PERCEPTIONS OF BARRIERS TO E-COMMERCE

Anthony Flynn and Sharon Purchase

University of Western Australia
Abstract
An exploratory survey of supply personnel from the mining industry in Australia indicated that
the main barrier to the implementation of e-Commerce systems for online purchasing was the
reluctance of current suppliers to implement systems within their own organisations. Overall,
there was a positive perception towards the implementation of e-Commerce for the use of
electronic purchasing.
Introduction
The Internet and electronic commerce has revolutionised how business processes between
organisations have been evolving. One area in particular where the revolution is expected to have
a large influence is supply chain management (Hardaker & Graham 2000; Lancioni, Smith &
Oliva 2000). Supply chain management will benefit from e-Commerce in the following 7 areas:
sharing of customer information (usage & demand); instantaneous notification of changes;
efficiently delivering tender information; increase the speed to process transactions; reduction in
business processing costs; reduction in human error; and sharing product information (Alexander
2001; Olson 2001; Schneider & Perry 2001). For those organisations situated in isolated and
remote locations the benefits of increased speed and efficiencies may be even more pronounced.
The Australian mining industry is an important industry within the Australian economy,
exporting $54 914 million during the 2000 calendar year (ABARE 2001). Many of these mines
are located in remote and isolated areas in Australia where there is limited access to traditional
services. Therefore, it could be expected that the installation of e-Commerce systems at such
mine sites would increase the productivity within their supply chains as it would overcome some
of the current problems they face due to geographical distances. But the mining and construction
industries in Australia have been one of the slowest industries to install e-Commerce systems
(Love et al. 2001). Therefore, this research was conducted to investigate the barriers to the
implementation of e-Commerce within the mining industry in Australia.
It is also important for marketing personnel to understand the behaviours and expectations of
supply / purchasing personnel in order to meet their future demand for value added goods. If
supply personnel require the utilisation e-Commerce platforms in the future, then, marketing
personnel need to ensure that their organisations implement their own technology systems to
complement those of their customers. This research is aimed at understanding the current
behaviours of purchasing officers towards the utilisation of online purchasing systems.
The Procurement function
One of the main business functions to benefit from the implementation of e-Commerce systems
is
expected to be the procurement function (Alexander 2001; Olson 2001). Benefits of online
purchasing include reduced paper work, faster product finds, reduced cycle times, lower
inventory, increased product choices, reduced time spent on minor purchases and lower costs in
order processing (Alexander 2001; Olson 2001). Each of the benefits will change the
procurement function within organisations, allowing purchasing officers or supply personnel to
concentrate on important activities. Important activities include developing relationships with
major suppliers, searching for possible new vendors with innovative products, managing
inventory levels on major expenditure items to reducing stock-outs and implementing JIT
systems to name a few. Searching for new vendors has been shown to be the most popular use of
the Internet with a recent survey showing that 81% of organisations use the Internet to identify
suppliers (Purchasing 2001b). The benefits mentioned are known to purchasing officers but the
uptake in online purchasing has still been slow (Alexander 2001). The next section will
investigate some of the barriers to the uptake of online technologies currently available in the
literature.
Barriers to e-Commerce implementation
With slow uptake of online purchasing it is necessary to discuss the barriers to e-Commerce
implementation. Love et al. (2001) categorised e-Commerce barriers within the construction
industry into the following 4 areas: technical; financial; organisational and behavioural. Barriers
to e-Commerce found in the literature have been categorised according to the same criteria as
Love et al. (2001) and as shown in table 1. Table 1 does not rank any of the barriers listed, it is
assumed that they are of equal value.
Table 1
Barriers to e-Commerce
Technical Financial Organisational Behavioural
Security &
encryption
(Commercenet 2000;
Love et al. 2001;
Chong & Pervan
2001)
Inability to develop
return on investment
(Love et al. 2001)
Lack of Business
models (Commercnet
2000)
Trust & Risk
(Commercenet
2000)
Lack of qualified
personnel
(Commercnet 2000;
Love et al. 2001;
Chong & Pervan
2001)
Investment risk
(Love et al. 2001)
Culture (Commercenet
2000)
Fraud
(Commercenet
2000)
User authentication
& lack of public key
infrastructure
(Commercnet 2000;
Love et al. 2001)
Cost of training and
education (Love et
al. 2001)
Organisation &
planning (Commercenet
2000; Love et al. 2001;
Chong & Pervan 2001)
Resistance to
change existing
business
processes (Love
et al. 2001)
Internet/ Web is too
slow and not
dependable
(Commercenet 2000;
Chong & Pervan
2001)
Loss of productivity
and market
uncertainty (Love et
al. 2001)
Lack of employee
knowledge (Love et al.
