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E-Procurement is the business to business purchasing of goods and services through the Internet. Eprocurement can be an invaluable tool for enterprises experiencing difficulties in their supply chain. If purchase orders are not being processed in a timely fashion and delivery dates are not being met through manual purchasing methods, e-Procurement can be extremely useful in streamlining the procurement process.
Johnson & Johnson Medical Products-a provider of healthcare products in Quebec, Canada- a Division of Johnson & Johnson Inc, markets wound management and infection prevention products including sutures, internal and skin staplers, surgical instruments, endoscopic instruments for less invasive surgery and orthopedic implants.
Heathcare institutions in the province of Quebec purchase hundreds of millions of dollars in supplies each year from hundreds of suppliers across North America, using the telephone, fax and mail as well as other manual procedures to place and track orders. These manual processes were labour intensive and paper-heavy, resulting in a large number of errors in receiving and invoicing, as well as higher maintenance and operational costs.
In order to reduce expenses and costs of operations, healthcare institutions tried to look for a solution that would provide a more-cost effective way to manage the ordering and procurement of supplies and free up additional resources to focus on their primary mission- improving -patient- care. As a leading healthcare-product provider, Johnson & Johnson was committed to supporting and serving its customers- Quebec healthcare organizations by looking for effective technologies and systems to better manage all order related documents and processes, shorten the supply chain, reduce costs of processing orders and improve overall customer service through greatly improved productivity. And as a result, the company would gain better customer satisfaction and increase brand loyalty.
Johnson and Johnson Medical Products has used the MediChain e-procurement platform, developed and operated by iCongo Inc., an e-commerce solution that seamlessly integrates diverse healthcare enterprise resource planning systems and supplier customer relationship management systems.
The platform allows partners to connect their systems over the Internet and to easily exchange documents related to the procurement cycle including personalized product catalogs, purchase orders, purchase order acknowledgements, advanced shipment notifications, as well as invoices. The platform changed the route normally taken by hospitals in buying goods and services: moving from traditional paper ordering to a paperless electronic process is expected to substantially reduce order-processing cycle times and administrative costs for both healthcare institutions and suppliers.
The MediChain platform is comprised of various B2B and EDI (electronic data interchange) applications that allow trading partners to effectively transact business and exchange documents via the Internet. The platform receives documents in a variety of file formats from suppliers and buyers, transforms the documents based on the established user profile and then sends each document securely to its defined destination in its required format.
The MediChain platform includes a series of web forms, which permit the online visualization of all transaction types (i.e. EDI 850, email, XML and others). Each supplier and healthcare institution will have a communication profile to allow the simple maintenance of their communication preference by transaction type.
Benefit of e-procurement in Johnson and Johnson
E procurement platform streamlines the entire purchase cycle, from creation of the purchase order to the receipt of the goods and payment of invoices. This results in simplifying ordering, improved order accuracy, reducing of staff workloads, and reducing editing and time to correct orders (e.g., quantity of supply, type of supply) which decreases billing discrepancies as well as disputes with the healthcare institutions.
Healthcare institutions and its suppliers to shorten the supply chain cycle, thereby allowing for goods to be shipped on time and invoices paid on time. Orders arrive at the warehouse or assembly plant faster reducing lead time to deliver.
In healthcare industry, it is estimated that the average cost to process and physically handle a simple purchase order can range between $50 to $75 per order. By automating the procurement functions using the Internet, the costs of handling and processing a single purchase order through all phases of the procurement cycle can be reduced to between $10 and $30 per order.
Faster order processing (which is particularly important where goods or services are expected to be delivered within a short timeframe). Since orders are sent electronically to suppliers, receipt of the order is immediate and orders will not be delayed or lost in the post.
Prompter payment, partly because invoices are likely to be approved more quickly because they will be automatically matched to orders and evidence of receipt or as a result of purchasing with a purchase card
E procurement creats greater exposure to new customers, for example, if a supplier's catalogue is included in a marketplace accessed by many customers. The catalogue will contain a description of products that Johnson and Johnson is offering to customers and may be used by other customers who have access to the e-procurement system. Besides, the customers can know the clearly the information about the products such as the price, availability, properties of products by catalog which was update through the e procurement by company without directly asking informatin from the company.
Disadvantages of e-procurement
E procurement though brings more customer satisfaction, it trends to raise bargaining power over suppliers, which increased competition and keener prices
It is price which is very expensive when they want to use the e procurement , If Johnson and Johnson want to install the e procurement - software , the price is about $100.000 to 2 millions . May be it is cost for covers software license costs and getting suppliers connected . Moreover , company must pay money for IT company to save information from catalog outside the firewall So it must be protected . Moreover, the Johnson and Johnson connect all catalog of external and internal of supplier to manage it
The staff of Johnson and Johnson must learn about how to use the e procurement because it is software and set-up available . If they do not learn, they can not know how to use it .
E procurement has limited about information and style of production. For example , customers they can see pictures of production on the internet , they agree to take it . But when they received the production , they disagree . Because when they see on the internet , sometime information of production is different , pictures can be edited more beautiful .It is called Limited sensory information . Moreover when customers return productions , we might pay money for this cost
Privacy, security, payment, identity, contract are problem of e procurement . Hacker can damage e procurement of Johnson and Johnson , it will steal the information of production or when customer use visa , their password can be lost .
