Best Practices in e-Procurement

Aberdeen cites 10 keys to success in e-procurement implementations

Boston  December 10, 2001  e-Procurement works, but it works best when organizations use it to support a broader procurement strategy.

That is one of the conclusions found in a new report released today by technology consultancy Aberdeen Group.

In the report, "Best Practices in e-Procurement," Aberdeen cites 18 enterprises for successful deployments of Internet-based procurement (e-procurement) and supply chain technologies, as well as the solution providers that powered these enterprises' implementations.

Through interviews conducted over several months with more than 50 enterprises that had implemented Internet-based procurement automation, Aberdeen identified best practices implementations based on such criteria as business and implementation strategy, scope of implementation, documented savings and return on investment (ROI).

"At a time when cost control is vital to survival, forward-thinking organizations are viewing e-procurement as a key strategy for controlling costs and maintaining profitability," said Tim Minahan, vice president of Aberdeen's supply chain research practice.

The consultants found that e-procurement solutions targeting indirect or direct spending, or sourcing, have delivered cost and process savings to enterprises.

Specific example's of accrued benefits cited in the report include 86 percent reductions in order-to-fulfillment cycle reductions at Eastman Chemical Co. (solution providers: Commerce One, Diligent Software Systems [formerly Webango]); a reduction in purchase request to goods delivery from 17 to 19 days to two days at FedEx Corp. (Ariba); a 50 percent reduction in sourcing cycle times at Sun Microsystems (iPlanet, FreeMarkets, Procuri and ICG Commerce); and a 40 percent reduction in purchase order processing costs at facilities service company UNICCO (elcom).

The report, an abridged version of which is available on Aberdeen's Web site, lists 10 keys to e-procurement success, including the call to view technology as an enabler of a larger procurement strategy. Organizations that have successfully implemented e-procurement "do not view e-procurement as a strategy itself," the consultants advise.

Companies should do a preliminary spend analysis prior to any implementation and develop a thorough plan for deployment. Aberdeen further found that successful companies map their internal processes before an implementation to establish benchmarks and to identify inefficient processes.

Other keys to e-procurement success: top-down executive support, combined with programs to drive end-user adoption and a designated champion to manage the deployment; a carrot-and-stick approach to supplier adoption; a strategy that first addresses so-called "low-hanging fruit," or those benefits achieved most easily and quickly; and, finally, constant measurement of such metrics as user adoption, contract compliance and cost savings, among others.