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76
20
th
Bled eConference
eMergence:
Merging and Emerging Technologies, Processes, and Institutions
June 4 - 6, 2007; Bled, Slovenia
Measuring the Business Value of Electronic Supply
Chain Collaboration: The Case of Electronic
Invoicing
Eleftherios Kioses, Katerina Pramatari,
Georgios Doukidis, Cleopatra Bardaki
ELTRUN, Department of Management Science and Technology, Athens
University of Economics & Business, Greece
{ekiose; k.pramatari; gjd; cleobar}@aueb.gr
Abstract
In the last decade, supply chain management has changed its focus, centring now
on value creation, by taking into consideration the recent trends of partners
integration and implementation of internet technologies. Within this context, this
paper presents measurable results regarding the business value of supply chain
collaboration practices enabled by e-commerce technologies. The presented
research addresses electronic supply chain collaboration by examining the case
of electronic invoicing (the electronic exchange of invoice data between supply
chain partners) as a type of collaborative message-based system. The paper
presents the quantitative and qualitative results of a series of case studies from
the grocery retail sector. The results indicate considerable cost savings,
especially as the extent of collaboration increases. Additionally, qualitative
results from the interviews are provided, supporting suggestions for future
research.
Keywords: supply chain collaboration, electronic invoicing, business value
1 Introduction
Since its origins, supply chain management has changed its focus from purchasing
and logistics between the mid-1960s and 1990s to an updated focus on value
creation since the mid-1990s and the new millennium (Kampsta et al., 2006). At
about that time, an ongoing discussion emerged that supply chain management
should be built around the integration of trading partners (Barratt and Oliveira,
2001), the sharing of information and benefits (McLaren, 2002) and particularly,
in the last decade, the development of innovative products and services utilizing
both information technologies (such as the internet) and collaboration of
organizations (Patrakosol and Olson, 2006). Today, supply chain management
“seeks to strategically reconfigure business in a systematic way to optimize the
long-term performance of all entities involved in delivering value to end-
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
77
customers through collaboration and partnerships between firms” (Davis-Sramek
et al., 2007).
Within this context, this paper aims to contribute to the literature by presenting the
practical business value of already applied supply chain collaboration practices
enabled by e-commerce technologies and a research approach towards measuring
similar services. Specifically, the practice of electronic invoicing between retailers
and suppliers in the grocery retail sector is examined, through data collection and
analysis of different case studies. Based on the data collected, practical value was
estimated and alternative scenarios have been developed in order to examine how
the extent of electronic collaboration may influence the benefits achieved. The
results indicate that electronic invoicing triggers significant cost reductions for the
retailer, especially for increased extent of collaboration.
The next section discusses the relevant literature. Then, section three describes the
specific research design and context. Section four presents and discusses the
results of the analysis. The paper concludes in section four, by referring also to
directions for future research.
2 Related literature
According to Barratt “collaboration is a very broad and encompassing term and
when it is put in the context of the supply chain it needs yet further investigation.
It is an amorphous meta-concept that has been interpreted in many different ways”
(Barratt, 2004). Several definitions have been given to collaboration within the
context of supply chain collaboration (Anthony, 2000; Akintoye et al., 2000;
Simatupang and Sridharan, 2005; Manthou et al. 2004; McLaren et al. 2002) and
electronic collaboration (Johnson and Whang, 2002). Specifically, Johnson and
Whang defines electronic collaboration as “business-to-business interactions
facilitated by the Internet” (Johnson and Whang, 2002). McLaren et al. classify
supply chain collaboration information systems into three major types (McLaren
et al. 2002):
message-based systems that transmit information to partner applications
using technologies such as fax, e-mail, EDI, or XML messages
electronic procurement hubs, portals, or marketplaces that facilitate
purchasing of goods or services from electronic catalogues, tenders, or
auctions
shared collaborative systems that include collaborative planning,
forecasting and replenishment (CPFR) capabilities in addition to electronic
procurement functionality
Using this typology, electronic invoicing, is categorized as a messaged based
system. The specific e-invoicing service examined could be defined as “the
electronic exchange of invoice data through the internet using an intermediary”.
