NAPP meeting: Change may create profit opportunity
By Agatha Ciancarelli -- Purchasing, 3/25/1999 7:00:00 AM
As MRO buyers well know, online purchasing tools can help reduce costs, improve productivity, and increase service levels. What may be less apparent to some is that use of online buying tools can help create new opportunities for profit.
That was one of the messages delivered by speakers at this year's meeting of the National Association of Procurement Professionals (napp). During the three-day annual session, attendees were exposed to different ways that companies have incorporated electronic commerce and their views on how it transforms the role of procurement and its relationships with suppliers.
"The Internet fundamentally changes everything," says Dan Roth, director of electronic commerce and business networks, Arthur Andersen. "It improves the process of reporting and controlling information. It reduces administration costs per transaction, and it offers better terms from suppliers."
Throughout the conference, speakers reinforced the idea that electronic initiatives offer competitive advantages--not only as a way to lower buying costs and improve service, but also to get purchasing professionals out of day-to-day transaction processing. Ultimately, buyers are then freed to work on building improved and stronger relationships with suppliers and other strategic activities.
"There are a host of tools available to drastically change the buying process," says Ted Ramstad, director of supply chain management, Perot Systems.
An example of a company that has created a competitive advantage through electronic commerce is W.W. Grainger, says Ramstad. Grainger has implemented a digital marketplace of more than 250,000 MRO products from more than 3,000 suppliers. This allows more buyers and sellers to conduct business, he says. "It provides optimized distribution services and real-time information."
"Electronic commerce can be used as a tool to drive down mutual costs of doing business," says Monica Luechtfeld, vice president, contract management and sales administration, Office Depot, and president of the Open Buying on the Internet (OBI) consortium.
"Office Depot has 50,000 users now ordering through the Internet," says Luechtfeld. "In the past, buyers had expressed concern with security and integrity issues surrounding ordering and payment processes. The information is on our business-to-business private Web site, which is protected and secured to do daily electronic transactions for office supplies. Eighteen percent of our orders from corporate customers come to us electronically; our objective is to get that to 30% this year.
"Our experience with implementing electronic commerce solutions is that the most difficult thing to change is the business process, says Luechtfeld. "It does not require technology solutions, it requires top-down solutions. It requires a commitment from the organization and a willingness to change."
In fact, some observers believe that difficulty some companies have experienced implementing the changes is due to their own infrastructural problems and other incompatibilities within their company. While some purchasing managers admit to having difficulty with the implementation of certain systems, others state that the same systems work well within their organizations. Most agreed that in order for a system to function properly, the company has to be prepared. One purchasing manager suggests that others have patience. "The process takes time and one must move slowly. You have to crawl before you can walk."
Language is another concern that arose during the purchasing manager's forum. As companies become more global, language barriers continue to arise. Purchasing managers also complain about EDI. "The volume is horrendous, and it involves a tremendous amount of effort to get it right." Others argue that the transaction costs that are quoted as $150 per purchase order trivialize their profession, and that some of the speakers did not take into account the value of the purchasing professional.
In conjunction with the daily seminars offered, the conference also features a procurement solutions and technology fair with representatives of such software suppliers as Netscape, Ariba, Clarus, Commerce One, Intellisys, and Oracle.
napp continues to be led by Dave Elko of SmithKline Beecham and Sal Grillo of Merrill Lynch.
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