RFID ( radio frequency identification) solution is helping streamline inventory processing. RFID is a powerful emerging technology that enables companies to achieve total business visibility. By knowing the identity, location and conditions of assets, tools, inventory, people and more, companies can optimize business processes and reduce operational costs.
DePuy Orthopaedics, part of the Johnson & Johnson family of companies, is a leading provider of orthopaedic implants to preeminent surgeons around the world.The company's orthopaedic devices and supplies include hip, knee, extremity, trauma, cement and operating room products.
Every day, DePuy Orthopaedics gets hundreds of calls from hospitals and clinics requesting same-day shipment of the Express Care kits of titanium and cobalt chrome joint replacements, such kits are collections of orthopedic knee or hip replacement parts containing up to twenty five separate components.
Because in the operating room, a surgeon won't know which size implant he needs until the surgery is in progress, the kit provides the doctor a selection of implants of varying sizes. After the surgeon chooses the appropriate implant, the kit, minus the device used, is returned to DePuy.
Before Depuy sent the kits out, employees previously had to open up by every item in the kit, check the kit by scanning the bar code of each component in a returned kit to determine which implant was used by the surgeons, then replace the missing implant, verify that the kit was complete and prepare it to be shipped out again. DePuy receives more than 600 used kits daily, and must ship out the same number of complete kits each day as well, which requires rapid replenishment and reshipment.
The point is that employees had to bar-code-scan each component in each kit twice-sometimes more than 100 per kit-then repack them before shipping. This manual process is not only very labor intensive, time consuming but also prone to error. It is very important that the components in the Express Care sets are accurate since the surgeons are depending on the right parts to be there when they make those cuts. Therefore, there should be no room for error when the company ships these kits.
The company wanted to streamline inventory processing, reduce the processing time, increase the efficiency and accuracy with which the company processes and package these vital parts is critical.
The company used an end-to-end solution, developed by ODIN technologies, which includes the UPM Raflatac UHF Gen2 DogBone RFID tags with EasyKitâ„¢ - RFID Kit Management Software and the RFID Medical Kit Tracking Tunnel Solution.
ODIN's Kit Management Kit Tracking Software provides replenishment, shipping, check in, quality control, report generation, and tag commissioning of high value medical and loaner kits in an easy to use GUI. It's RFID medical kit tracking made easy. Designed specifically for the warehouse environment, RFID Medical Kit Management Software, when combined with EasyTunnelâ„¢, integrates seamlessly within existing databases and provides a single operator with the instant visibility of all appropriate, decommissioned, held, missing, extra, or expired medical kit items without ever having to open a single medical kit or box. EasyKitâ„¢ is a "drop in" solution, requiring no extra hardware, or additional space. The EasyKitâ„¢ software seamlessly integrates into any database or data acquisition program in days, not months.
The solution improved efficiency in DePuy Orthopaedics' supply chain logistics by automating the manual inventory inspection process. Instead of scanning boxed items individually, workers now replenish Express Care kits and load completed kits onto a conveyor belt in an RFID scanning tunnel.
Each implant is located in a sterile, vacuum-sealed plastic bag that is then placed into a larger package, and the self-adhesive tag is attached to that package. Boxed items and completed kits are both RFID-tagged, enabling easy verification of orders prior to shipment. Employees place the kits on a conveyor that brings them through an RFID reader tunnel. After each kit moves through the tunnel, software shows the worker which components are missing from that kit. A completed kit is then sent through the tunnel once more prior to shipment, to verify that it is complete.
The return on investment was achieved in just a few months. DePuy dramatically improved shipping accuracy to one hundred percent and made it possible to more accurately bill surgeons for the items they actually use. Consequently, inventory management, efficiency and customer service were improved.
With the implants inside each kit now RFID-tagged, DePuy has reduced the time required to process each returned Express Care kit to less than one minute-the process that formerly took 10 to 30 minutes to complete. Employees are now able to replenish and reship the company's daily output of Express Care kits faster than ever before. In addtion, RFID technology can read multible items at the same time and through packaging materials.
The titanium and cobalt chrome materials used in the joint replacements could create interferences to the radio frequency signals used to read passive RFID tags, but the DogBone tag is designed to work well in the presence of metal, and parts are not necessarily placed uniformly in boxes.
The solution is accurate, scalable and simple, which requires little formal training for workers.
UHF GEN 2 tags greatly reduce (if not eliminate) the ghost tag problem, using a mandatory hardware based CRC. The CRC is created when the tag is encoded, and the reader verifies the CRC when the tag is read. If the CRC does not match, the data read is considered invalid. In addition, more tags can be read simultaneously when using GEN2.
Security concerns: RFID is not a line-of-sight technology like barcoding. So, there are a lot of new security issues will be arised. For example: A competitor could set up a high-gain directional antenna to scan tags in trucks going to a warehouse. By this way, this competitor could use the data received to determine flow rates of various products. One more thing, if RFID is used for high-security operations such as payment methods, cheating is always occurred.
RFID is one of the newest technologies so its cost is quite high. The components and tags are more expensive than barcodes by many times. Moreover, RFID tags are vulnerable to damage - Water, static discharge or high-powered magnetic surges (such as lightning strike) may damage the tags.