The use of internet and intermediate strongly differentiate the service examined
from previous research undertaken for invoices for EDI. Figure 1 provides a
schematic representation of the electronic invoicing service and the role of the
intermediary. Given the use of an intermediary, electronic invoicing could also be
Measuring the Business Value of Electronic Supply Chain Collaboration…
78
considered as a service of electronic marketplaces. A recent survey has indicated
that electronic transactions (i.e. the electronic exchange of orders, invoices and
dispatch advice messages), has been the main service used by the participants of
five different
e-marketplaces in the Greek market (Kioses et al., 2006).
Figure 1: Schematic representation of the electronic invoicing service
There are several researchers that have identified the need for research in the area
of supply chain management and collaboration practices. Some of them have
identified the need just in the area of supply chain collaboration, while others have
also included the e-commerce perspective by referring to electronic collaboration.
According to McLaren et al. (2002) “given the strategic importance of supply
chain collaboration for many organizations, there is a clear need to further
investigate and validate the models put forward in this study”. The same point is
supported by other researchers as well, arguing that both practitioners and
academics are increasingly interested in supply chain collaboration (Simatupang
and Sridharan, 2005; Min et al. 2005). Vereecke and Muylle (2006) refer also to
the important extension of the supply chain collaboration study with the research
“of the impact of internet technology and electronic business practices on the
relationship between supply chain collaboration and performance improvement”.
Subramaniam and Shaw (2002) state that it is necessary to achieve a better
understanding of the value creation process of business-to-business supply chain
processes. Specifically, “even as organizations are moving to web-enabled B2B
processes in the hope of improving their B2B supply chains and reaping economic
benefits, there is a need to fully understand how this value is created and
realized”. Likewise, Min et al. (2005) present the same opinion that “supply chain
collaboration seems to have great potential, but further investigation is needed to
understand its practical value”.
Buyer (Retailer) 1
Information
System
Buyer (Retailer) 2
Information
System
Supplier A
Information System
Supplier B
Information System
Supplier C Internet
Access
Intermediary
Invoices, Dispatch advices, Orders, etc.
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
79
Nevertheless, there are several approaches in the literature towards understanding
performance and the value of collaboration. In regard to the more practical impact
of collaboration, such as cost reductions, although the trend in supply chain
management since the mid-1990s is the inclusion of less tangible and non-
financial measures in performance measurements (Saad and Patel, 2006), there are
several publications that have referred to cost performance (McLaren et al. 2002;
Cassivi et al. 2004; Lefebvre et al. 2003). Specifically, according to McLaren et
al. (2002) “the benefits of collaboration include reduced process costs, inventory
levels, and product costs”. Philips and Meeker discuss e-business connections
(another terminology relevant to collaboration) arguing that “connecting with
outsiders means lower transaction costs” (Phillips. and Meeker, 2000) and as such
they consider search costs, information costs, bargaining costs, decision costs,
policing costs and enforcement costs. Subramaniam and Shaw (2002) refer to
transaction costs, inventory holding costs and procurement costs.
Regarding electronic invoicing in particular, the European Associations of
Corporate Treasurers (EACT), based on reports of BEWECO consulting firm,
indicates 243 million euros saving from B2B e-invoicing in Europe and a 60 to 90
percent cost reduction. According to this report, the cost of processing a paper
invoice for issuers is estimated to 5 to 15 euros savings from automatic
reconciliation of payments; for receivers, the cost (and potential savings) is much
higher because it includes data entry, matching with orders and consignments,
disputes and electronic payments. It is estimated to a total cost of processing of 25
to 60 euros. A report of National Council for the Economy and Employment
CNEL of Italy indicates invoice handling on the part of the issuing and receiving
party to be circa 24 euros, and electronic invoicing reducing this cost in half.
The importance of invoice verification in the procurement process is noted by
Rosemann (2003), who describes it as the interface between procurement and
accounts payable. Wong and Li (1998), in their case study for EDI, refer to cost
reduction of invoice in terms of man-hours saved and paper flow reduction. Staff
reduction from EDI-based e-invoicing is also noted by Williamson et al. (1997).
Golden and Powel (1999) measured that before EDI there was an extra cost of 1.5
person days a week to process invoices of one supplier. They also observed
greater information accuracy. Attaran (2001) argues that when invoice data are
transmitted electronically, company cash flow is improved. McIvor et al. (2000)
state that electronic invoicing has the potential to change the role of the
purchasing professional from merely being involved in clerical type activities.
