The e-Procurement Edge

• Web-based system for placement of tenders and receiving bids
• Submits advance intimations about dispatch
• Has online help for bid submission
• Provides printouts of quotations submitted for future reference
• Makes available categories in which vendors are registered

The Indian Farmers Fertilizer Cooperative, better known as IFFCO, is the
largest fertilizer producer in the country. IFFCO has always been at the
forefront of adopting technology and spreading the benefits of IT across
functions. In 2003, IFFCO was instrumental in implementing its indigeneously-developed
e-procurement system, now a point of reference for several organizations
exploring procurement over the Internet.

Procurement, typically, involves several steps and this makes the entire
process extremely time consuming. In addition, the Purchase Officer is required
to enter each and every detail manually, according to his transaction with the
vendor. The interaction between IFFCO and the vendor, for every transaction, was
done by post, telephone, fax, and, sometimes, by email. This invariably made the
procurement cycle longer, increasing the total cycle time.

E-procurement typically enables enterprises to manage their purchases across
the entire requisition-to-payment cycle, online. It creates specialized networks
of suppliers on the Internet where one can place Request for Proposals (RFPs),
exchange specifications, and receive and approve quotes. The e-procurement
solution enables organizations-huge, small or medium-to automate their
purchasing processes and reduce processing costs. The objective at IFFCO was to
reduce overall expense in the procurement process, reduce time and labor, and
reduce paperwork.

Today, IFFCO is one of the earliest corporates in the country to implement
such an e-procurement system based on digital signatures and e-tendering using
PKI and SSL.

Bringing Simplicity

With an e-procurement solution in place, employees can search for a product
and check on its availability. The next step is automatically generating the
requisition to accounting information and sending it for approval. After the
approval, the tender is released and hosted on the website with email and SMS
alerts to vendors. The order is sent across to the suppliers directly, and
fulfilled. Then an invoice is automatically processed and sent to the
back-office. Here, the information is analyzed and suitably reported.

"The most important objective was to bring simplicity into the entire procurement process." SC Mittal, Sr GM (MSD), IFFCO

E-procurement systems allow organizations to consolidate their purchasing
power, as purchases pass through a single order-placement mechanism. Without an
e-procurement system, a company may place numerous orders for machine parts,
office supplies and the like from multiple offices with no centralized control.
The amount a company spends on a particular supplier or a product is difficult
to track. When all the orders for a certain set of materials are placed through
a centralized system, the amount spent becomes easy to track. Says SC Mittal,
senior general manager (MSD), IFFCO, "The most important objective was to
bring simplicity into the entire procurement process."

In the earlier system, vendors had to approach the organization. With the
e-procurement system in place now, the organization is able to reach out to
vendors, provide them information online, send clarifications on queries and bid
submission using digital certificates, besides maintaining data safety and
security. Key benefits derived from the system are online updation of vendors'
database with direct participation of vendors; online access of all information
associated with the procurement cycle for authorized personnel and empanelled
vendors; facilitation of online submission of technical and price bids,
procurement cycle time, and reduction in inventory cost; ensuring better
transparency in the procurement process and reduction in paperwork.

On Offer...

Some of the key features of the e-procurement system at IFFCO are:

• Access authentication
• Online updation of vendor database
• Online issue of enquiry and submission of bids; online placement of orders
  and amendments
• Intimation of dispatch with the help of SMS and email
• Query-based online helpdesk

Access authentication: Initially, all registered
vendors were issued a vendor code and a password. A vendor could access the
vendor integration system with the code and password. However, it is mandatory
for the vendor to change the default password the first time, which is stored in
the database using encryption algorithm that increases security.

Online updation of vendor database: Vendors now have
the option to access this database and make relevant changes to ensure that all
personal and relevant details remain updated on a continuous basis. Vendors can
provide up to three email addresses and mobile numbers so that vendors
definitely receive all alerts or mails that are sent out of IFFCO.

Issue of enquiry: Once an enquiry is made in the
existing Material Management System (MMS), emails and SMSs are sent to vendors.
Vendors also have the option to take printouts at their end. Acknowledgement
from the vendor is recorded in the database automatically, which helps to keep
track of transactions at every stage.

Submission of bids: Submission of bids online is a
crucial step in any e-procurement system and requires foolproof security
mechanisms. IFFCO uses digital certificates as a measure of security. A vendor
can submit his unpriced technocommercial, and priced commercial bid online using
his digital certificates. The entire data remains encrypted till the bids are
opened electronically.

Placement/acceptance of order and amendment: Once an
order is made in the MMS, email alerts are generated by the system and sent to
the vendor. Once the vendor receives the order, the acceptance is captured in
the database. Similarly, all order amendments are made available to the vendor
directly through the Vendor Integration System.

