Case Study Description

The Western Australian Government currently spends approximately $A5 billion on goods and services and estimates of average transaction cost are estimated at an average for simple purchases of $100 (DoIT, 2001b).

Early in 2000, the West Australian government agency responsible for management of government purchasing, the Department of Contract and Management Services (CAMS), embarked on the development of major project known as the Government Electronic Marketplace (GEM)(DoIT, 2001a). On July 1, 2001, because of Ministry of Government changes, the responsibility for the project moved to the replacement for CAMS, the Department of Industry and Technology (DoIT). This case study traces the development GEM from inception to pilot implementation within one major government agency. This process illustrates several of the major issues associated with marketplaces in general and highlights some special difficulties in implementing such a marketplace within the public sector.

The published objectives and benefits of the system listed on the DoIT Web site (DoIT, 2001b) are:

Project Objectives

  1. To provide an end-to-end online buying solution using Web browser technology.

  2. To enable supplier created and maintained catalogues.

  3. To enable distributed requisitioning and workflows.

  4. To satisfy Government buying and policy compliance. *

  5. To enable buyer-to-buyer (sic) procurement efficiencies.

  6. To integrate Financial Management Information Systems (FMIS) with Gem.

  7. To support the Open Buying on the Internet (OBI) standard and Australian Procurement and Construction Council (APCC) Guidelines. *

  8. To provide a confidential and secure infrastructure.

  9. To provide a vehicle for procurement reform. *

Expected Benefits

  1. Reduced time to perform searches, secure approvals, place orders, make payments and acknowledge receipts.

  2. Reduced 'real' cost of procurement and processing times.

  3. Reduced duplicate payments.

  4. Minimized data entry and streamlined data collection.

  5. Improved data quality for management reporting.

  6. Open trading model for transacting on a many-to-many basis.

  7. Added value to supply chain management.

  8. Supplier maintained catalogues.

The items marked with an asterisk are those that differentiate this e-marketplace from those in the private sector. Note that on further discussion with the Project Sponsor, we established that Objective 5 should read "project-to-buyer procurement efficiencies." The establishment of GEM is not just a tool for implementing market efficiencies, but also for implementing a variety of policies as discussed above.

As addressed earlier, there are many stakeholders in any marketplace; typically, all markets must have both buyers and sellers in order to exist. Additionally, the market may be owned controlled by third party whose business is the delivery from effective and efficient market to the both buyers and sellers. In the case of GEM, the government owns most of the buyers, some of the sellers and the operator of the market. To further complicate matters, it also owns the policy-making body that sets the rules for open and effective competition for all government purchasers. This separate body is known as the State Supply Commission.

In identifying potential leading-edge buyers for the market, the selected agency was selected for a variety of reasons. It had already commenced the process of reviewing supply chain management with a view to outsourcing the management its supply chain. The Chief Executive had been the chief executive officer of CAMS in his previous position and was known to be a strong supporter of the implementation of strategic procurement initiatives. A solution value assessment conducted as part of the process of implementation of a new financial system (Oracle 11) had indicated in the transaction costs within the supply chain could be significantly reduced by the application of current information technology.

In early 2000, CAMS held a series of briefings for agencies. Initial proposals established that GEM was more than simply an e-marketplace. It was in fact a front-end procurement system and marketplace combined. GEM was designed to provide a complete service from the time a need was identified (purchase requisition) through purchasing to the receipt of goods.

As mentioned earlier, the agency was, at this time, in the process of re-implementing its Financial Management Information System (FMIS) and upgrading the application software to and ERP system (Oracle Financials, Version 11). A significant feature of this implementation was the implementation of the procurement module of Oracle Financials that included provision for self-service purchasing (SSP).

At these meetings, it was established that there was considerable overlap between the proposed functions for GEM and the functionality of the ERP solution in situ. As GEM was at the time, an unproven concept, it was decided to run parallel implementation of GEM and SSP, with the split along functional lines:

  • Main function procurement: GEM

  • Rest of ministry: SSP

It was considered that within the agency the introduction of e-procurement systems was in its infancy and that the organization would be prudent to "hedge its bets" by this method.

The GEM solution proposed at this stage addressed only the negotiation and execution phases of the trade life cycle and did not address the settlement (and costing) requirements of the agency. The concept had been conceived from the procurement perspective, rather than from an integrated accounting information systems perspective, thus, the issues associated with payment and distribution of costs had not been addressed.

To address this problem, the first step was to decide on the point of integration between the FMIS and GEM. This was particularly difficult as the project was of a scale that would require a phased implementation over an extended period. The need to run two systems in parallel also influenced the decision.

It is important to note that many state government agencies in Western Australia have implemented Enterprise Resource Planning (ERP) systems. Each agency has selected the system that it considers most appropriate for itself resulting in a heterogeneous collection of Oracle, SAP, Peoplesoft and other systems across the sector. It is clear that Western Australia has chosen to consider the agency as the "enterprise" for these systems, rather than take a whole of government approach such as that adopted in the state of Victoria. This results in some difficulties for the integration of GEM into the FMIS of buyer agencies.

After due consideration of many integration points, it was agreed that the most feasible point at which to integrate would be after the settlement (payment) phase of the transaction had been completed. These issues were crucial to the success of the implementation from the point of view of the agency. DoIT agreed to modify the system to handle the complete cycle from Procurement to Payment, in order to meet the needs of the agency.

With the widened scope, GEM was implemented at a single pilot site in July 2001. At October 2001, GEM is operational at limited purchasing sites with several hundred suppliers actively participating in the market. It will be progressively rolled out to further sites, other agencies and suppliers.



Managing Globally with Information Technology
Managing Globally with Information Technology
ISBN: 193177742X
EAN: 2147483647
Year: 2002
Pages: 224

flylib.com © 2008-2017.
If you may any questions please contact us: flylib@qtcs.net