Download Implementing e-Procurement: A Practical G T Shrinking Costs and Transforming the Way You Deal with Suppliers and Customers (Hawksmere Special Briefing) PDF

TitleImplementing e-Procurement: A Practical G T Shrinking Costs and Transforming the Way You Deal with Suppliers and Customers (Hawksmere Special Briefing)
File Size329.5 KB
Total Pages84
Table of Contents
                            1: The e-procurement journey
2: Alternative approaches to e-procurement
3: Writing the business case
4: How to choose the right software vendor
5: Catalogue management and content management
6: Change management
7: Project management of an e-procurement solution
8: Case studies
Document Text Contents
Page 1



Maureen Reason
and Eric Evans




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• Better financial information (commitments and accruals)

• More control of capital/project spend.

All of the above:

• take time to build up sufficient mass to make a difference

• cost a lot to measure in the first place, let alone to measure post-implementation

• take you into the realms of process re-engineering (marginal when it comes to

purchasing, much more when it comes to financial transaction processing)

• take you into benefit areas (like finance) which may not be yours to claim, or may

already be claimed by someone else

• very frequently evaporate into a black hole.

Of course, all of the above then have to be tightly related back to your plans for introducing

e-procurement into the company and the considerable costs of doing so.

What do other companies do?
Listed below are some indirect quotes from companies who are in the process of rolling out

e-procurement systems:

Major airline

• ‘De-centralised procurement leading to lack of control’

• ‘Poor compliance to contracts’

• ‘Cost reduction in indirects’

Financial services company

• ‘Desire to further centralise purchasing function’

• ‘Free procurement staff for value adding work’

• ‘Reduce indirect procurement costs’

• ‘Integrate legacy systems’

• ‘Best practice procurement’

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Electronics company

• ‘Centralise purchasing of indirects’

• ‘Be able to assimilate other operating companies as they grow’

• ‘Procurement as a revenue generating operation’

Pharmaceutical company

• ‘Supplier rationalisation’

• ‘Lack of visibility of purchasing activity’

FMCG company

• ‘Standardised purchasing processes across each operating company to demonstrate


• ‘Become a launch-pad for e-commerce in the company’

• ‘Demonstrate the company’s ability to implement consistent change across all operating


• Ultimately deliver benefits equal to £100 million per annum (on a total spend of £1.1

billion per annum)

Demonstrating the benefits
As stated earlier,measuring the benefit is reasonably straightforward and scientific.However,

demonstrating the benefit is a lot more difficult, particularly where anything that doesn’t hit

the bottom line doesn’t count.

What can you do to demonstrate benefit? There are a few options:

1. Cut budgets


This means that the benefits derived from sourcing and negotiation don’t disappear on something

else instead.


This will be a highly unpopular way of measuring with other business managers,who will not

see better purchasing as an influencer of their own success. It will need strong sponsorship

right from the top to force it through.

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General Mills (USA)
General Mills in the United States of America has an annual turnover in excess of $6 billion,

and is on the Fortune 500 list of companies.In 1999 the company upgraded its e-procurement

arrangements and moved to PurchasingNet, the US service provider.

The Director of Services and Supplies Purchasing believes that this move has helped the company

to achieve its objectives and streamline all business processes,including procurement.The system

now provides e-procurement activity in direct ordering,approval ratings,and self-service order

status checking.The company has also integrated the back-office components of invoice matching.

The business is now able to deploy personnel to where they add more value – the strategic

elements of the business.There is now considerably less emphasis on routine and administration

work,and more emphasis on managing contracts,developing supplier relationships and leveraging


Although the company is reluctant at this stage to discuss specific figures, there is impressive

evidence of a reduction in maverick buying.The view within the business is that because the

software is so easy-to-use, requisitioners prefer to use the system rather than place orders for

themselves.When the system was being implemented at the pilot stage, there were requests

from people outside of the pilot programme to be included.

One of the less publicised benefits of e-procurement is access to good reliable information.

General Mills believe that the decision support tools that accompany e-procurement are such

that they now have much more valuable negotiation tools and information.

The approach which General Mills have taken is to include selected supplier catalogues in

their purchasing system.They use a catalogue junction software system that allows the organisation

to update online catalogues within three or four minutes.Catalogues tend to be updated annually

or in some cases quarterly,and responsibility for managing updates is with suppliers.General

Mills have however, retained control over the content of the catalogue and have the right to

restrict information that is included by suppliers.

The Far East
After a slow start, business-to-business e-commerce is beginning to come to life in Asia. Sales

are expected to rise from $2 billion in 1999 to $32.6 billion in 2003.This significant trend has

serious implications for the way businesses act on a worldwide basis.Asia is already a natural

manufacturing centre for a high percentage of the world manufacturing capacity in a wide-

range of products, from computer chips through to trinkets and industrial products.As such

it is a natural trading partner with the Western world.

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Using the web, small and medium-sized computer peripheral manufacturers in Malaysia, for

example, can develop relationships with large computer manufacturers in the United States.

As the virtual world grows, size and scale become less significant. Communications via the

Internet have proved to be a critical factor in opening up global ways of working.

In Asia, B2B commerce is significantly greater than B2C commerce, where consumers have

resisted the idea of shopping online because of security concerns and the lack of computer

facilities in many parts of the Far East. Exporters, however, are being pushed online by large

companies in the West, in both industry and retailing.The Thai Government has even enacted

legislation that insists that companies complete their import export documentation online.

The trend to e-commerce is not just in Internet procurement.One of the biggest growth areas

is supply chain management., for example, has seen a surge in requirements for

supply chain management solutions to help high-tech manufacturing companies share and update

forecasts with their suppliers,transmit orders,and exchange price quotations from a web-base.

To give you an insight into how this works,one company,TSMC,a huge integrated circuit chip

manufacturer, allows customers to do just about everything online. The customer can

interrogate capacity of the company’s plants, follow order processing within a typical six to

eight week manufacturing cycle, track the flight details of the shipments, and even monitor

manufacturing schedules to gain confidence that deliveries will be made on time,thus reducing

the need for stock within the pipeline.

There is no doubt that the use of Internet trading by companies like Matsushita,Motorola,Siemens,

and others has forced suppliers in the Far East to take on the technology.Unlike EDI,however,

the price of admission to the Internet trading world is simply the cost of setting up a web site

and the monthly running charges.This allows many small and medium-sized enterprises,which

were unable to join EDI trading communities, to begin trading electronically.

For many Western companies the Far East has seemed like an obvious proving ground for testing

e-procurement technology. Taking suppliers with no legacy systems, and developing e-

procurement systems with them,has been much easier than dealing with companies that have

constraints imposed by their ERP systems.General Motors,for example,now does almost 20%

of its retail business in Taiwan online.A further 10% of business starts online and ends with

the sale completed in the showroom.The complete sale via e-procurement will increase as

soon as e-banking payment solutions are implemented.

This change in the way business is conducted means significant changes for the role of

intermediaries between manufacturer and customer.The showroom role changes to merely

holding a few display vehicles.Test drives are scheduled online, vehicle servicing is arranged

online,and the manufacturer is able to gain much more direct feedback from customers,which

is useful in shaping design and product trends for the future.

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