Humphreys et al. (2006) also refer to business-to-business e-commerce and
indicate errors reduction in invoice data, which was also expected by EDI
(Fenton, 1984). McIvor et al. (2003) refer also to the positive effect of electronic
invoicing, within the context of supply chain collaboration, in terms of improving
transaction accuracy and invoice payments.
The aforementioned literature demonstrates that although there is research in the
area of electronic invoicing, this research mostly refers to EDI which does not
take into consideration the emergence of e-invoicing conducted through the
internet using an intermediate. Thus, the impact of e-invoicing conducted through
the internet is usually based on findings from the EDI literature, while specific
Measuring the Business Value of Electronic Supply Chain Collaboration…
80
estimations of the practical value of e-invoicing are usually based on the work of
practitioners.
The purpose of this research is to specifically examine electronic invoicing
conducted through the internet using an intermediate, as the basic service of
electronic supply chain collaboration and measure its practical value. Within the
context described in the previous section, this paper addresses the question of
“does higher extent of electronic supply chain collaboration, and specifically e-
invoicing, lead to increased business value for the company?”. The following
section presents the research approach towards this question.
3 Research approach
Because of the exploratory nature of the research, a case study approach was
selected. The case study approach conforms to the identified increase of direct
observation methods of a more interpretive nature in the supply chain
management research (Sachan and Datta, 2005).
In order to answer the aforementioned research question the case of electronic
invoicing has been selected. The reasons for the selection of this case are that it
represents the simpler type of electronic supply chain collaboration in McLaren et
al. (2002) typology, and because the invoice is the basic document in commerce.
The supply chain chosen for examination is the one of the grocery retail industry,
based on the criteria proposed by Cassivi for the selection of a single supply chain
for research (Cassivi et al. 2004). These criteria were that the supply chain itself
has to be electronically integrated and electronic supply chain collaboration has to
be under way among its members; that the supply chain structure has to consist of
several layers; publicly available information has to be obtained in order to
appropriately qualify the supply chain members for the multiple case study; the
number of supply chain members has to be high so that it can be possible to obtain
a critical mass of respondents for the survey. The grocery retail industry conforms
to most of these criteria. In addition, in the 1990s a number of supply chain
innovations have emerged in this sector (Holmstrom et al. 2002). Additionally, the
specific supply chain has a large number of invoices exchanged yearly in a many
to many environment.
For the case study research, the well-established approach of Eisenhardt for
building theories was adopted (Eisenhardt, 1989).
The approach included firstly, the definition of the research question (“Does
higher extent of electronic supply chain collaboration, leads to increased business
value for the company”).
The next step was the selection of the case which, as already mentioned, was the
electronic exchange of invoices using an intermediary in the Greek grocery retail
sector. Firstly, the research would address the receivers of invoices and secondly
the issuers (currently, only the receivers data analysis is complete and presented in
this paper).
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
81
The next step was the crafting of instruments and protocols for the collection of
both quantitative and qualitative data using semi-structured interviews. The
qualitative data of the developed questionnaire aimed to process mapping and the
quantitative data to acquiring figures for the process, in order to measure cost
savings. Based on the pertinent literature, the research was designed to measure
the process man-hour costs, errors, paper flow costs, storage costs and other
related operational costs.
When this step was completed, in-depth interviews were conducted with both
retailers and suppliers (receivers and issuers) followed when possible by on-sight
observations. Interviews were conducted between December 2006 and January
2007. Firstly, a series of interviews aiming to the mapping of the invoice
management process. The first interview involved the personnel of the
intermediate (two persons considered as experts in the invoice area). The duration
of this main interview was 1.5 to 2 hours. Then one interview per participating
company (total of 5 interviews, three retailers and two suppliers) was conducted
for the same purpose of mapping the process. These interviews’ duration was 15
to 30 minutes and they mostly validated the results of the first interview.
As the request for direct observation was declined for the majority of the process
steps, the data gathering was based on acquiring data from already conducted
internal surveys fro the companies and in-depth interviews with the personnel.
There were two to three interviews for acquiring data with one up to three
employees per company. A total of 8 people (retailers’ low level employees and
supervisors) were interviewed. These employees were selected by the companies
as experts in the area of invoice management. The personnel questioned came
from the information systems departments, the accounting departments and the
financial departments. The duration of these interviews was from 45 minutes to
1.5 hours. The data provided were based on actual data (e.g. document numbers,
personnel numbers), internal surveys (e.g. processing times) and experience.
