Development trends of e-procurement in the republic of Kazakhstan

One of the major trends in the current market environment is the rapid development and implementation of information technologies and the latest electronic developments in business processes. This article examines the current situation, the main trends and prospects for the development of electronic procurement in Kazakhstan.

One of the major trends in the current market environment is the rapid development and implementation of information technologies and the latest electronic developments in business processes. In the commercial sphere, these changes are expressed primarily in the pursuit of companies to transit to the Web-style sale.

Internet is becoming an important medium for conducting electronic business, and hundreds of millions of people around the world today use it for everyday communication, information, entertainment and making on-line purchases. Modern global trends and innovations in the field continue to have a positive impact on the state and development of e-commerce or e - commerce throughout the world. It received the greatest spreadin South Korea, Japan, Sweden, UK, USA, Australia and shows stable growth dynamics. The volume of global e-commerce is estimated by international experts at a level of $ 600 billion - $ 1 trillion.

E-commerce in Kazakhstan is at an early stage of its development and has significant growth potential in the medium term. The achievement of psychologically important mark of $ 1 billion turnover in e-commerce is projected by 2015.

In Kazakhstan , the industry is still in its formation stage. The variety of on-line services and trade entities offering their goods and services in the Kazakh segment of the Internet (KazNET) gradually increase. The turnover of e-commerce market in Kazakhstan is estimated by some experts at $ 300 million. At the same time, many experts and market players predict market growth in 2015 till $ 1 billion. The most popular products being purchased online are books, movies, music and computer programs. The sale of electronic tickets takes the largest share in the structure of e - commerce ("Air Astana" (airways company) and "Kazakhstan TemirJoly" (railways company)), the segment of consumer electronics and household goods [1].

The audience of Kaznet is actively growing, and according to the Ministry of Transport and Communications, the number of Internet users exceeded 9 million ( 59 % of the population) , which certainly will favorably affect the development of e - commerce industry. The formation of regulatory support of ecommerce and electronic services system go as well. In July 2011, the law which made amendments to some legislative acts regarding electronic money was adopted. Today, the regulations of law work, and the first domestic electronic money system designed to serve commercial transactions online appeared in Kazakhstani market.

The Law "On Electronic Document and Digital Signature" works to the full extent, the necessary infrastructure for the use of digital signatures in the key sectors of the economy is created. A major step in the development of e-commerce may be the introduction and transition to the use of electronic invoices. Currently this issue is being studied by the competent public authorities. Phased implementation of electronic invoicing is expected from 2014. [1]

Formally, the e-procurement system is any enterprise rendering the services for search of suppliers of goods or services to their customers via Internet. The services that provide optimal definition of the suppliers of the applicant upon request are often perceived like one kind of such systems. This is the fundamental difference between the e-procurement system and ordinary advertisement boards. The "input" of such a system - specification of goods or services, delivery conditions, price and other details, and the output - the supplier which is ready to perform the contract to the most suitable conditions for the customer.

There can be given two definitions to the "eprocurement" term: "hard" and "soft ". In the hard one: e-procurement is a method of executing transactions for the purchase of goods or services solely in electronic form, i.e. for the recognition of the legal significance of the transaction you will not need to sign paper documents and meet with a contractor regarding this issue. E-procurement system in this context is a convenient place to carry such transactions out. But life is richer than "hard" definitions. Now very few companies are willing to abandon paper contracts - all internal document flow structure is built and debugged under the control of paper contracts. So now almost no one carries transactions for the purchase of goods out directly in electronic form. Therefore, a "soft" definition of e-procurement system is a convenient place on the Internet, the website or group of websites, where the services on the preparation of the transaction are provided. E-procurement system solves the problem of finding contractors, notifying them about the purchase, holding competition to select the winner among them, the preparation of transaction reports or statistics on the transaction.

