Utility firm banks on Net for MRO buy
By Mark Vigoroso -- Purchasing, 9/16/1999 2:00:00 AM
Start small but think big. Buyers charged with nailing down the right e-commerce systems for their companies may do well to heed this sage advice.
Deb Kunkler, procurement manager at Idaho Power Co., would agree with this approach. Instrumental in her company's selection and deployment of Commerce One's Commerce Chain solution for the procurement of indirect goods and services, Kunkler has set her sights on millions of dollars in inventory, transaction, and process time savings. These are indeed big goals but, by all metrics, Idaho Power started small.
Since about 1996, communicating and transacting with suppliers on the Internet has been a stated objective of Idaho Power's purchasing department, well before their pilot launch of Commerce One's system in January, 1999. "A supplier's willingness to pursue electronic commerce became a large part of our request-for-proposals (RFPs)," says Kunkler.
In 1996, Idaho Power launched a corporate enterprise resource planning (ERP) software system, but they found it frustrating and complicated when it came to procuring office supplies and other MRO materials. Insufficient cataloging capabilities led to order-entry errors, which in turn led to numerous and costly product returns. In addition, disparate buying patterns among 1,700 employees and 17 plants translated directly into wasted time and dollars.
"We in purchasing were spending lots of time setting up contracts and corporate pricing agreements with suppliers," says Kunkler. "But the maverick buying was undercutting our ability to take advantage of volume discounts."
Consequently, Idaho Power assembled a team of purchasing and IT professionals to find a solution to their MRO sourcing problems. The result of their efforts was the pilot launch of Commerce One's Commerce Chain solution in January. The initial scope of the pilot was modest, focused solely on office supplies and involving just 60 users in the Boise, Idaho, area.
The Commerce Chain solution consists of an intranet-based component called BuySite, through which requisitioners order from approved suppliers at a commerce portal called MarketSite (www.marketsite.net), where Commerce One manages supplier catalog data, order tracking, and transaction services. Suppliers make real-time updates to their data on MarketSite and can present customized views of their catalogs, depending on the identity of the buyer. Buying organizations that opt not to invest in BuySite can subscribe to a hosted version of the application on a subscription basis.
As is typical with buy-side e-procurement systems, Idaho Power's purchasing department can determine which requisitioners have access to which products and suppliers. They can track enterprisewide spending patterns and enforce compliance with existing supplier contracts. Just two suppliers were included, but there likely will be five by the end of the year.
By directing their users to pre-approved suppliers on Commerce One's MarketSite, Idaho Power hopes to reduce their annual $35-million MRO spend by 5%, or $1.75 million. But Kunkler is hoping for more than just hard-dollar savings.
"Our buyers will be freed from transaction processing to work on supplier relationship building," says Kunkler. "And with this enhanced control over our spending habits, we'll be able to meet our goals for minority- and women-owned suppliers much more successfully."
Having invested significant time and money in their ERP system, Idaho Power required extensive back-office integration from their e-commerce system. As part of their full rollout in March of 2000, this integration with accounting and inventory systems will be achieved.
"The integration will give us one more level of automation and efficiency," says Kunkler. "We'll be transmitting system-generated requests for materials."
Idaho Power's full deployment of Commerce Chain will support 400 to 500 users and will handle an array of MRO goods and services, including office supplies, travel services, and printing services.
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