These interviews provided data measurements for labour costs (related to
processing times, associated with the processing of invoices at different points
within the company), storage costs, packing costs, shipment costs from the stores
to the headquarters, costs of the e-invoicing service, errors in the process, number
of documents among others.
During these interviews there was also further discussion referring to the overall
experience from the e-invoicing adoption.
The approach towards the measurement of cost was based on the description of
organizational processes (Pentland et al., 1999) and activity-based costing
(Gunasekaran et al., 1999) by considering the invoice as the product examined.
Previous work using activity based costing for similar purposes exists for both
EDI (Hoogeweegen et al., 1998) and electronic commerce (Tatsiopoulos et al.,
2002). Due to the fact that some of the data acquired validity could be questioned,
the figures acquired were validated internally per case (for different figures
related) and then cross validated among cases. The aforementioned data collection
and data analysis approach can be summarized in the following 9 steps:
Measuring the Business Value of Electronic Supply Chain Collaboration…
82
1st step: Map the process
2nd step: Identify sources of cost in the process
3rd step: Measure the sources of cost
4th step: Validate measurements for the case
5th step: Repeat steps 1-4 for different cases
6th step: Cross validate for all cases
7th step: Cost model development
8th step: Experiment with different scenarios
9th step: Request additional data
Data analysis followed, including detailed write-ups, transformation of this
information to a more structure registry, cost model development, scenarios
development, cross-case pattern and recollection of data. The different scenarios
and their rational are presented in the following section. The data acquired were
cross validated with the three retailers that have accepted to participate in the
study.
The final steps of the case study research include the shaping of hypotheses,
generalization, enfolding of literature and reaching a closure. The following
section presents the results of the research.
4 Results
Before presenting the results of the research, the document flow of invoices in the
grocery retail sector is presented, as it was recorded during the in-depth
interviews. Then, the different scenarios developed are presented, followed by a
separate discussion of quantitative and qualitative results.
1.1 The process
This section presents the flow of invoices in the grocery retail sector, focusing
namely on the receiver of the invoice (i.e. the retailer).
Currently, even if the invoice is sent electronically from the supplier to the
retailer, the supplier is obliged to issue a hardcopy invoice and sent it to the
retailer (which is not necessarily the case for the future). It is also important to
clarify that the process described below is the outcome of cross validation among
different retailers. The process mapping focuses namely on steps of the process
that can be quantified.
The process (figures 2 and 3) starts with the issuing of the invoice by the supplier.
When the supplier issues the invoice, he has two options: to send the invoice
along with the products to the store (with the exception of delivering to
headquarters) or to send it separately to the headquarters through regular mail.
The invoices received at the store are processed by the store employees. Invoices
are compared to the respective orders for errors, their data are registered and then
they are stored to be sent to the headquarters usually through an internal mail
service.
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
83
The invoices received at the headquarters are sorted out, separating those coming
from the stores and those coming directly from the supplier. Then, if the invoices
come from a supplier that uses the electronic invoice service they are rapidly
compared to the electronically received data. If the supplier does not use the
electronic invoice service then the invoices are checked for errors and then their
data are entered into the system manually by an employee. When the check is
complete, the invoices are stored for 6 months to one year in the headquarters.
When this period of 6 months to one year is over, the invoices are sent to a
storehouse (usually around a 2,000 m
2
size). The invoices are stored and
maintained for 5 to 6 years in the storehouse. Then the invoices are simply
destroyed.
In regard to invoice errors, regardless of their nature (with the exception of
extreme problems, such as the disagreement on prices that initiates negotiation),
the solution is mainly requesting the supplier to issue a new invoice. This new
invoice could be either a regular invoice or a credit invoice. The reduction of
observed errors was suggested in the literature as well by Humphreys (Humphreys
et al., 2006).
