DILEMMA: A friend keeps extolling the virtues of e-procurement. To be honest, I'm not really sure what she is on about but I'm too embarrassed to reveal my ignorance. She's normally such a cynic about new IT systems, so there must be something in it. How do I figure out whether it is relevant for my business?
ISSUES: E-procurement sounds hip but all it really means is purchasing goods and services over the internet rather than by mail, phone, fax or in person - anything from e-mailing an order to someone to completely automated reordering and updating of your stock control and ledger systems.
How do you decide how far you want to go? Start by asking your finance director what proportion of your costs are represented by purchased goods and services. If he or she doesn't know, you've got more fundamental problems to solve.
Savings may arise from reduced purchase costs, administrative efficiencies, the opportunity to buy in smaller quantities or collectively with other smaller companies. Once an e-procurement system is set up, purchases are usually made direct from suppliers without complex internal approval processes or involvement from a purchasing department. To make this work you need to review delegated authorities and set up good monitoring processes.
You also need to consider the adequacy of your IT plumbing and whether a separate web site is required to reduce security risks. What about payment processes? Will suppliers provide e-procurement credit cards that can be used only for specific purchases and have credit limits, just like ordinary credit cards? And don't forget about credit terms. They may be inflexible.
Reviewing your approach to purchasing is useful whether you opt for e-procurement or not. If you do, don't forget about the training implications and consider starting with low-risk, low-value purchases, such as stationery or travel, to develop experience.
- Think before you pick up the phone to a consultant.
- If any of your friends use e-procurement, ask them to talk you through it. Humility is a gateway to knowledge.
- Get suppliers to put you in touch with other customers using it.
- Make sure your IT plumbing can cope.
- Look at how people buy your products. You may need to change the way you sell as well as the way you buy.