E-commerce is ready to change the way organizations interact with customers, suppliers and other organizations. E-procurement is one of the easiest components to implement, and many companies believe this component is not only a mean to improve the efficiency, but with the creation of portals the mean of generating profits and acquisition of advantages in the industry as well.

The technology of procurement organization in commercial organizations on a competitive basis is well developed now, and the talk about their automation is carried on for a long time. Although automated competitive procurements of companies have had acquired terms (eg "B2B systems"), they are still considered exotic, at least in Kazakhstan. The main reasons are likely companies conservatism and partly the fear of giving excessive transparency to procurement, which is a direct consequence of the automation of procurement activities and the translation of them to competitive basis.

The purpose of any procurement competition is to save the budget by means of competition between suppliers and increasing market transparency. Automation of this process helps to increase the speed of decision making and reduce the cost of purchase management. Automation also allows you to collect the necessary statistics on procurement, which is essential step towards the creation of a sound procurement strategy. In short, automation becomes profitable when the cost of its implementation is lower than achieved economies of scale. So first of all, the interest in the automation of procurement often is shown by large companies with a wide range of goods and services procured.

Experience of public sector organizations. Automation of procurement is a rare area where public agencies are ahead of commercial sector, if not on the scale of relevant information systems implementations, but certainly in well-conceive ideology.

It is understandable that the public and commercial sectors have a few differences that we should consider. First of all, large companies with geographically distributed structure, often deprived of such benefit of government agencies like the ability to centralize procurement (state organizations have rigidly centralized nature, executing it through the centralization of power). But, in order to reduce the invoice expenditure on allocation of purchased from the center to the periphery and to bring closer the procurements to profit centers and needs, companies often seek for decentralization at the same time.

Centralization is a key condition for improving the efficiency of the competitive procurement. Consequently, each company is required to identify the products, which will be advisable to buy centrally. It may be, for example, the purchase of exports, when competitions are held among Western vendors / manufacturers and major resident suppliers. Also, have a sense of the massive competitive purchases of low value goods (eg. stationery). In practice of government agencies the purchase low-value goods carried on noncompetitive basis, mainly by request of price quotations (price lists) from suppliers. Procurement of low value goods can give the greatest savings due to the fact that such products are standardized and offered by a lot of suppliers.

Structure of large geographically distributed companies often not as obvious as the structure of state organizations. State structures are organized by natural for our country territorial principle - they are based on indivisible geographically limited areas under the full and exclusive jurisdiction of the relevant state agencies (regional administration, for example). The situation in companies may be different: for example, business units can operate in regions with different levels of economic development, or even in different countries, living by different laws. From the perspective of centralized procurement, this may mean that centralization can be carried out only within the boundaries of regional divisions, in particular because of customs barriers. In any case, the criterion for determining the optimal degree of centralization should be the level of costs to consolidate applications of units for purchase and distribution of procured to them.

Automation of competitive procurement in companies. Practice shows that the task of competitive procurement automating can be solved by the introduction of highly customizable information systems.

Such systems should consist of at least the following functional modules: budget planning and formation of procurement registry; module of auctions for carrying reverse auctions out; module for procurement contracts registration; module for collection and analysis of data on procurement [2].

Competitive procurement automation system allows passing the whole procurement process, from data collection on the needs of business units to the strategic planning of procurement on the basis of the statistics analysis. The above problems of companies associated with the lack of motivation, corruption, inflexible procurement budgeting and complexity of centralized distribution of purchased are solved when the system is implemented and at the level of system.

In particular, during the implementation of the system, the new conduct ideology of procurement units of the company should be developed: "competitiveness", which is a basic feature of public procurement, should take the same place in companies' procurement policies. Competition today as the basic concept of a market economy is more appropriate to apply to state structures in terms of procurement.

Another basic element that companies should change is the perception of the annual budgeting procurement as a "sacred cow". Approach to budgeting as a dynamic process (when only the upper limits strictly defined) would give purchasers a formal basis to save.

