Originally Published - 4 January 1999
Electronic purchasing systems are set to revolutionise the way in which ?32 billion pounds of business to business sales are conducted, cutting suppliers and undermining regional price variations, according to a new report by Warwick Business School.
The new study by Warwick Business School researcher Dr Simon Croom, examined developments in Electronic procurement systems used by a number of companies and public sector bodies for procurement of Maintenance, Repair and Operating (MRO) equipment supplies such as stationery, office equipment and catering services. In the UK alone ?32 billion a year is spent by companies on such items. By developing Electronic-based procurement packages with Internet links direct to company approved suppliers, purchasing organisations will gain immense strategic advantages:-
- Effective centralisation of the purchasing function gives purchasing managers greater leverage over suppliers in price negotiations.
- Electronic procurement makes every transaction visible giving comprehensive information on the whole of an organisation's purchasing activities, even where there are significant numbers of individual budget holders.
- The global reach of the Internet can allow electronic commerce to exploit price variations between countries for the same product - even exploiting price differences between branches of the same manufacturer in different countries.
- Steps in the supply process can be reduced and the number of suppliers cut.
- Compliance with a company's list of authorised suppliers can be assured.
- Time spent processing an order can be cut from 2 days to 16 seconds and administrative costs can be cut by two thirds by switching from manual processes.
Dr. Croom commented: “The impact of Electronic procurement will be either to drive the Purchasing function into extinction, or alternatively to raise its status onto a far more strategic level. The opportunities are there for all organisations to improve their purchasing effectiveness; the main question is whether the Purchasing function will capitalise on this opportunity.”
Purchasers still have some concerns about security of electronic information as well as the mechanics of developing an electronic based supplier catalogue - but should large numbers of companies implement such Electronic purchasing systems then many links in supply chains will probably have much more to worry about.
For further information please contact:
Dr. Simon Croom Tel: 024 76 528222 or 0973 471728
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