By now you may have had it up to your lower lip with the Internet and its impact on the way we live, buy and communicate. Dot com-itus, you've decided, sounds epidemic and untreatable. And while you¹re not averse to change, you might still be having trouble getting your brain around the concept of online procurement.
But the era of e-procurement is here. Ignore its impact on your job, company or organization at your peril. Between buy-side systems, online catalogs, aggregator sites and reverse auctions, the Internet provides powerful tools to save money not just on commodity goods but on specialized parts and services.
The Internet is already transforming the way purchasing and supply management professionals think, how they behave and their status in the corporate hierarchy. "With the Internet, purchasing people can eliminate a lot of those silly calls and faxes -- it will all be handled for you at the correct site," says Keven Gray, vice president of procurement and strategy for MaterialNet.com, Lake Success, New York. "e-procurement lets you spend more time on purchasing techniques, streamlining parts or improving certain areas, rather than the administrative baloney that has sucked up purchasing time for years."
Gray, himself a former purchasing manager for his family-run manufacturing concern, agrees with other purchasing managers and industry experts when it comes to the Internet as an agent of change. Impressed with the opportunities in the e-business arena, Gray left his "traditional" purchasing and supply management job and went to work for a dot com leveraging his knowledge to help his new employer. Gray and others making the leap see this new world through a very strategic lens: With the savings and efficiencies derived from online procurement, purchasing and supply managers are free to think more along strategic and holistic lines.
eProcurement is also causing a subtle but unmistakable power shift that favors purchasers over suppliers more than any other market development in memory. That means that purchasing and supply managers can behave more proactively.
Those two e-procurement developments in themselves force a third issue: Through strategic thinking and proactive behavior, purchasing and supply managers are likely to get absorbed in the decision-making nucleus of their organizations, increasingly reporting to the CEO or CFO rather than an administrative figurehead.DemandStar.com
Loll made the same move as Gray, leaving the traditional environment to pursue a career heavily focused on e-business, specifically e-procurement. This career shift should become more common as purchasing and supply management professionals see advancement opportunities in the e-business world. "The economic environment is ripe for evaluating and taking action on your next career move," says Loll.
Savings and Methods
Apocryphal and real-world e-procurement activities have captured the attention of investors, directors and chief executives. Savings can be gleaned from volume purchasing, either inside an organization or across an entire industry, like the planned procurement portal jointly developed by DaimlerChrysler, Ford Motor Co. and General Motors.
Other industrywide portals are being discussed or built in segments such as steel, retail, real estate, aeronautics and chemicals. But so far these online market exchanges that bring together multiple purchasers and sellers have generated more headlines and puzzlement than benefits or savings. In the automotive portal, it's unclear whether the price for a car part will cost GM and Ford the same, if one will pay more than the other or some combination, depending on the piece of equipment or service in question.
The savings from e-procurement can be sizable, according to consultancy Booz Allen & Hamilton Inc, McLean, Virginia. IBM estimates it saved 10 to 15 percent on $12 billion in expenditures in 1999, while Chevron is predicting 15 to 25 percent overall cost reductions on all goods and services purchased online this year.