And finally, the approach to motivate buyers is needs to be changed by stimulating savings each time a contract for the supply is signed. By solving the above tasks and automation of its procurement, the company will receive the benefits that completely worth the effort and money spent, the opportunity to plan flexibly its procurement budget and dynamically change it during a year, the ability to accumulate and then analyze the statistics on prices and needs, which ultimately increase market transparency for the company; provide direct access to company's high level management to the company's analytics, formed on the basis of procurement data and goods/services markets monitoring needed for decision-making.

How does automation of procurement work. The company buys goods on a regular basis evenly over the year. A new supplier of goods with low price was introduced to the market. This happened in the middle of the year, when the company selected half of the budget for this product. It has a chance to sign a contract with a new player in the goods market and save. Eprocurement system already has the information that the price of goods from a new supplier is 15% below of the previously purchased due to the fact that this new supplier submitted its price proposal together with the application for competition the last month. Procurement automation system can suggest estimated total budget savings for the remaining six months (the system has a module for calculation of procurement budget based on current prices and needs). As a result, the company decides to change its budget in the middle of the year and signs a contract with a new supplier. The changeof the budget is approved by the company's management on the basis system's data. The place of competitive procurement automation systems in company's information systems complex. Procurement automation system is perhaps the missing element in many companies' business applications complex. It can complement for management the complete picture of costs, tying together the accounting system of wealth, a system of budget planning and execution, decision-support system and contracts accounting system (Figure 1).

Since competitive procurement systems have in some degree all the above mentioned functionality, they can serve as a good replacement to the listed complex systems, for example for mid-sized companies [3].

Described structure of the tenders automation

The main "narrow" point of the electronic procurement system is the process of negotiation and conclusion of contracts. At this stage, managers may attempt to prevent the signing of the contract with "unfavorable" from their point of view supplier or modify the terms of delivery. Therefore, the system must have a mechanism to control the execution of contracts. For system was repeatedly tested in the automation of public procurement and, in our opinion, is optimal for large and medium-sized companies. While many companies are concerned about the choice of accounting and planning systems, they miss a tool that actively influences on costs - a procurement automation system. Translation of procurements on competitive basis and their automation will allow to the companies to fill a major gap in their information field and get a return, easily expressed in money.

effective control measures there should be possible to fix each stage of the contract (for example, an agreement within the corporation and with the counterparty), which will allow corporate control authorities to identify bottlenecks in the contractual document management. In the case of not signing, termination or renegotiation must necessarily be recorded detailed explanation of those corporation's responsible persons and supplier's position on this matter.

The system should also monitor another characteristic feature of Kazakhstan (and the whole postSoviet) economy, appearing in the presence of "unreliable" firms and "one-day companies". The possibility to face with "unreliable" supplier becomes dangerous in a situation where there may be highly probable and/or unacceptably high losses from nonperformance or improper performance of the contract (for example, repeatedly exceeding the purchase price). In this case the reputation of the supplier necessarily must be taken into account, even if it offers products at a higher price. Supplier's reputation accounting mechanism is possible to execute by means of rating (scoring) system.

As to the "electronic" as an ordinary commodity market supply companies are required to confirm their reputation through as much as possible successful trades, it is important to use a "wide" scale scores. The usage of the 100-point rating scale seems enough for this case [4]. For every successful transaction (in the absence of claims from the buyer) supplier automatically receives one point. If there are claims to the supplier the points (up to all its available) are deducted, but the buyer must be rigorously justify the nature of claims. Further,

in determining the winner of the competition, these points should be taken into account. At the same time, the cost of benefits of suppliers with a high reputation (rating) should not be too significant.

Thus, in the proposed model, an optimal combination of the interests of buyers and suppliers - distributors is achieved. Suppliers by earning a determined reputation may rely on preferential conditions in determining the winner of the competition; buyers receive certain guarantees regarding the "reliability" of suppliers during the procurement of goods and services in a situation where circumstances require so.