2001; Chong & Pervan
2001)
Fear of jobs loss
(Love et al.
2001)
Interoperability
(Love et al. 2001)
Available credit
(Love et al. 2001)
Lack of infrastructure
(Love et al. 2001)
Need to
undertake
training (Love
et al. 2001)
Initial set up costs
(Chong & Pervan
2001)
Reluctance to link to
other parties (Love et
al. 2001)
Uncertainty and
lack of overall
stability (Love
et al. 2001)
On-going
maintenance costs
(Chong & Pervan
2001)
Time taken for
implementation
(Purchasing 2001)
Costs of switching
from current EDI to
online systems
(Deeter-Schmelz et
al. 2001)
Lack of supplier
interest (Alexander
2001; Deeter-Schelz et
al. 2001; Chong &
Pervan 2001)
Lack of perceived need
(Chong & Pervan 2001)
Technical
From table 1, compatibility / interoperability was perceived to be a barrier in the previous
research undertaken. In a recent survey, 45% of companies perceived that extensible markup
language (XML) would help overcome the enablement and interoperability problems that have
existed in the past (Purchasing 2001a). Therefore, the interoperability barrier may not be
perceived as a barrier in the future.
Financial
Financial barriers looked at the cost required for investment, maintenance and risk of an e-
Commerce system. Financial barriers and an acceptable return on investment are highlighted as
an important barrier to e-Commerce and were found to be important in the Australian
construction industry (Love et al. 2001).
Organisational
Organisational barriers were categorised as those barriers that originated from the organisations
attitude towards the implementation of e-Commerce systems. Size of the organisation has been
found to be critical in the implementation of e-Commerce although not a barrier in itself (Boyle
& Alwitt 1999; Chong & Pervan 2001). Size also is critical for the size of the advantages
obtained through the use of e-Commerce systems (Lancioni, Smith & Oliva 2000).
Supplier / vendor ability to operate in an e-Commerce environment has also been found to be
influential on the attitude of the buyer towards the adoption of online purchasing (Chong &
Pervan 2001; Deeter-Schmelz et al. 2001). Finding suppliers that are able to transact online is
seen as critical if organisations are to compete against companies that are already receiving the
benefits of online purchasing (Hoffman, Timson & O’Shea 2001). But, a recent survey of
purchasing agents also found that they expected to move online when their current suppliers
made the transition and then educated them on how to use their e-Commerce systems (Alexander
2001).
Behavioural
Behavioural barriers involved the issues relating to people and their resistance to change (Love
et
al. 2001).
Working from the categories of barriers outlined by Love et al. (2001) and given the lack of
research into the barriers to the adoption of e-Commerce in the supply chain within the mining
industry in Australia the following research question was developed.
What do the purchasing/supply officers on remote mine sites in Australia perceive as the
barriers
to the implementation of online purchasing and e-Commerce systems?
The research question relates directly to online purchasing and its connection into the overall
information system currently in place and would include examples such as Enterprise Resource
Planning Systems (ERP).
Research Method
Supply personnel from 11 mines were interviewed for the research. All mines, except 2, were
over 100 kilometers from their major sources of procured goods, thus ensuring that isolated
locations were included in the study. Such isolated sites were included as it was expected that
they had more to gain through the implementation of electronic communication and online
purchasing then their counterparts in more developed areas of Australia. In all cases, goods
arrived by truck after shipment from major suppliers. Each mine site had a central supply
function and a department on site where major purchases were conducted.
Data was collected through telephone interviews with supply/procurement personnel who
operate
from the mine site. Telephone interviews were chosen as face to face interviews were unrealistic
and it was considered that a researcher should be present to explain any information technology
jargon that may not have be known by the interviewees. A standard interview protocol was
developed and covered all 4 categories of technical, financial, organisational and behavioural
barriers as outlined in the literature review. Interviews were conducted during April 2001.
