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&PROCUREMENT AT WORK: A CASE STUDY*
E-PROCUREMENT- CHILD OF THE INTERNET AGE
What Is E-Procurement?
The Internet has had revolutionary effects on corporate purchasing practices. It recently became a major enabler of significant productivity improvements in various businesses. The companies offering so-called e-procurement solutions are positioning themselves as generators of considerable cost savings for those manufacturers consuming the largest share of the economy's tangible inputs. The overall productivity of the manufacturers often depends on their efficiency in purchasing those inputs.
E-procurement sites, also known as business-tobusiness (B2B) marketplaces, electronic supply chains, trading hubs, or trading communities, are essentially Web-based procurement networks in which one or more companies try to source their suppliers at the lowest costs possible [14]. From a conceptual standpoint, e-procurement does what tendering, its pre-- Internet world analogy, has been doing-it helps companies source input products and services at the lowest cost, while ensuring that those inputs meet technical and other (tender) specifications [14]. By making this process Web-based, e-procurement solution providers are changing the process in ways that go far beyond its mere computerization and automation.
The Rise and Future of E-Procurement
The emergence of B2B marketplaces, although not unexpected, has been very fast paced. In the second half of 1999, B2B e-commerce suddenly began to mean much more than end-consumer-oriented online auctions and digital versions of product catalogs. Despite the fact that it is in its infancy, e-procurement managed to reach about $145 billion in transactions in 1999 [15]. Forrester Research, a consulting firm, predicts that e-procurement will grow 99% annually, meaning the volume of transactions will reach $1.3 trillion by 2003 and account for 9.4% of the U.S. B2B market [2]. Goldman Sachs, an investment bank, forecasts that e-procurement transactions will reach $1.5 trillion by 2004 [2]. The increasing number of B2B marketplaces will accompany the growth of e-procurement transactions volume. There are currently between 600 and 1,000 B2B marketplaces and, according to some estimates, their number will increase to 10,000 by 2003 [2].
The predictions of astounding growth for B2B e-- commerce are not simple approximations based on trends. They are backed by the strong attractiveness of e-procurement to U.S. corporate buyers. A study of U.S. companies with revenues greater than $1 billion undertaken by Deloitte...