IFFCO’s E-procurement System Cuts Bid Time by a Third15th Nov 2007
IFFCO (Indian Farmers Fertilizer Co-operative) is among the largest manufacturers of nitrogenous and phosphatic fertilizers in the world IFFCO had a manual procurement system but it was plagued by problems of inefficiency. They got help from a technology that allowed for security as well as efficiency in the vendor management and e-procurement system.
- How to address security issues around e-procurement
- How to bring people closer to technology
- How to handle change management problems
For starters, the traditional procurement cycle was lengthy and time consuming. "The interaction between IFFCO and the vendor was by post, fax and at times by e-mail," recalls S.C. Mittal, ED (Management Services & IT) of IFFCO. Vendors from distant locations were finding it difficult to contact IFFCO, collect bid documents and submit quotes on time. Many a time, local vendors like transport contractors or local service vendors, material handling contractors and local service vendors formed a cartel and did not allow other vendors to collect tender document, submit quotes or participate in the bid opening and finalization process. To tackle this problem, Mittal decided to put together an e-procurement system for IFFCO's procurement activities in 2003-04.
Case Study Highlights
- 14 The Number of days it now takes for a bid to close — from 21 days.
- Today, IFFCO is wholly owned by 37,000 farmer cooperative societies.
- It is among the first in India to develop and successfully implement a digital signature and PKI encrypted e-procurement system
The first roadblock before Mittal was security. "We wanted to address security issues like authentication, confidentiality, authorization and non-repudiation for purchases using the Internet. Solutions available at that time in this space were studied, but no software was found to meet IFFCO's requirement of online tendering and bid submission," he says. Undaunted, Mittal decided to develop the software in-house.
Technology was just one of the hurdles; IFFCO also had to address workforce's apprehensions. The whole process of e-procurement was new to vendors, partners and even internal users, says Mittal. "Many of them were not computer savvy and some have not even used computers earlier. The whole legality of the process was under a cloud," he recalls. In order to get vendors on his side, Mittal organized vendor meets in major Indian cities.
For the smooth rollout of the e-procurement system, Mittal setup help desks at IFFCO's corporate office, plants and major marketing offices to address the queries of vendors. IFFCO was not ready to implement e-commerce applications because internal users were uncertain about the confidentiality and security of the whole process. Even the management was not sure if e-procurement was the right way forward. Fielding Security Concerns Mittal explained the entire process to the management, and told them about digital certificates, encryption and decryption of bids, time stamping of bids and the provisions of the IT Act. The management agreed, but added a clause stating that the system should be audited by an internal audit, the finance department, and by IFFCO's legal expert dealing with cyber crimes before roll out.
He zeroed in on Microsoft's ASP technology. IFFCO's developers were trained to use digital certificates and encryption and decryption technologies. A certifying agency was also hired to develop the encryption and decryption component for the e-procurement system. The first version was implemented using ASP technology. But the ASP rollout was just the first part of the e-procurement story for Mittal, who wanted to move the system to Microsoft's .Net technology - and this meant that he had to convince Microsoft. "Microsoft partnered with us under their 'Enterprise-GO' program and arranged necessary training on Visual Studio .Net for developers," he says. Rather than merely converting the system from ASP to .Net, Mittal decided that this would be a good time to seek inputs from internal and external users about various components of the system.
Mittal says that it is difficult to define savings on tendering in terms of direct monetary benefits because the tenders are being floated by six units of IFFCO. However, IFFCO saves on cost of printing, dispatch, human resource, and filing, while vendors save on cost of traveling, preparation of bid, and dispatch. More than this, he stresses that one should look at ROI from a non-monetary angle too.
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