Purchasing in a dot.com World
Richard G. Weissman, C.P.M.
Richard G. Weissman, C.P.M., Director of Purchasing, PurchasingCenter.com, Inc., Burlington, MA 01803, 781.993.2806, www.purchasingcenter.com, firstname.lastname@example.org
85th Annual International Conference Proceedings - 2000
Abstract. The explosion of web-based business to business to business services, coupled with rapid advances in electronic commerce tools, applications, and opportunities, is transforming the traditional business environment. Purchasing professionals must respond to these changes by quickly developing an electronic commerce roadmap that will enhance both themselves and their organization.
This paper will focus on developing a personal electronic commerce roadmap that will assist the purchasing professional in providing the maximum value to their organization while maintaining their position at the forefront of this business transformation. Concentration will include an overview of e-commerce trends, the use of on-line business research and resources, identifying and leveraging vertical Internet communities, managing cyber relationships, and a glance into the future of purchasing in a "dot.com" world.
What is E-Commerce? E-commerce is term that brings chills to many buyers, but it is nothing to be afraid of. It is an all encompassing term for managing and conducting business within a digital environment. Have you ever sent an e-mail to a supplier to check on the status of an order? Have you ever logged on the Internet to research a supplier or find a source? Does your company have telephones, fax machines, and computers? If you've answered yes to any of these questions, you have been involved in e-commerce! Electronic commerce is nothing more than utilizing electronic based business practices. We've all done them, but let's take the opportunity to demystify the process.
Buyers cannot pick up a trade magazine, attend a trade show, or even turn on the television without being bombarded with the latest of e-commerce solutions that will help them do their jobs better, make more money for their companies, and improve customer satisfaction. Are these claims right? Yes, ultimately they are. However, choosing the right e-commerce tools that match your organizational and personal needs is an important step in climbing the e-commerce ladder.
The business to business segment of e-commerce is exploding. Some surveys report that B2B e-commerce will exceed $1 trillion dollar in a few years. Currently, business to business commerce is larger than business to consumer commerce by a multiple of 5! This quiet but building revolution will find its way into all corners of purchasing and supply management in a relatively short period of time. Organizations that fail to use elements of e-commerce will be at a distinct disadvantage.
This goes for buyers and sellers as well. Those selling organizations that do not react to buyer requirements to become e-commerce enabled (even just an e-mail account!) will quickly loose business. Conversely, those buying organizations that cannot access pertinent information on supplier web sites or through other means will be forced into doing business with suppliers in an ever-dwindling and sophisticated pool.
Purchasing professionals are once again being asked to reinvent themselves as we transform into a "dot.com" world. Were do we fit? What do we do? How do we do it? What do our companies need? What do our suppliers need? How do we navigate through the e-commerce maze? These are opportunities to improve the performance of your organization while also improving your personal skills and enhancing your career.
E-commerce in Supply Management. Purchasing and the Internet are a natural fit. Communication within the supply web is a critical aspect of supply chain management, and good purchasing and supply managers are strategic communicators with suppliers, buyers, corporate management, and customers. The Internet provides an inexpensive communications network with secure commerce capabilities. Safety issues have been eliminated.
The majority of buyers have Internet access. According to a December 1998 Purchasing Magazine survey, almost 90% of buyers have Internet access, and almost 75% of those surveyed are using the Internet for purchasing related applications. The three main uses of the Internet are:
- Research and Sourcing. Buyers are locating suppliers and product data, researching financial and technology trends, and reading current industry and market news. Buyers can also access and join virtual vertical communities to learn about specific industries and markets, join a community of buyers with like interests and challenges, and buy on line.
- Communication and Collaboration. Purchasing professionals are utilizing e-mail, intranets (private networks accessed only from within a company), and extranets (private network accessed only by designated trading partners). Communication within the supply web is increasingly becoming easier.
- E-commerce. There is a growing acceptance of e-commerce tools and applications, including sell-side applications, electronic marketplaces, online trading communities, and business to business auctions. Many organizations are beginning to test the waters of e-commerce. Some organizations are starting with lower cost products such as MRO items and industrial supplies. Once their comfort level increases, buyers are transitioning over to higher value and more critical items. Business to business auctions are also becoming popular as buyers gain a comfort level with business to consumer auctions in which they may participate.
According to the Purchasing Magazine survey, purchasers will continue to use the Internet to research suppliers (95%), learn about supplier's products (82%), communicate with suppliers (81%), get technical data (73%), use supplier catalogs (64%), and track technology trends (62%). However the study also shows that only 33% of those surveyed plan to conduct transactions. This number is expected to grow as buyers become more comfortable in conducting online transactions and the supplier community begins to force the use of e-commerce applications. These transactions will not only be order based. Suppliers are beginning to reduce and eliminate printed material and are depending on electronic methods of information delivery, including product data, product support, and order processing updates. It will be only be a matter of time before suppliers will accept purchase orders in an electronic format only.
