“e” Marks The Spot

eProcurement may be a goal, but it is also a process, a journey, if you will, that takes a company’s purchasing department from the days of phone and fax into the Digital Age. As with any journey, the move toward e-procurement requires a roadmap showing...


As part of the change management process, UTC has been careful to chronicle the tremendous amount of learning that has taken place as it implements new aspects of e-procurement. Documenting key decisions, processes and results with regard to one division can ease the introduction of new systems into other areas of the company. UTC has actually institutionalized the learning process by creating a database available to its worldwide employees through the company’s intranet. For example, staff can learn why the company selected a particular supplier, what the criteria were and how the deal was structured.

Finally, management buy-in and support are again critical for ensuring that decisions get implemented. Line management was particularly instrumental in adopting FreeMarkets, according to Brittan, simply because the line managers themselves appreciate the organized structure of the auction process and the quick, measurable results that the auctions produce. Consequently, Brittan has been able to rely on these managers to intervene when necessary to ensure that the e-procurement process moves forward.

Purchasing's Next Frontier
UTC’s e-procurement initiatives have clearly had a tremendous impact throughout the company. The projected cost savings alone speak for themselves. But e-procurement has also had the effect of raising purchasing to the level of a core competency within the organization. Awareness of purchasing and supply management has increased significantly throughout the corporation, according to Brittan. "Purchasing was sort of a backwater, and it no longer is," he says. “The company is realizing that a high percentage of our cost is in the supply base."

UTC continues to expand its e-procurement program to embrace additional divisions. But one of Brittan's primary interests these days is designing methodologies for measuring the non-price savings generated by e-procurement systems, such as cycle-time reductions, quality improvements and improved processes. Brittan is working with teams of MBA students to develop these methodologies. By July, one team had designed a process for measuring quality savings, and UTC is running a pilot program in one of its divisions to test the methodology. Another team was working on material flow lead-time issues. Brittan clearly believes that measuring non-price savings is purchasing's next key challenge, and his enthusiasm for the topic is manifest: "This is exciting stuff. It’s like the wind and currents. You don’t see them, but you know they’re there, and they have an absolute impact. The company that can manage and measure this stuff will have real competitive advantage."

After more than three years leading UTC’s e-procurement effort, Brittan still speaks with excitement about being on the cutting edge of purchasing: “I love supply management, because we are smack in the middle of this whole e-business revolution. Every aspect of life is going to be affected by the Internet, but procurement is there now. It’s not tomorrow, it’s now."

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