A company-wide purchasing system is set to save Europe's largest
electronics company tens of millions of dollars
Europe's largest electronics company - Philips - is to roll-out
an electronic-procurement system, which, it claims, could cut its
annual purchasing costs by tens of millions of dollars.
The Dutch electronics manufacturer plans to roll-out an
e-procurement system, to more than 100 sites worldwide, in a
project which aims to cut 8% from its $5bn global supply bill.
The system will link 100 separate ERP systems throughout Philips
to create a company-wide purchasing system that will channel orders
to a small number of preferred suppliers.
The move follows research by Philips that showed it was only
achieving 3% of the savings it could make because staff were either
unaware of who the preferred suppliers were or failing to place
orders with them.
"We will be able to reduce the cost of transactions and increase
the speed of realising savings negotiated with our suppliers," said
Neil Deverill, head of purchasing at Philips.
The system, dubbed STEP (simple total electronic procurement) by
Philips, is designed to eliminate paperwork by allowing staff to
order equipment from their desktop PCs.
In preparation for the new system, which will take up to 18
months to deploy, the company has standardised on Dell desktop PCs
and installed an intranet.
Philips has contracted its IT consultancy subsidiary, Origin, to
manage the roll-out. The e-procurement software is being designed
and supplied by Ariba, while PricewaterhouseCoopers will assist
individual Philips sites to re-model their businesses around the
new system.
One of the challenges facing Origin and Ariba is the development
of middleware to feed purchasing decisions to 100 separate ERP
systems in Philips plants, which include legacy systems developed
in-house and many older systems which are no longer supported by
their manufacturers.
"Origin are probably in a fairly good position in that they have
been partners with ERP suppliers, Baan, JD Edwards and SAP. Having
said that, it is still a very major project," said Marianne
Kolding, analyst at IDC.
Philips has been running a poster campaign to encourage its
staff to "buy in" to the new system.
but the company will need to offer carrots and sticks, to
persuade staff to use the new system in their day to day work,
warned Kolding.
Benefits
- Savings of up to 8% from $5bn global purchasing
budget
- Provides managers with up-to-minute information on purchasing
costs
- Could cut time spent on paper work by 100 man-years in
Europe
- Provides managers with an automatic audit trail for each
purchase made