Figure 2: The document flow of invoices in the grocery retail sector
Supplier
Issuing
Packaging
Shipping (to
store or to
headquarters)
Retail
store
Receiving
Comparing
Registering
Storing
Packing
Shipping
Retailer’s
headquarters
Receiving
Sorting
Processing
o Data entry for
not e-invoicing
o Comparing for
e-invoicing
Storing
Packing
Shipping
Storehouse
Receiving
Storing (6
years)
Maintaining
Destruction
Measuring the Business Value of Electronic Supply Chain Collaboration…
84
Figure 3: The generic data flow diagram of the invoice process in the grocery
retail sector
Invoice to
headquarters
Invoice
sent
Invoice
created
Start
Shipment to
headquarters
Shipment to
store
Store
receipt
Comparing
to order
No error
Store
process
Error
Order for
invoice
Registry
Storage
Packaging
Sending
Headquarter
receipt
No error
Error
Electronic
invoice
Sorting
Comparing
to hardcopy
Comparing
Short time
storage
Shipment to
storehouse
Long time
storage
Destruction
End
Electronic
invoicing
No electronic
invoicing
Data entry
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
85
1.2 Collaboration scenarios
In order to understand the practical value and cost reduction of electronic
invoicing, alternative scenarios were defined, depending on the percentage of
invoices exchanged electronically and on whether the hard-copy invoice is also
used in association. The scenarios examined are the following:
Scenario 1: This scenario describes the situation before the adoption of
electronic invoicing. In other words, it is the case of 0 percent electronic
invoicing.
Scenario 2: This scenario describes the initial phase of adoption of electronic
invoicing by the major suppliers and it is represented by 25 percent of
invoices exchanged electronically.
Scenario 3: This scenario describes the current situation. Based on the cases
studied, today around 50 percent of invoices are exchanged electronically.
Scenario 4: This scenario describes what will happen to today’s situation if one
more major supplier (supplier that delivers daily to the stores) adopts the
electronic invoices.
Scenario 5: This scenario describes a future situation, when 75 percent of
invoices are exchanged electronically.
Scenario 6: This scenario describes a future extreme situation, when all the
invoices (100 percent) are exchanged electronically.
Scenario 7: This scenario describes also a future situation, when the actual
hardcopy invoice is not sent by the suppliers (currently there is the necessary
legislation for this practice, but it is not yet applied by the companies). In this
scenario it is assumed that today’s percentage of invoices exchanged
electronically (50 percent) is not represented by an actual hardcopy invoice.
Scenario 8: This scenario is the more futuristic and extreme scenario of all,
when all the invoices (100 percent) are sent only electronically.
1.3 Quantitative results
The cost for the aforementioned scenarios was calculated based on the quantified
elements of the previously described process for each of the eight scenarios
presented in the previous section.
As far as the cost of the process is concerned, there are several cost factors in this
process. The main cost factors that influence the total cost of invoice identified
are:
The labour costs associated with the processing of invoices:
o at the store
o at the headquarters
o and at the storehouse
The storage costs for
o the headquarters
o and the storehouse
The packing costs
o At the stores
o and at the headquarters
The shipment costs from the stores to the headquarters
Measuring the Business Value of Electronic Supply Chain Collaboration…
86
The calculation of the labour costs for the stores and the headquarters was based
on the process time for each activity for each invoice. The participants provided
the number of invoices, daily, yearly per store, and the average process time for
the activities. These figures were cross validated with the total cost of man-
months provided by the participants and then cross validated among the three
retailers. Regarding the process time, different figures occurred only in one case,
in which the average time was used for calculations. The labour cost for the
storehouse was based only on man-months of full-time personnel employed in the
storehouses. The storage cost (not including the respective labour cost) was
directly calculated for the facilities used. The packing and shipment cost was
calculated per store using an average cost (since the invoices were packed and
shipped in butches). These figures were also cross validated among the three
retailers.
Another source of cost is the errors that cause the repeat of the process through the
issuing of new invoices. In today’s scenario the errors that cause the repeat of the
process are calculated from 5 to 6 percent. The figure before the implementation
of electronic invoicing, according to conservative estimates of the participants
exceeded 10 to 12 percent. The percentage of errors was also incorporated in the
calculations.
Additionally, there is the cost of the charge of the intermediate for the provision of
electronic invoice service, which was provided by the intermediate fixed per
invoice.
It is important to note that the calculations were based on additional assumptions
that lead towards a conservative calculation of figures, such as the cost of man-
month or the cost of mail. Furthermore, some costs were considered unimportant
and were not calculated (for example, the storage cost in stores, telephone
communication charges, the cost of electricity for the personal computers used).
The electronic invoice influences the process cost in several steps.