Cost, service, and customer support continue to be major business drivers. E-commerce allows for lower transaction costs, improved customer service, and the instant communications that every segment of the supply chain is requiring. The Internet, as well as other methods of electronic commerce, will continue to drive down the cost of transactions and improve service levels at all levels of the supply chain. Simply, economics will drive the use of the Internet and other forms of electronic commerce and communication.
Let's look at an example of the Internet improving communication and service levels. All buyers are at the mercy of transportation providers, be it large truckload shipments, airfreight, or delivery by UPS. Prior to the Internet, it was difficult for buyers to track a shipment from a supplier. The advent of computerized electronic tracking systems, coupled with the Internet, allow buyers to have immediate information as to the whereabouts of a shipment. Test this with the next Federal Express shipment that you receive. After the driver scans the airbill, the data is uploaded into the Federal Express computer and is available on the Internet. Before the driver gets back in the delivery truck, real time information is on the Web, including the time the package was received and who signed for the package. No wait, no tracking, no callbacks. Instantaneous information that improves the process. E-commerce!!
The same goes for other trucking and delivery information. Satellites, computers, and the Internet allow you to track shipments all over the world. Are Global Positioning Systems (GPS) parts of e-commerce? When they track shipments and allow for customer service, they are. E-commerce has far reaching implications.
Electronic Commerce Benefits. What kinds of benefits are buyers enjoying? Many purchasers report that they have saved time in sourcing products and services, identifying new sources of supply, and creating quotes. This allowed them to work on more strategic tasks. Another unexpected byproduct of utilizing the Internet is the ease of introducing competition back into the marketplace. It is far easier to identify new and alternative sources of supply and quickly send a quote via e-mail or through a web site than through the mail. Response time is improved and the ability to quote several sources of supply is enabled. Competition has the potential to drive down costs.
This increased competition also comes with a price. Many suppliers embrace relationship selling to such an extent as to almost eliminate competition. Buyers, prior to the advent of e-commerce tools and applications, may have found it difficult to find and manage new sources of supply, and almost become victimized by existing relationships. E-commerce has opened up the market. While relationships are very important to supply management, over dependence on any one supplier is inappropriate and potentially damaging. Purchasing today embraces both competition and relationships. This allows the buyer excellent flexibility.
Barriers to success. There are many barriers to success. Unfortunately, many buyers lack the computer skills necessary to effectively utilize e-commerce tools and resources, and others may be restricted by company policies against using the Internet. Needless to say, these buyers need to catch up quickly, and those restrictive companies need to be come enlightened. Technology is available and inexpensive. Excuses from the buy side are quickly evaporating.
Ineffective marketing from the sell side is also a problem. Many suppliers have excellent e-commerce tools and methods, but they have failed to inform and train their sales forces of their existence and use. Buyers need to continue to query suppliers about their existing tools and future plans to enable e-commerce tools and applications. Buyers need to lead the charge and deliver a wakeup call to suppliers who are lagging behind.
E-commerce Roadmap. Purchasers must build an e-commerce roadmap in order to be successful in a "dot.com" world. This roadmap must reflect both personal and organizational requirements.
- Align business goals. Make sure the goals of your supply management organization match the goals of your business and customers. Only then can you translate these requirements to the supplier community. It is important that this alignment reflect the entire business function, not just e-commerce-related processes. A bad process that is automated is just an automated bad process. The rewards come from automating good practices and identifying those that would benefit from automation.
- Assemble a cross-functional team. Do not do it alone. There are levels of expertise throughout your organization. Seek out team members with passion, subject matter knowledge, and commitment.
- Develop a technology plan. E-commerce need not be expensive, nor a proprietary software program. Remember that e-mail is an element of e-commerce. Review basic technologies and business needs. Start small and grow the process. Speak with your suppliers and customers. Design an e-commerce process that is applicable and scalable to your business and organization. Benchmark, research, and investigate. Technology is growing at a very rapid pace, and not every latest trend or tool may be applicable. Be open but cautious.
- Motivate and train employees and suppliers. E-commerce attitudes and passion will vary greatly. Buyers may have to sell the merits internally and with suppliers. Make e-commerce education and training part of supplier and employee reviews. Set reasonable and obtainable expectations and track performance.
- Review, revise, and revisit. E-commerce is exploding, and changing on a daily basis. Be prepared to react to those changes. Purchasing professionals are an adaptable bunch!
Summary. Purchasing in a "dot.com" world will be a challenge, for sure. But purchasing professionals are used to meeting challenges. E-commerce will finally allow purchasers to increase their effectiveness and to continue the migration towards strategic supply management. The Internet will continue to enhance communication and collaboration within the entire supply web. These benefits are well documented. The next frontier of the Internet will focus on commerce, purchasing products and services online. Once buyers and sellers embrace commerce, the full effects of the Internet in the supply management world will be felt.
The "dot.com" world can be mystifying and imposing to many, but that not need be the case. The addition of e-commerce tools, coupled with the progress and sophistication of the purchasing profession during the past decade will allow the buying community to prosper. The business-to-business explosion is happening. Decisions, applications, and processes are being created at this very moment that may affect the future of our profession. Buyers can choose to be in the game or watch from the stands.