Opinion

Time to embrace e-procurement

E-business

Peter Duschinsky

When Computer Weekly asked me to pen an opinion as part of its UK E-Business Month initiative, Iwas glad to have the opportunity to get a key message across to the UK's IT community. My message is this: stop theorising and start doing something about e-procurement.

E-procurement is the electronic management of all purchasing activity, often starting with low-value, high-volume, non-strategic goods and services that support the business. On average, this accounts for 36% of companies' external spend (more in service companies) and is where companies are inadvertently losing millions of pounds, through below-par buying processes and sub-optional decisions by staff.

All organisations are facing continued demands to reduce cost so this "indirect" spend presents a huge opportunity. E-procurement provides a quick, low-risk means to deliver e-commerce capabilities into the business, improve service to end-users and save money - savings on support spend then potentially go straight to the bottom line and recur year-on-year.

And of all of the e-commerce challenges, e-procurement is perhaps the least risky. The quantified benefits are well-documented and the commercial consequences of making mistakes are minimal. E-procurement can therefore be a useful way for companies to introduce an e-commerce culture into the organisation.

That being the case, why are so many companies holding back?

There are companies where the board hasn't quite got the plot or has other priorities - such as major change programmes or systems integration mergers - so e-procurement is seen as something of a burden.

But for others there are two main reasons. Firstly, when there is a lack of standards, a confused and burgeoning market will put off play-safe managers (and we have all been there haven't we?)

Electronic data inter-change (EDI)was heralded as the saviour for UK industry, enabling suppliers and customers to interact electronically, speeding up the time from order to delivery right across the chain. And it did - but only for about 2% of firms, due to factors such as high costs and the needs of smaller companies being neglected.

Secondly, the hype surrounding the topic encourages the view that e-procurement equals public electronic marketplaces - a radical change to the way most of us are used to doing business. And that, for some, is scary.

Sellers, in particular, may suspect this is becoming a way of forcing them to disclose bids, compete in auctions or commoditise their offering - in short, to save loads of money for dominant customers at a high cost to themselves. Not an attractive prospect.

But, actually, most of the top purchaser companies I have spoken to are more interested in using e-procurement to involve their existing suppliers in more efficient supply relationships via electronic catalogues, purchase cards and private marketplace solutions.

Sure, they will be investing in marketplaces for spot buying of commodity items and sure, there will be some further rationalisation of suppliers. But there are also opportunities in this for suppliers to extend their reach to previously unavailable customers and to now become visible to customers two or three tiers up the supply chain.

So this is a call to all companies involved in business-to-business purchase and supply. E-procurement is something you need to understand and do something about today.

As a purchaser, you should look at procurement to improve the way you purchase goods and services to deliver better quality service to your staff at a lower cost.

As a supplier, you need to be ready to respond to what your customers and their customers are doing. Don't wait around too long. The technology, as always, is not the problem - changing how you work and getting people to learn how to use the technology is. And that takes time.

Peter Duschinsky is secretary of the Buy ITBest Practice Group IT World Consultants

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This was first published in November 2000

 

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