In headquarters, the increase of invoices sent electronically, reduce the
invoices for data entry (total of 3.5 minutes per invoice process time
required) and increase invoices for simple comparison (total of 1.4 minutes
per invoice process time required). The ratio of process time influences
scenarios 1 to 6.
In the store, the existence of invoice data electronically reduces the
process time for receiving the order. This also influences scenario 1 to 6.
Reduced errors caused by electronic invoicing reduce the total flow of
invoices in the system. This reduction influences all scenarios, including
scenarios 7 and 8, which are expected to have dramatically reduced errors.
The future elimination of the hardcopy invoice (scenarios 7 and 8) influences the
process cost in almost all steps of the process, since for the electronically
exchanged invoices:
There is no need for storage
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
87
There is no need for packing and shipping
The errors are dramatically reduced
There is still the need for comparing the invoice data with the actual order,
but processing time is similar to current process time for electronically
received invoices (assumed the same for calculations)
There is a need for electronic storage of the data
Table 1 summarizes the results for all the scenarios. This table includes the
average cost per invoice as well as an indication of the cost of an average size
retailer with 1,050,000 invoices per year. Furthermore, the table includes the
percentage reduction between scenario 1 (no electronic invoice) and the other
scenarios.
Total Cost
for 1,050,000
invoices
yearly
Average cost
per invoice
Reduction
Existence of hardcopy invoice
Scenario 1: 0 percent of
invoices exchanged
electronically
3,643,282 €
3.469 €
Scenario 2: 25 percent of
invoices exchanged
electronically
3,349,988 €
3.190 €
-8.04%
Scenario 3: 50 percent of
invoices exchanged
electronically (today)
3,046,278 €
2.901 €
-16.37%
Scenario 4: Scenario 3 plus
one major supplier
3,040,937 €
2.896 €
-16.52%
Scenario 5: 75 percent of
invoices exchanged
electronically
2,536,437 €
2.415 €
-30.38%
Scenario 6: 100 percent of
invoices exchanged
electronically
2,035,277 €
1.938 €
-44.13%
No hardcopy
invoice
allowed
Scenario 7: 50 percent of
invoices sent only
electronically
1,035,495 €
0.986 €
-71.58%
Scenario 8: 100 percent of
invoices sent only
electronically
806,615 €
0.768 €
-77.86%
Table 1: Summarized results for the scenarios
In regard to the actual figures for the average cost per invoice (3.469 euros), this is
quite low compare to the aforementioned European surveys. However, this can be
explained. The grocery retail sector is characterized by a large number of
invoices; consequently all fixed costs are distributed to a large number, thus
lowering the cost per invoice. Additionally, invoices are recognized by the
Measuring the Business Value of Electronic Supply Chain Collaboration…
88
sector’s practitioners as a source of cost and are managed efficiently (perhaps by
taking advantage of economies of scales in their processing).
The results of table 1 provide the basis for further discussion. A first observation
is that electronic invoicing causes important savings. Comparing the current
situation to what happened before the introduction of electronic invoices, we
observe savings of 16.32 percent which is quite important for a sector such as the
grocery retailing, with high competition and low profit margins. Given that this is
a proportional reduction, it is expected that larger organizations, will experience
greater overall benefits than smaller companies, which conforms to previous
research (Kioses et al., 2006). Additionally, further calculations indicate that the
intermediary could increase the fee per invoice up to 200 percent and the retailers
would still break even this cost.
However, as indicated by scenarios 5 and 6 (especially the more feasible scenario
5), there is still a margin for further cost reduction. This reduction is considerable
for scenario 5 compare to the current situation (scenario 3) (an additional 16.6
percent reduction), thus proposing that there is a point for retailers to try to
persuade more suppliers to adopt electronic invoicing. The contribution per new
supplier is expressed in scenario 4. According to this scenario, a supplier that
delivers per store daily and will adopt the system will cause a reduction of 0.27
percent per invoice. This proportional reduction may lead to savings of thousands
of euros for the retailer (in this example, for a retailer with 1,050,000 invoices
volume, savings of 6,000 euros).
However, although, there is a point for the retailer to add more suppliers to the
system, there are even more arguments to upgrade the electronic invoicing service
to eliminating the hardcopy invoice (scenario 7). As indicated, the adoption of
scenario 7 will lead to a further decrease of 59.17 percent compared to scenario 3
(today), which is considerably larger than the reduction caused by the inclusion of
more suppliers (which is usually a challenging task).
