular strong when the buyer side is less powerful or a significant proportion of
other network players have adopted information technology. Subramanian and Shaw
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(2002) highlighted that competitive pressures are an important component in the
adoption process.
Improvements in supply chain efficiency can be developed through the closer
interactions between buyers and suppliers and improved relationship building.
Adoption of e-procurement systems is not different with closer relationships predicted
to have a positive impact on the adoption process. But previous research has found
this factor to be inconsistent with Carr and Smeltzer (2002) finding that eprocurement systems did not improve the level of trust. While Zahay and Handfield
(2004) found that relationship priority was not an important factor in the adoption
process. Alternatively Ellram and Zsidisin (2002) found that close relationships
through alliances did have a positive impact on the adoption process. These
contradictions make it necessary to consider the role of suppliers relationship in the
adoption process.
Integration of Electronic Systems
The extent of infrastructure integration between organisations has a direct impact on
the savings and benefits that can be obtained (Min and Galle, 2003). Lack of
integration has been highlighted as a constraint on the benefits developed through the
use of e-procurement due to processes such as the requirement to re-key data.
Integration also affects co-ordination processes and information flows between
organisations (Osmonobekov et al., 2002). Reliability, consistency and infrastructure
with adequate capacity are also important in allowing the benefits of integration to be
obtained (Croom and Brandon-Jones, 2004). Higher levels’ of integration allows
critical information to be exchanged improving overall decision making.
Internal Support for Adoption Processes
With the focus on gaining improvement within the supply function the adoption of eprocurement is one way of achieving this aim (Lancioni, Schau, and Smith, 2003).
Internal organizational forces which impact e-procurement vary from: technical
capabilities of purchasing personnel (Zahay and Handfield, 2004); extent of
investment in training (Subramanian and Shaw, 2002; Joo and Kim, 2004; Panayiotou
et al., 2004); influence of IT division in choosing software (Osmonbekov et al., 2002)
and top management support (Kennedy and Deeter-Schmelz, 2001). In each of the
above cases internal support for the adoption of e-procurement has a significant
influence.
Conceptual Focus
The research focus is to determine how each of the above factors affects eprocurement adoption and develop a model of e-procurement adoption within an
Australian context. Each of the above factors has previously been shown to affect the
process, but few have incorporated them within the single research project and none
have investigated Australian organisations. Also within the previous research there
are contradicting results and this research investigates some of these contradictions
further.
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Methodology
Questionnaire Development and Constructs
A questionnaire was developed after a review of the literature, incorporating
previously used items for measuring the main constructs: internal organizational
support; electronic integration; supplier participation; perceived convenience/ task
improvement; and supplier pressure. The questionnaire was pre-tested on a group of
mature age, external students studying for their bachelor of commerce, majoring in
purchasing and materials management at Central Queensland University. These
students were currently working in purchasing positions and had a good knowledge of
the procurement process. Following pre-testing the questionnaire was developed using
items anchored by a 7 point likert scale (1 – very strongly disagree to 7 – very
strongly agree).
The dependent variable, e-procurement intentions, consisted of four items which
measured the respondents organization intention to implement e-procurement
systems. The items included: (a) our organization prefer to use e-procurement, (b) our
organization re-purchase using e-procurement (c) intentions within the next 12
months and (d) intentions within the next 5 years. Items (a) and (b) in particular
consider perceptions of continuing the use of e-procurement highlighting their
commitment to future intentions.
Data Collection
Surveys were conducted with purchasing professionals within the Australian Institute
of Purchasing and Materials Management (AIPMM) and Queensland Purchasing (a
state government department). An email was sent, by the participating organisations,
to all potential respondents asking them to participate in an online survey.
Respondents were purchasing professionals whose main role is procurement. The
survey only considers the buyer side of the e-procurement process. The link to the
survey was embedded within the email message and respondents clicked through to
the survey. From the emails sent 211 surveys were completed, of which 199 were
usable. As the emails were sent from the participating organisations it is not known
how many emails were received and therefore not possible to accurately determine
response bias.
Model Development
A model of e-procurement adoption was developed using the two stage structural
equation modeling. During the first step confirmatory factor analysis was conducted
on all of the constructs with results given in table 2.
Table 2 Results of the Confirmatory Factor Analysis
Factor
Task Improvements
Supplier Participation
Supplier Pressure
Internal Support
Integration
e-procurement Intentions
Probability Level
0.121
0.750
0.962
0.369
0.058
0.467
Cmin/DF
2.116
0.101
0.002
0.996
3.605
0.53
RMESA
0.059
0.000
0.000
0.000
0.091
0.000
Composite Reliability
0.875
0.907
0.860
0.903
0.710
0.902
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From the results of the factor analysis composite reliability scores were calculated and
shown in table 2. All reliability scores are above 0.7, indicating adequate reliability
(Hair et al., 1998). Measures of fit for most of the constructs are within acceptable
limits. Electronic integration has a high RMESA although still within the limits of
below 0.1 (Arbuckle and Wothke, 1999) and supplier pressure has a low Cmin/DF.
The above constructs were inputted in Amos™ for the development of the structural
model shown in Figure 1. The model has the following measures of fit: RMESA –
0.035; Cmin/DF – 1.081; and Probability – 0.373. When considering measures of fit a
number of different measures should be considered (Hair et al., 1998). The measures
of fit for this model were all within acceptable limits.
All numbers indicate regression weights that are significant at the 0.05 level.
Figure 1 Model of e-procurement Adoption
Perceptions of task
improvements/ convenience
Supplier
Pressure
0.378
0.421
Supplier
Participation
0.402
Electronic
Integration
0.501
0.309
0.491
e-procurement
intentions
Internal organizational
support
Discussion
Figure 1 shows a model indicating the positive influences on e-procurement adoption.
Only two constructs, supplier participation and perceptions of task improvements/
convenience, have a direct influence on intentions. Overall, supplier participation has
the strongest influence on e-procurement intentions. Such a result is not unexpected as
both sides of the dyad need to incorporate e-procurement processes if benefits are to
be obtained. Suppliers willing to participate in e-procurement will have a strong
influence on the intentions of their buyers. Previous research on supplier participation
also had a positive influence though the strength of the influence was not as strong as
in this case (Deeter-Schmelz et al., 2001). This strong finding though contradicts
research which have shown that relationship priority and trust and not important
influences in the adoption process (Carr and Smeltzer, 2002; Zahay and Handfield,
2004).
Also supplier participation directly influences the extent to which the buyer will
electronically integrate with their suppliers. Electronic integration can only occur if
both sides are willing to integrate their information systems. Therefore, the influence
of supplier participation and willingness to implement e-procurement on extent of
integration is not unusual.
The other construct with a direct influence on intentions is the buyers perceptions of
how e-procurement improves their current tasks by removing some of the
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administrative functions and allowing purchasing professionals to concentrate on
strategic procurement objectives. Such a finding fits with previous research which
found the respondents perception of how useful, convenient and overall job
improvement positively influences adoption intentions.
The respondents perception of internal task improvements also has a positive
influence on the support obtained from internal sources (training, help from IT
support staff etc). Such a finding highlights that managers need to have their
purchasing staff “on side” to assist with obtaining resources for the implementation of
such systems. In conclusion, supplier participation is critical given its strong influence
on e-procurement perspectives.
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