Ebuy

Headnote

Supply chain managers in all industries can get discouraged by the gulf between the e-procurement promise and actual experience. But the savings are worth it if you make the commitment.

The gulf that often lies between expectation and reality has become a common theme that dogs many new technology applications-including e-procurement. Despite projections for rapid adoption and huge benefits, the use of technology to improve the procurement process has been slow to take off, and, in many cases, to pay off. Internet research firm eMarketer says that only 8-10 percent of the Global 5000 companies have implemented e-- procurement software. And most of those companies are piloting the e-- procurement technology, not fully deploying an operational model.

Many companies that have made the investment echo a familiar technology theme-disappointing returns on their investments. Expected e-procurement savings have been revised downward from double to single digits. E-procurement systems were supposed to work for most types or categories of purchases: They currently cover only a few.

Yet under the right circumstances, e-procurement solutions have brought substantive improvements. Making purchases online helps eradicate maverick buying. It secures better prices and contract terms; it reduces the costs of their procurement processes. And companies that implement e-procurement systems can shave months from the time it takes to realize sourcing savings by leveraging the data that gets captured in every transaction.

How do leaders achieve their e-procurement goals? It is a complicated process, but generally they share two approaches. First, they view e-procurement not as a standalone technology, but as a support system for their bigger strategic supply management picture. Second, the frontrunners have learned key tactical lessons from the past. They successfully confront the complexities of buying dozens-if not hundreds-of types of goods and services through three key actions:

* ensuring they target the right categories and provide the appropriate solutions, including effective content management;

* choosing platform and standalone functionality that best fits their needs; and

* devoting adequate attention to supplier and user adoption issues.

Preparing to Take Off

E-procurement and technology-enabled strategic sourcing are sometimes used interchangeably or otherwise confused with one another. It hasn't helped that initially many e-procurement software providers claimed strategic sourcing benefits as their own. In reality, the two are distinct,...