Impact of e-procurement on the performance of integral coach factory-Chennai with a specific reference to lead time analysis

Abstract

It is normally reported that performance of purchase division in government department like Railways/Pus is not as effective as in private sector s procurement function, since there has been a lot of material related problems which have led to shortfall in production of coaches. Even after the introduction of 100 % E- procurement in ICF, and the development of IT capabilities in the market, it is still noted that there is a long lead time in the procurement of stores in ICF resulting in high inventory Turnover ratio of 11 -12 %. Apart from the long lead time, there is also uncertainty in the supply of materials from the trade. Hence, these delay causes supply problem and stock-out or over stock of idle inventories. This study aims at impact of e- procurement (electronic procurement) on organizational process and performance benefits. Hence, I have taken-up to study the e- procurement system at Integral Coach Factory-Chennai. The study examines whether e-procurement has any impact on the performance of ICF. So, questionnaires were issued to senior executives, and dealing staff associated with E-procurement and suppliers were also separately asked to give their response on the impact of E-procurement. The study shows that many executives and staff have stated that there is a positive impact of e-procurement which has facilitated timely issue of tenders and settlement and service level has improved despite increasing demands from customers for more materials. Similarly, positive feedbacks were received from the suppliers too. Field visits were made to BOSCH Ltd, Bengaluru and IBM India Ltd, Bengaluru to study their supply chain management systems and to understand the best practices followed in the private industries to assimilate them in ICF. Further study focuses on lean management principles and practices followed in BOSCH and IBM India and analyzed long lead time activities of procurement functions and came out with possible reduction in the lead time against each activity. During the study, it has been found that there is a possibility to reduce the lead time from 204 days to 110 days. It is noted that lead time can be further reduced to 30 days by applying concepts like long time collaborative network with firms, digital contracting, and cognitive business solution. Based on the field studies and literature review, I came out with alternate policy like digital contracting which will integrate ICF purchase functions in iMMS with financing, payments, and also with outside eco systems like suppliers ERP and inspection agencies. The study focuses on need for big data analysis which will finally lead to cognitive business solution. Since these concepts are new to ICF, there is a need for changes in the existing rules and policies at railway board level. This study proposes possible policy recommendations like changes in the vendor rating methods duly taking cost reduction policy in vendor rating, long term contracting, Vendor managed inventory which will bring ICF a competitive advantage and take the organization to the next level in doing business.