E-commerce is impacting the way that procurement is done.  What will change?

• Information will be available 24 x 7 and instantaneously
• Web assisted transactions will reduce administrative burdens
• Buyer will gain market power though information mining
• Buyer will be able to more easily compare supplier offerings
• Buyers and suppliers will be able to collaborate on supply chain planning

Multiple e-commerce environments will be available to the buyer.  What are they and what do they offer?

• One to One - Buyer and supplier communicate directly via the web. Essentially this is EDI but using the flexibility and power of the web. For simple repetitive transactions with large suppliers, this is a simple easy environment.
• "Storefront" - Suppliers offer their own web sites providing product information and availability as well as an efficient means for completing transactions.
• Buyer Hubs - Large buyer will come together to dictate how an industry will do business.  It may be as simple as requiring transaction formats or as complex as dictating industry wide technical specifications.
• Vertical Markets - Buyers and sellers will use a third party with provides a neutral site for making deals.
• Industry Exchanges - Sites where suppliers post available products and services, essentially new form of Yellow Pages.

A new set of best practices specifically focused on e-commerce are emerging.  Some of the initial practices are listed below.  Check this site periodically as we add detail in this most important emerging area.

Requirements Planning - Supply chain efficiencies represent the next profit improvement frontier for many industries. While this is not a news item, the explosion of e-commerce opportunities greatly facilitates achieving this vision.  Two specific practices are described below.

Collaborative demand planning - Orders are scheduled and deliveries planned and executive by the joint collaboration of suppliers, the manufacturer and its customers.

Forecast and production plans exchange - A subset of collaborative demand planning is simply sharing production plans with suppliers to maximize the planning horizon and thus insure material and services are provided just in time.

Market Assessment - It is not just the dot com world that is rapidly changing. Supply matters from petroleum to metals to paper to healthcare are rapidly evolving. The internet is a powerful tool for keeping pace with the changes as described below.

Online source material - People say you can find anything and everything on the web. It is true. From search engines to industry and government sites, and pages like Smart-Purchasing, information is available. For market assessments tap sources such as Forrester Research (www.forrester.com) or The institute of Management and Administration (www.ioma.com).  The government's Bureau of Labor Statistics (www.bls.gov) provides comprehensive monthly indices of pricing data for 10,000 industrial components.

Contracting - E-commerce is about the business of contracting.  For my money, there are three key aspects to understand and implement - they provide the largest bang for the buck! 

• Finding new suppliers - The web offers a great source to find new suppliers. Increasing the competitive environment has great value for the buyer. The web permits the buyer to search around the globe while sitting at her computer.

Online bids and auctions - The Ebay revolution is just as powerful in B2B as it is in C2C. Online auctions are taking off. For the purchasing community the opportunity to drive prices down though a the ultimate competitive process is exciting. However, there are some cautions:

   - Suppliers must be pre-qualified to insure the winner is someone you will do business with.

   - The specifications must be crystal clear or you may end up with a product of inferior quality.

   - The terms and conditions must be comprehensive and clear so you have an apples to apples comparison.

Insight of these concerns, we recommend start small and learn in low risk areas!

Consortium purchases - Scale has value. Until recently most scale was achieved through aggregating the volumes across a corporations business units.  Over the past 5 years some independent corporation have banded together to jointly purchasing common materials. Today with the internet, horizontal and vertical consortiums are forming to leverage volume and share best practices. (See the Consortium section of this site for details.)

Administration - Paper processing is the bane of all purchasing executives. None want to accept the idea that half or more of their departments time is spent processing transactions. All want to shift that time to value adding activities such as requirements planning or contracting.  E-commerce is facilitating the shift from paper to value.

All paperwork via the web - This is true win-win for the buyer and the seller. The picture below tells the whole story.

Logistics - Transportation has always been on the forefront of technology use, the transportation industry invented and implement EDI.  This leadership position continues.

Online shipment tracking - All logistics managers sleep better when they know where their shipments are.  Both FedEx and UPS offer powerful e-commerce storefronts.  Look at these sites and ask does your transportation provider have comparable information.

Pooled inventory - One of the logistics best practices is to substitute information for inventory.  The progress in this area has been largely internal to a corporation.  With the web, companies are increasingly sharing inventory with other users.  The focus thus far is on critical spare parts where the unit price is very high and usage is sporadic.

Supplier Development - Getting the most from your suppliers is a critical value add for purchasing.  The web makes gathering and discriminating information easier.

Online supplier evaluation - One of the inhibitors to implementing supplier development programs is the administrative effort required to obtain and analyze the performance information.  Using the web to trap the data, is very easy and cost effective. Equally, the web can be useful in disseminating the information with your company and with our suppliers.

June 9, 2000
Copyright © 2000 TransSource Corporation