Want to have a closer relationship with your suppliers, cut down billing periods, and have a greater knowledge of where you are spending your money?
In the heady days of the dot com boom, pundits were predicting many -- perhaps most -- routine corporate purchases would be made via electronic exchanges or markets. Suppliers' systems would be invited to quote against a buyer's specifications, and an automated process would select the best bid according to price and other criteria.
While some exchanges were successful, Paul Liddiat, supply chain marketing director Asia-Pacific at PeopleSoft, says the model was too advanced for most organisations as they were only just moving from paper-based systems. "Crawl, then walk, then run," is his advice.
Another possibility is that procurement is traditionally a relationship-driven process and businesses on both sides of the fence were reluctant to treat goods and services as if they were commodities, unless that really was the case, and the only differentiators were price and availability.
Some industry-based exchanges are still going, including those in the steel, chemical, and grocery markets, says Peter Dowling, Asia-Pacific procurement leader, IBM Business Consulting Services, but those in horizontal markets were less successful. Part of the problem was that some companies had enough buying power to drive prices down to where they wanted them, while some suppliers refused to participate in an environment that reduced everything to price. However, exchanges "were great to clean up spaghetti junction," he says -- integrating suppliers and buyers in a many-to-one-to-many structure was easier to implement and manage than a many-to-many network of relationships. While there wasn't sufficient momentum for widespread change, the experience did educate organisations about the value of e-procurement, and companies such as Corporate Express (in the office supplies market) are effectively aggregators rather than traditional suppliers.
Bruce McCabe, technology analyst and principal of S2 Intelligence, suggests most electronic markets are really private networks comprising an organisation and its top suppliers, typically between five and 10 companies. A big network comprises 20 or 30 organisations. "But that doesn't mean it's not worth doing," he says, because even very small networks can give good returns and some organisations are getting excellent returns.
Regardless of the success of exchanges, organisations are successfully implementing e-procurement as a way to reduce administrative costs and to provide better monitoring and control of purchasing.
Benefits
Industry players identify three major benefits of e-procurement: administrative savings, elimination of maverick spending, and analytics.
| -Procurement processes, when they aren't automated, are riddled with waste." Paul Liddiat, Supply Chain Marketing Director AP, PeopleSoft |
Simplifying the administration of the procure-to-pay process will reduce costs. "It tends to be a very manual and administration-heavy area ... and therefore costly," says Neil Richardson, iPOS commercial product manager at Professional Advantage.
Close integration between e-procurement and financials or ERP software is essential if these savings are to be achieved.
"Procurement processes, when they aren't automated, are riddled with waste," says Liddiat. Forcing users to select from an online catalogue saves their time, and automating the workflow adds to the administrative savings. For example, users can track the progress of their purchases via the e-procurement system instead of phoning procurement staff.
One objective of e-procurement is to "make it easier for people to buy from preferred suppliers than not," says Greg Higgins, e-procurement specialist at Capgemini. He recommends organisations prioritise areas of expenditure that will give the best return, though this may be in terms of cultural impact and behavioural change (eg, eliminating unnecessary travel) rather than a simplistic financial analysis.
The elimination of maverick purchasing yields benefits soon after implementation, Richardson suggests.
Even the settlement process can be improved, suggests Liddiat. "It's all about getting the supplier off your back," and clear communication and quick resolution of discrepancies leads to quick processing.
Greater control over purchasing can be gained through the analytic tools provided by e-procurement systems. These give more insight into the purchasing process, revealing where, how, and with whom the expenditure is occurring, and whether suppliers are adhering to contract terms.
E-procurement can bring about a (possibly subconscious) change in users' senses of responsibility, suggests Higgins, reducing demand for some items more effectively than any management edict. "You're creating an environment where people are trying to do the right thing."
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Australia: A new era in e-procurement |
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FOR IMMEDIATE RELEASE
Weapon for NSW Clubs against Gaming Tax launched
Intertask Pty Ltd (Sydney Australia) today announced a weapon for NSW clubs against the Gaming Tax with the launch of it’s 100% Web Hosted e-Procurement platform - Conexa.
Using VirginBlue, JetStar and the banks as an example, Managing Director Mr. Frank Ditta said “why does VirginBlue, JetStar charge $10.00 more if you book a ticket over the phone and why do the banks charge up to $8.00 if you process a cheque ‘over the counter’? Because it costs more to process something manually vs. online”. He continues, “if companies like these have identified these savings by going online, why shouldn’t NSW clubs be able to have similar savings”
Mr. Ditta, who has been in the Business-to-Business (B2B) arena since 1997, says that savings achieved by the clubs goes directly to their bottom-line and they DON’T pay taxes on savings. …he continued “why should clubs have to raise prices and pay more tax – when they can lower their costs by using Conexa and they don’t pay taxes on savings!”
Conexa is a 100% Web Based e-Procurement platform which allows a club buyer to access their suppliers catalogues from their desktop where they are able to view their current suppliers catalogues (loaded Free by Intertask) and their negotiated pricing with those suppliers. Conexa allows the club management to control maverick spending and achieve documented savings of up to 30% - ALL of which goes directly to the bottom line of the club.
Conexa does not impact on any current I.T. systems or planned initiatives by the club and in fact, allows them to send purchase orders in whatever format (fax, secure email, EDI) that the supplier requires.
Conexa is used by the New Zealand Government, Optus incite, Transfield Services and is under trial by the CSIRO.
Intertask has launched a calculator for clubs at http://www.intertask.com.au/clubs_landing.html which allows them to see how much Conexa can save their club.
Conexa costs as little as $10.00 a day to use and Intertask is able to provide a quote for the use of the platform for a club who is interested. Simply go to www.intertask.com.au/clubs_landing.html and enter your details and click Submit.
For more information please contact Frank Ditta at frank@intertask.com.au
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