[From iSource Business, February/March 2002] The last two years have seen considerable growth in purchasing and supply management. Companies are implementing cutting-edge technologies that are creating new ways to reduce costs and improve efficiencies throughout the value chain. Many, such as Eastman Company, are using eXtensible Markup Language (XML) technology to create system-to-system connections with key suppliers and customers. In addition, collaborative forecasting and replenishment is seen by many to hold the promise of reducing inventories and costs through real-time connectivity.
As the industry becomes more competitive on the sell side due to the utilization of e-business tools, I have seen that the companies taking a leadership role to reduce costs throughout the supply chain have a competitive advantage. However, with all of the strides made to date in purchasing and supply management, there is still some maturing that must take place before the full potential of purchasing and supply management can be realized.
Over the past two years, numerous technology companies have come on the scene with various kinds of purchasing and supply management solutions. For all the new technologies that prove to be worthwhile and useful, many more are not. I believe we will begin to see a shakeout in the number of technology providers in the market today, as a result. This will happen when some of the providers fail to gain enough customer traction and simply fade away, while others will merge together or be purchased and integrated into larger companies.
Technology consolidation will also lead to the creation of a sense of standardization in purchasing and supply management, making it easier for organizations to choose the best technologies once the more problematic and inferior technologies have faded.
Focus on ROI
Unfortunately, many companies have invested in e-procurement technologies but have yet to realize the full potential of their investments. That is why I believe that companies will increase their focus on return on investment, getting as much value as possible out of the technology investments made in this area.
For many organizations this will call for a culture change. While management may have embraced e-procurement, in many organizations those individuals on the front lines - those who actually make the purchases - have yet to fully accept the concept or benefits of purchasing and supply management. Until these individuals adopt and embrace purchasing and supply management to the same degree as management, then no amount of technology spending and investment will change the organization.
The use of change management that outlines the whys for change, as well as the expectations and rewards, will also be key to removing the barriers that obstruct the total acceptance of purchasing and supply management. Management needs to continue to focus on communicating to employees the importance, results and benefits of using Internet-based tools. Providing tools that make their jobs easier goes a long way toward gaining acceptance, and the challenge is effectively communicating these benefits to those front-line employees.
While e-procurement has already altered the purchasing process within many organizations, there is still plenty of room for growth and change. As management places increasing emphasis on getting more out of technology investments and on promoting the use of e-procurement tools by those on the front lines, I believe there will be an even greater streamlining of the tactical aspects of purchasing, which is the true goal of purchasing and supply management.
What we will see is even less time being spent on the tactical aspects of purchasing, with more emphasis being place on value-added work. Ideally, we will get to a point where more time is spent making strategic purchasing decisions rather than finding suppliers, searching through catalogs and filling out procurement forms. The end result of streamlining the procurement process will be that organizations will be more efficient and better able to serve customers, resulting in a win-win for companies, management, front-line employees and, of course, the customers.
Steve Odom is director for worldwide indirect materials and services at Kingsport, Tenn.-based Eastman Chemical Company.