As far as the research question is concerned, although there is the limitation of
only examining one aspect of collaboration (message-based systems), the output
of the case studies propose that the greater extent of collaboration leads to
increased business value for the companies. Moreover, it is suggested that the
impact on business value could be influenced by service (or system)
characteristics (in this case the existence or not of hardcopy invoice).
1.4 Qualitative results
The qualitative results of the research were based on the in-depth interviews. They
mostly validate previous findings of the EDI literature, but their value is that they
present these findings for business-to-business interactions facilitated by the
internet and an intermediary.
According to the participants, comparing their experience with EDI systems from
the previous decade, the existence of the intermediary makes the electronic
exchange of invoices feasible also for small companies. This is the main benefit of
Eleftherios Kioses, Katerina Pramatari, Georgios Doukidis, Cleopatra Bardaki
89
this internet-enabled service compare to the classical EDI, since the larger retail
companies are now able to cooperate electronically, with a greater number of
suppliers compare to the EDI (thus achieving greater proportions of document
exchange), and the smaller supplier companies to begin their engagement in
electronic activities.
As expected, the information exchange between retailer and supplier is improved.
It is faster, more accurate and safer, since the only possible “licking” point could
be the intermediary. The accuracy of information was proposed in the literature by
Golden and Powel (Golden and Powel, 1999). However, an innovative aspect
recognized was that the existence of data fast in an electronic form makes possible
their statistical analysis, which leads to the evaluation of partner’s performance
and personnel performance. Especially the evaluation of the partner’s
performance is a first sign towards the change of the cooperation of the two sides,
which may have important consequences in the future. As far as the personnel is
concerned it can now be used for more important activities instead of simple data
entry, as proposed by McIvor et al. (2000).
Regarding the relationship between supplier and retailer, it is improved due to cost
savings, to problem reduction and to faster supplier payment. Additionally, the
existence of such a service provides the basis for future more advanced
collaborative practices for the supply chain. However, the large number of
electronic linkages created empowers this base, by creating the opportunity for the
cooperation of more partners.
5 Conclusions
The paper indicates that electronic supply chain collaboration in the form of
electronic invoicing provides actual business value for the participating
companies. In parallel, it proposes a research approach for the evaluation of
electronic supply chain collaboration.
As far as the research question is concerned, the output of the case studies
proposes that greater extent of collaboration leads to increased business value for
the companies. The business value is greater for larger organizations, but
significant to all organizations. Fully electronic invoices are expected to strongly
decrease costs even for a smaller number of invoices. Achieving proportions near
to 100%, although beneficial, is not practically possible due to the large number of
suppliers that have to be convinced; but seeking further cost reductions towards
upgrading existing services can provide even higher benefits. Eliminating
hardcopy invoice is a possibility, but perhaps not the only one.
Additionally, the paper presents these conclusions using a measurement of the
business value of electronic invoicing that could interest the management of
organizations. Practitioners may use such findings in order to support their
decision making process towards the management of invoices (or related
activities). Furthermore, the aforementioned research approach towards measuring
the business value can be used for the measurement of other similar electronic
Measuring the Business Value of Electronic Supply Chain Collaboration…
90
applications as well, and in this way support the management of electronic
linkages.
Nevertheless, the presented research has certain limitations that need to be
addressed in the future. The main limitation is the examination of only one aspect
of electronic supply chain collaboration, the case of message-based systems in the
form of electronic invoicing. Another limitation is that this is a case study
research and consequently it is subject to the respective limitation of this
methodology. Finally, another limitation is that the research was conducted for the
Greek grocery retail sector, disregarding different practices in other countries.
Indications for future research address these limitations and suggest other
directions. The first clear future step is the completion of current research with the
inclusion of a similar analysis for the issuer of invoices (the supplier). Other
suggestions for future research are the implementation of this research approach to
other types of supply chain collaboration such as electronic hubs or CPFR. A
possible proposition would be a field survey addressing companies applying e-
invoicing for validating and empowering these results. Finally, the trend in supply
chain management research is moving from exploratory to model building and
testing (Sachan and Datta, 2005), thus developing a theoretical model
incorporating this research may be recommended.
Acknowledgements
The authors would like to express their appreciation to the management of IS
Impact S.A. for their support, as well as to all the participating companies. The
authors also want to thank to the European e-Business Support Network for their
assistance.
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