Data Analysis
All interviewee were aware of e-Commerce, could grasp some of the areas where it would
change
their current work processes, and realised that the procurement function will be one of the initial
business processes targeted for e-Commerce implementation. Characteristics of the interviewees
are outlined in table 2.
Table 2
Characteristics of the Companies Interviewed
Compa
ny
Procureme
nt
Budget
($M)
Commodi
ty
Type
Distance
from
suppliers
(km)
ECommerce
timeframe
IT
Usage
Internet
Usage
A 9 Metal 100 >6 Months V High Low
B 28 Metal 1200 6 Months Mediu
m
Low
C 11 Metal 500 >1 Year High Low
D 4 Services 10 Not soon Mediu
m
Low
E 9 Metal 900 6 Months High Browsin
g
F 36 Metals 1100 >2 years V High High
G 10 Metal 1000 6 Months High Low
H 5 Ceramic 10 Not soon High Low
I 12 Metal 1000 6 Months V High Browsin
g
J 3.5 Chemical 2000 Not soon Mediu
m
Low
A majority of interviewees indicated that they perceived e-Commerce would make their present
tasks easier. No interviewee had an operating e-Commerce platform operating although
companies B, E, G & I indicated that they would be installing a system within the next 6 months.
Of all companies that were installing an e-Commerce platform every one had an ERP system
(SAP in every case) already operating.
Perspectives on Financial Issues
Not one interviewee believed that there were enough savings to be gained that would pay for the
e-Commerce system outright. Therefore, the return on investment would be low when justifying
the system. Financial benefits were seen as having the ability to focus on more critical supplies
and negotiating better deals with their suppliers. Such intangible benefits were perceived as more
difficult to justify through quantitative data.
Perspectives on Technical Issues
Interviewees indicated that they did not foresee any technical problems with the implementation
of an e-Commerce system for online purchasing. It was not expected that the interviewees would
have a detailed knowledge concerning the technical aspects of implementing e-Commerce
systems given their functional positions within the organisation.
Perspectives on Behavioural Issues
Companies B, E, G & I were positive about the implementation of their e-Commerce systems
and
looked forward to its progress, with only some minor reservations. Barriers relating to resistance
to change were only present in 2 other companies, both of which indicated that they were
uncomfortable with the use of technology in general.
Perspectives on Organisational Issues
All interviewees indicated that e-Commerce would offer the supply function greater capability to
respond to the organisations needs in a more flexible manner, thus, improving the standard of
service they are able to offer other departments within their organisations.
All sites had thousands of suppliers most of those being small one or two item specialty suppliers
with less than 50 suppliers at each site being the source for more than 10 items. Such a
fragmented supplier base makes the purchasing function very complex. One of the organisational
benefits perceived is that the number of suppliers will diminish with the advent of an e-
Commerce platform.
One question asked relating to suppliers was, “if they were being drawn into e-Commerce by
suppliers?”( interview data). No interviewee felt that e-Commerce was being forced upon them
by
their suppliers, quite the opposite was perceived. Most suppliers are SME’s and do not have any
intention of implementing an e-Commerce platform. Interviewees mentioned that in discussions
held with specialist suppliers an attitude of “you want my product. I am the only supplier of it,
why should I have to put in an expensive system just to keep doing business” (interview data)
was very common. Such comments indicate that the power within the buyer-supplier
relationships for those items is currently with the supplier.
Conclusion
The barriers mentioned in the Commercenet Survey (2000) were not found in this group of
interviewees. All respondents found that the technological barriers were no longer significant
which is consistent with the results indicated by Purchasing (2001a). The main barrier given by
all interviewees is that of suppliers not implementing e-Commerce systems within their own
organisations. As most suppliers are small specialist organisations with some ability to influence
the relationship, it is difficult for the mine site to implement an e-Commerce system without the
cooperation of these suppliers. Supplier cooperation was found to be a significant issue by
Deeter-Schmelz et al. (2001) and is consistent with the findings of this research. Overall, the
perception of the use of e-Commerce for electronic purchasing from onsite procurement
personnel was positive. The implications of these results for companies marketing to mine sites
is
that they should seriously consider how they could work with the mining companies in reducing
this negative perception the mining companies have towards their suppliers when it comes to
developing electronic relationships.
The major limitation of this research is that this was only a very small sample of
purchasing/supply officers working within this industry. It is difficult to generalise to the
industry
in general and further research needs to be conducted to indicate if these findings are consistent
across the industry.
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