Dispatch Intimation: Vendor can fill in the details
about material dispatch online. This dispatch intimation is then sent to the
stores module for record.

Helpdesk: Finally, a query-based information system is
provided to vendors.

Architecture

The design of the Vendor Integration System is based on a three-tier
architecture using Microsoft Visual Interdev 6.0 as a development tool, which
supports the ASP (Active Server Pages) technology. The application server used
is Windows 2000, while Oracle 8i is used as the RDBMS, with IIS 5.0 as the web
server.

The system has been implemented at IFFCO's production units
at Kalol and Kadla in Gujarat; Phulpur and Aonla in UP; zonal offices in
Chandigarh, Bangalore and Kolkata in addition to the head office and central
marketing office.

How it has Done

The project team comprised of 10 people. The backend was ready by 2000, but
IFFCO had to wait for the government to give clearances to certifying agencies
for the issue of digital certificates. It was only in 2003 that the system was
made online. The pilot was conducted at the Aonla unit in 2005.

The overall implementation can be spread across four stages.
The first stage was to make the backend completely functional. Stage two
involved implementing the solution at the Delhi headquarter and the central
marketing office. The pilot was conducted in stage three at Aonla. Stage four is
what the organization aspires to reach when procurement at all branches of IFFCO
in the country can be made online.

To make the initiative successful and to take it forward,
IFFCO trained its suppliers and vendors on the benefits and use of the
e-procurement system. Workshops were conducted at Delhi and Mumbai.

While implementing the e-procurement solution, companies can
adopt the best practices because they set their own business rules for approval
routing and control of access to supplier catalogs. Also, the system captures
data that is vital for more effective, strategic, supplier management, and
produces reports on product use and supplier performance. Thus the organization
is rendered more efficient and, hence, more productive.

Bhaswati
Chakravorty

Focus: Aonla Unit

The Aonla unit has achieved 100% results with the
implementation, and the entire procurement at the plant is now being done via
web

IFFCO's Aonla Unit is located in the Bareilly district of
Uttar Pradesh. The Unit is located 10 km from Aonia village, 25 km from Bareilly
City and 260 km from Delhi. The Unit procures various items and services from
vendors of all sizes who are geographically distributed.

To start with, all the registered vendors were informed
through post about the proposed e-Procurement system, and were requested to
create and send their email addresses to the concerned personnel in the Unit.
Those who had not opened their e-mail addresses were persuaded through letters
to go for the same. Adequate followup was done over telephone. Once the email
addresses were obtained, vendors were given brief introduction to digital
certificates and digital signatures through email. They were advised to gear up
for e-procurement before 1st September, 2004. To encourage quick adoption and to
ensure readiness, the contact details of Certifying Agencies were sent to all
registered vendors along with the details of formalities to be completed.

Weekly meetings were organized for all local vendors. Vendors
were invited, over phone, to attend these meetings on all Thursdays. Nearly 120
vendors were covered under the awareness program which was followed by a grand
vendor awareness program organized on 7th April, 2005 under the Chairmanship of
Shri HC Dave, executive director, Aonla Unit; wherein about 150 vendors
participated from Bareilly and some nearby towns and cities.

Vendors were provided all the required assistance in adopting
the e-procurement system as and when required. A Help Desk was set up where any
vendor could walk in and get assistance and demonstration of the system. Cyber
Kiosks were promoted in the vicinity of the Unit to provide easy access for
local vendors. Certifying Agencies were requested to set up their local offices
to facilitate easy issue of digital signatures. Help was extended to vendors to
get email IDs from the Internet. Vendors who did not furnish email ID were
debarred from participating in the bidding process. Such vendors were also
guided to get digital certificates from the various certifying agencies.

A major hurdle was faced with respect to non-IT savvy
vendors, with generally low level of education. The Unit requires services from
a cross-section of vendors who have little exposure to computers. A special
drive was undertaken to generate confidence in them. The ease of the system and
the long-term benefits associated with it were explained to them. Majority of
vendors at the Aonla. Unit have now adopted the system and opened email accounts
and obtained digital signatures. Based on the feedback and inspiration provided
by registered vendors, other vendors are now motivated to adopt this new channel
of procurement. Appreciative feedbacks and testimonials are received from
several vendors who have participated in IFFCO's online e-procurement process.

Continuous improvements are undertaken in the e-procurement
system. Twenty-five scanners are being distributed at the Aonla Unit. Data link
has been provided between Gurgaon, where the e-Procurement site is hosted, and
the Aonla Unit, where the backend database is located. Upgrade happens by means
of MPLS-VPN, for better and reliable connectivity. Efforts are being made to
ensure maximum uptime of data link and also educating and persuading all the
vendors to participate in this endeavor.