The Impact of E-procurement On Strategic Sourcing A Case Study: CBZ Bank Limited, Zimbabwe A Research Report presented to the Graduate School of Business Leadership University of South Africa In partial fulfilment of the requirements for the MASTERS DEGREE IN BUSINESS LEADERSHIP, UNIVERSITY OF SOUTH AFRICA by DAISY.D.CHIPIRO Student No:71364048 December 2009 Abstract Purpose – The purpose of this paper is to examine the factors influencing E- procurement adoption in CBZ Bank, Zimbabwe (hereinafter referred to as CBZ Bank) and its impact on the bank’s strategic sourcing, and enhance understanding of the impact of E-procurement on strategic sourcing. The study will investigate the key elements of the impact of E-procurement on strategic sourcing which include: strategic elevation of the procurement function, information sharing benefits of implementing E-procurement and current procurement practices. The study will also investigate the impact of Internet on the procurement function through E- procurement and consequently on the strategic sourcing of the Bank. With ever- increasing competitive pressures, growing numbers of firms use electronic procurement (E-procurement) in an attempt to reduce costs and increase profitability. Academics and practitioners alike agree that one of the most important benefits of E-procurement is its ability to facilitate integration within the firm and across the supply chain. Literature review - Theoretical considerations and empirical literature review will be undertaken to identify the key elements of the impact of E-procurement on strategic sourcing. This will be followed by a statistical analysis of key elements of E- procurement utilising data from the organisation. Design/methodology/approach – This paper reports on a case study of E- procurement in CBZ. A three stage methodology is adopted – a case study of CBZ, a questionnaire survey of CBZ, and interactive interviews with management in CBZ. The research is a case study analysis of the impact of E-procurement on strategic sourcing in CBZ a leading financial institution in Zimbabwe. Findings – Findings from statistical analysis confirms the maturity level of an organisation influences the uptake of E-procurement to compliment its strategic sourcing processes. Cost and strategic factors dominate E-procurement drivers and technical issues dominate E-procurement barriers. The key success factors of E- procurement and strategic sourcing reflect the need to infuse internal change management processes, principally upper management support. The results of the survey show a cautious approach and hesitation in regard to implementation of E- procurement within the organisation, probably because the technologies for inter- based procurement systems are still in the emerging or developmental stage. Research limitations/implications – This research focuses on CBZ, a leading commercial bank within the financial services industry in Zimbabwe. This could have implications for other complex systems within organisations such as the public sector, or multinational companies considering implementing E-procurement with suppliers in developing countries. The study will show the research methodology, design, and data analysis and how it will contribute to the body of knowledge. The population for the study will be a random sample comprising the Bank’s management and employees, located in Head Office and at least 30 Branches of the bank. The researcher will use primary data and secondary data which include observations, in-depth interviews, questionnaires, e-mail, Bank’s procurement manuals, the Bank’s financial statements and the Bank’s strategy as methods of collecting data to enhance response rate for the survey. Questionnaires will be administered to bank employees and management. Based on extensive literature review and previous empirical studies, a research framework addressing strategic as well as operational issues will be developed and the resulting hypotheses empirically tested. The research will conclude with results, managerial implications, limitations and recommendations for now and future research. Practical implications – E-procurement needs to be considered in the context of other procurement policy objectives. What may be good E-procurement practice in one organisation may be viewed as competing with broader policy objectives of other organisations. Originality/value – Much research on E-procurement has been conducted in the public sector of European and Asian countries and this paper contributes to the small but growing number of studies of E-procurement in the context of the private sector in Africa by studying the impact of E-procurement on strategic sourcing in CBZ. Keywords - E-procurement, Strategic Sourcing, Procurement, services industry, CBZ Bank, Zimbabwe. Paper type - Research paper. Table of Contents Abstract Research Mind-map ........................................................................................ i Declaration .................................................................................................... ii Acknowledgements ...................................................................................... iii List of Tables .................................................................................................. v List of Figures ............................................................................................... vii List of Acronyms .......................................................................................... viii CHAPTER 1: ORIENTATION ............................................................................. 1 1.1 Introduction........................................................................................... 1 1.2 Purpose/ Objectives of the study ......................................................... 12 1.3 Statement of the problem and sub-problems ...................................... 13 1.4 Research questions and/or hypotheses ............................................... 14 1.4.1 Research Questions .................................................................... 14 1.4.2 Hypotheses ................................................................................. 14 1.5 Definition of terms .............................................................................. 16 1.5.1 E-procurement ........................................................................... 16 1.5.2 Direct and indirect procurement ................................................ 16 1.5.3 Strategic sourcing ....................................................................... 17 1.6 Significance of the study ...................................................................... 18 1.7 Assumptions of the study .................................................................... 20 1.8 Delimitation of the study ..................................................................... 20 1.9 Outline of the research report ............................................................. 21 1.10 Summary .......................................................................................... 23 CHAPTER 2: CBZ BANK LIMITED, ZIMBABWE ................................................ 24 2.1 Background.......................................................................................... 24 2.1.1 CBZ Bank’s Vision: ...................................................................... 24 2.1.2 CBZ Bank’s Mission Statement: .................................................. 25 2.1.3 CBZ Holdings and CBZ Bank Organograms .................................. 26 2.1.4 Challenges during 2008 .............................................................. 28 2.1.5 Strategic response to challenges ................................................ 28 2.2 CBZ Bank Procurement Policy and Procedures .................................... 29 2.2.1 Supplier Selection ....................................................................... 29 2.2.2 Budgets ...................................................................................... 30 2.2.3 Capital Expenditure .................................................................... 30 2.2.4 Stationery ................................................................................... 34 2.2.5 Tender Procedures ..................................................................... 36 2.2.6 Receipt of purchased items ........................................................ 37 2.2.7 Why CBZ Bank, Zimbabwe? ........................................................ 39 2.2.8 Contracts in place ....................................................................... 40 2.2.9 Items procured by CBZ Bank Procurement Department ................. 40 2.2.10 CBZ Bank Procurement Requisition and Approval process ......... 41 2.2.11 IT infrastructure.......................................................................... 42 2.2.12 Leasing of assets ......................................................................... 42 2.3 Summary ............................................................................................. 43 CHAPTER 3: THEORETICAL PERSPECTIVES ..................................................... 44 3.1 Introduction......................................................................................... 44 3.2 Trends in Procurement ........................................................................ 44 3.2.1 Procurement .............................................................................. 44 3.2.2 Procurement process types and