Online Buying Continues Upswing

ISM/Forrester report: Online purchasing of direct, indirect materials rises in second quarter

Tempe, AZ  August 5, 2002  Online purchasing increased substantially during the second quarter, marking a return to last year's upward trend, according to a new report from the Institute for Supply Management (ISM) and technology consultancy Forrester Research.

The seventh ISM/Forrester Research Report on e-Business found that the percentage of companies purchasing direct materials online surged to 64.6 percent in the second quarter, up from 53.3 percent in the first quarter. More companies purchased indirect materials online, too, rising to 84.2 percent of respondents for the second quarter from 78.1 percent for the previous quarter.

Although most companies are still in the early stages of online purchasing, more non-manufacturers reported significant adoption of the Internet in purchasing activities than manufacturing companies.

"This quarter's survey showed encouraging movement," said Edith Kelly-Green, spokesperson for ISM and vice president and chief sourcing officer at FedEx. "Organizations are buying significantly more direct and indirect materials online. Although not considered a trend, it does indicate that there may be a rise in demand, that companies see the value of online purchasing and, as also indicated by the results, suppliers are improving their online offerings to their customers."

"This quarter revealed a return to the adoption trend seen in surveys conducted throughout 2001," said W. Daniel Garretson, senior analyst at Forrester. "Despite the difficult economic environment, we are seeing growth in using the Internet to purchase  particularly among manufacturers  picking up where we left off at the end of 2001."

The report also indicated that more than one-third of large buyers bought goods or services via e-marketplaces or private hubs. Almost one-third of buyers used an enterprisewide procurement tool that incorporates the Internet. And for the first time, more than half of responding companies (51.5 percent) reported collaborating with suppliers online  compared with only 48.2 percent in the prior quarter  and buyers also reported higher levels of satisfaction with their suppliers' online capabilities.

The report, developed in fall 2000, is based on surveys of supply management executives from both manufacturing and non-manufacturing organizations.

The next release of the ISM/Forrester Research Report on e-Business will be October 15, 2002.