A classic example of the potential power of the transactions using the B2B systems - The "Dell" computer corporation. Many client companies use the Internet to order computers, which automatically enhances the design, production and delivery of computers to order. Making deals by means of B2B systems have helped to "Dell" expand their business quickly. Today, the company owns 15 % of the world computer systems market. The "Dell", as evidenced by their website through which every day about USD 40 million goes through, has more than a deep understanding of the importance of a successful internet

infrastructure and opportunities for successful deals with B2B systems" - emphasizes L. Myuel, the president and chief technical inspector of the international company "Ariba", engaged in the development of solutions for the use of electronic transactions in relation to e-commerce.

Regular use of B2B helps "Dell" to remain profitable company in the industry, which is famous for the fact that profit literally slips out of the hands of many companies. According to data cited by "Technology Business Research" research firm, gross profit of the "Dell" significantly above the industry average, and the cost of sales was 10.3 %, with an average of 12.6 % for other PC manufacturers. More The comparison of the average annual income per employee, which is the standard measure of performance. In the "Dell" every employee brings in revenue more than USD 750 thousand, while the industry average is USD 525 thousand. "Achievements of the "Dell" in the Internet- oriented markets will determine whether the company continues to increase revenues by 30 or more percentages "- says Brooks Gray, an analyst at the "Technology Business Research" [5].

An important issue that affects the decision making of any company - the cost of acquisition of electronic trading platform and its operation. In this regard, the use of IT- outsourcing not only reduces costs but improves the quality and reliability of service as well. Typically, outsourcing companies give guarantees and responsibility for the quality of work performed. Foreign analysts note that the use of outsourcing is the most convenient way to solve the problems associated with information technology and the Internet, for companies whose principal activities are not related to the Internet and information technology.

ISO 9001-2008 standard is the basis for all procedures on the JSC "ArselorMitall Temirtau". The main section of the standard related to electronic procurement process is section 7.4 "Purchases". It specifies requirements for the management of suppliers - evaluate and select suppliers based on their ability to deliver the right products and to establish criteria for the selection and periodic evaluation of suppliers. Procured products must meet the requirements established to the procurement. The type and extent of control applied to the supplier and the purchased product shall depend on their effect on the subsequent production of semi-finished and finished products [6].

One of the key issues of logistics - the quality of the supplied raw materials and components - despite the competition among potential suppliers in the domestic and international market, remains a vexed problem. Quality programs of purchased through electronic network components and raw materials should be deeply worked through the supply of goods to avoid either mediocre or poor quality [7]. Therefore, based on the quality strategy, the electronic procurement at metallurgy should be recommended only for auxiliary materials, the quality of which does not directly affect consumer properties and quality of the finished product.


List of references:

  1. Ashyrbekov E., Donskikh V.A new opportunities for growth. Kazakhstanskaya Pravda (Republic periodical newspaper) - 23.11.2012 (in Russian).
  2. Balakhonova I., Volchkov S., Kapiturov V. Logistika. Integration of processes through ERP- systems.- Moscow: Prioritet publishing house, 2006.420 p. (in Russian).
  3. Technologies of corporate management. The competitive procurements automation.Sergey Sedykh. "NORBIT" company, 2009.
  4. The application of electronic systems in the statecorporate companies sphere // Vestnik of Moscow State Technical University namedafter Bauman. -Vol. 9. №4. - 2006.- p. 27-30 (inRussian).
  5. James D. B2B deal: vogue or many noise from nothing? Wired. 2001.- p. 8-10.
  6. ISO 9001:2008 International Standard. Quality management systems. Requirements. SGS Kazakhstan Ltd, 2008. -p. 35 (in Russian).
  7. Gelmanova Z.S. Production processes management by quality criterions. - Karaganda: Center for scientific-technical information 2014.- p. 170 (in Russian).
Year: 2017
City: Karaganda
Category: Economy