Adapt & AdopteProcurement

Do we have time to "wait and see?" Many say no, including this purchasing professional that describes himself as enlightened to the benefits of e-procurement.

Purchasing folks are hardened skeptics - an evolution from constantly being "sold" by the sales/marketing arms of our suppliers. As a result we are not what marketers would call "early adopters."

Compounding matters is an endless stream of seemingly outlandish claims made by e-procurement Web sites, cyber-prophets, industry pundits and advertisers. Even the terms used ... e-procurement, digital marketplaces, B2B, reverse auctions, forward auctions, dutch auctions, market makers, exchanges, market liquidity, buying rooms, collective commerce, aggregators, extranets, etc ... can make us believe their validity.

Faced with this landscape, I (with most of my purchasing brethren) invested time rationalizing why online bidding wouldn't work. Why should I assume the risk? Heck, I spent years crafting an efficient supply chain and forging long-term relationships with top-notch suppliers. So, rather than intelligently creating a disciplined plan to locate e-procurement enablers, run pilot tests and develop metrics for evaluating e-procurement solutions, I complacently chose to view the Internet as a nice extension of the Thomas Register or Machinist's Handbook - for information gathering only. My tune changed drastically when I was mandated to develop a corporate e-procurement strategy.

Under this gun, we scoped a comprehensive project to review the transactional e-marketplaces based on promotional literature, trade magazine articles, financial publications and Internet searches. Mostly the project succeeded in failing - that is failing grades for hundreds of sites that were neither applicable to our sourcing objectives nor did they provide the streamlined functionality they touted. But the project was still dramatically successful.

Despite the abundance of sites that promised but didn't deliver, several Web sites enabled us to secure higher-quality sources, providing both raw materials and outsourced services, at great savings, in hard dollars and in time. In short, a procurement grand slam. These amazing successes transformed me into an evangelist for e-procurement, and this is my lot today. I can't tell enough people, or yell loudly enough, about how the good electronic marketplaces are fundamentally changing industrial procurement forever. Our department located savings of nearly 10 percent of our total materials spend in less than two months of online bidding! This process would have literally taken years of concentrated efforts to obtain the same results using our pre-existing methods. So compelling was the experience, I went to work for one of the very marketplaces with which I had experienced success. I've met purchasing individuals from all industries, from small and large organizations, that have optimized their supplier pool, saved money and re-engineered the relationship to focus on price, quality and on-time delivery. The days of unquantifiable relationships are dimming. The new metrics illustrate the critical, measurable impact procurement professionals have on the bottom line.

Now it is the time to get off our collective duffs and try this stuff. Many sites are still in their infancy, but every month (yes, the pace of change is that quick!) the good ones get geometrically better and distance themselves from the pack. You can be as conservative or as aggressive as you like. Many sites allow buyers to try them for free, and the suppliers pay small transactional charges as orders are placed. An error many first time users commit is that they send RFQs/RFPs for items that have little chance of attracting the most competitive bids. They often get a poor result and quickly conclude that e-procurement does not work for them. Using this sort of skewed sampling, whether inadvertently or in an effort to preserve the status quo, is a disservice to themselves and their employers. The right requirements sent to the best Web sites will yield savings in both material and processing costs. (Imagine never having to send another fax again.) You only need look as far as this author to witness the profound effect these "winners" can have on purchasing practitioners. eProcurement is a powerful tool. Those who embrace it early on will be positioned to lead their organizations as they move into this brave new world.