e-Procurement Continues Upswing

NAPM/Forrester report shows progress in adoption of online purchasing

Tempe, AZ  July 26, 2001  Despite trouble in the tech sector, an increasing number of organizations are using the Internet to purchase both indirect and direct materials, according to new report from the National Association of Purchasing Management (NAPM) and Forrester Research measuring the adoption of online procurement.

The quarterly report on online activity for both manufacturing and non-manufacturing organizations, the third NAPM/Forrester Research Report on e-Business, found that nearly 73 percent of organizations are using the Internet for indirect purchases, an increase of 2 percent over the figure for last quarter.

During the same period, 54 percent of buyers reported using the Internet to purchase direct materials, an 8 percent increase from last quarter's level. These online buyers reported sending 9.8 percent of their total direct materials order over the Internet.

Commenting on the results of the survey, Edith Kelly-Green, vice president for sourcing and procurement at FedEx, tied the moderate adoption rate to the broader economy. "The full impact of economic conditions are seen in a mixed progress by many of our responding companies," she said. "While the general trend is positive, I believe there is now more of a tendency to wait and see before making major strides. This does not mean that the goal is being reassessed, but that the timing may not be as quick as initially planned."

Bruce Temkin, group director at Forrester, concurred, saying: "The Internet continues to expand as a buying channel, but the panacea has lifted. Buyers realize that e-procurement takes more than surfing on supplier Web sites. That's why we're seeing a growing number of organizations changing their procurement practices  and running into the difficulties of integrating their purchasing systems."

The NAPM/Forrester report also showed a marked increase in the use of online auctions. Greater than 20 percent of organizations bought products or services through an online auction in the second quarter, up from 15 percent in the previous quarter.

Meanwhile, the number of large-volume buying organizations reporting online collaboration with suppliers dropped to 46 percent, down from the 56 percent level reported last quarter. Small-volume buyers increased their online collaboration activity to 41 percent from about 35 percent last quarter.

For the report, NAPM and Forrester Research received survey replies from supply management executives from both manufacturing and non-manufacturing organizations. To understand the difference in online behaviors of these organizations, the report analyzes three areas: the results of all organizations; the comparison of manufacturing and non-manufacturing organizations; and the comparison of organizations that procure more than $100 million per year and those that purchase less than $100 million per year.

NAPM and Forrester will release the next e-business report in mid-October 2001.