e-Procurement is (obviously) using the Internet (and the Web in particular) to replace traditional purchasing processes with online ones. Actually, as now normally defined, it's a little bit more than that. It is best described as :
the purchasing of all non-strategic goods and services - those that support the business - on a preferred-supplier basis from companies that are able to provide an end-to-end service.
Obvious candidates are the purchasing of PCs, stationery, printing, travel, and even contract staff.
The UK government's e-envoy Alex Allen, said in May 2000 that ..
"The potential e-procurement has for impacting positively on UK plc is huge. In the context of the profound effect the new online world is having on the way we all work, the efficiency advantages business to business e-commerce offers are revolutionising the procurement industry. The openness it brings to the market, and the flexibility it brings to the supply chain, means that time to market is reduced; the capability to build to order extended; costs cut; and efficiency massively increased."
So e-Procurement is "a good thing" yet the take-up within UK industry is remarkably slow.
e-Procurement should be able to deliver real cost savings - both in terms of getting cheaper goods and in lowering the administrative costs of the purchasing operation. Yet, the cautious approach to dotcom issues seems to have extended into the e-Procurement arena. This is part of the culture that still seems to perceive the web as something extremely new-fangled and strange (best left to those upstart dotcoms who understand it), rather than simply as another tool to be used to raise productivity and effectiveness.
e-Procurement normally works with employees having desktop access to either Web-based catalogues or electronic exchanges (whether sector-focused - vertical marketplaces - or general - horizontal marketplaces) (see b2b exchanges) In either case, all the budget management, authorisation and goods received paperwork - and even payment - is electronic.
For larger companies, where departments have traditionally been responsible for buying their own support goods and services (and acting in ad hoc, sometimes irrational ways!), e-Procurement can provide significant savings by bringing this process back to the centre and reducing duplication.
One significant advantage is that all purchasing information flows to or through a single point and firms can use this information to start buying 'harder and smarter'. What really helps is that the buying department also benefits - by getting faster delivery of cheaper goods!
Useful information on the art of the possible, and the advantages of e-Procurement are available by reference to BuyIT. BuyIT has been established (in June, 2000) as a best-practice network of organisations interested in the e-Procurement of IT goods and services. Membership is open to all organisations, including trade & professional bodies, private companies and public sector organisations.
The forum provides :
This latter sub-network is an e-Procurement Experience-Sharing Group, designed to support the introduction of e-procurement systems in member organisations. It provides an independent, informal and confidential exchange for its members. Membership of this group, which is self-funded, is open to private and public sector organisations planning to introduce e-Procurement programmes. Representation is typically at senior management level.
Members are particularly interested in exchanging ideas and experiences related to the implementation and roll-out stages of their e-procurement programmes, where difficult issues are being raised that nobody has really solved yet, like overcoming internal corporate culture barriers, e-enabling supplier relationship management and integration with existing enterprise resource planning systems.
Computer Weekly is also publishing a series of articles/case studies/ The series aims to help readers emulate the achievements of firms that have been particularly successful in implementing and exploiting the latest information and communication technologies. Case studies are published on a regular fortnightly basis, with expert commentaries from BuyIT members.
KPMG principal consultant Peter Loughlin
recently warned that organisations should be wary of simply automating
a part of the purchasing chain - a simplistic approach to eProcurement
may just transfer a set of costs from one department to another. This
seems to be echoed by a recent survey (by Saville Rossiter-Base) which
suggests that many organisations are using the Internet to make purchases
(most commonly office supplies and computers) but that most of them had
little idea of whether it was saving them any money, and quite a few even
suggested they KNEW they weren't saving money.
At a 'nuts and
bolts' level, once the principle has been accepted, eProcurement should
be approached on a commodity-by-commodity basis, rathen than on a departmental
basis. This is the fastest way of reducing the number of suppliers - and
the costs involved in processing orders to each of those many suppliers.
Pharmaceutical company AstraZeneca expects to save at least $600m each year by using web-based purchasing. The company is implementing software from Ariba across its global operation and will go live at its first location by the end of 2002. The eprocurement system will be used for purchasing indirect goods : these acount for approximately $6bn of spending. AstraZeneca considered establishing an exchange or marketplace but, after examination, considered a 'simple' solution implemented alongside internal business transformation offered a greater chance of long-term success - and mininised risk.
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