Electronics buyers warm up to the Web
By James Carbone -- Purchasing, 3/26/1998
Most electronics buyers have access to the Internet at work, and many are using the World Wide Web to research suppliers and distributors, according to a new Purchasing Magazine survey. The survey also finds that more buyers are starting to use the Web to buy parts, but in relatively small quantities.The survey finds that 94% now have access to the Internet. That's up from 54%, less than two years ago. The survey also finds that 23% say they have purchased parts via the Internet. That figure is up from just 4% one year ago. However, those purchasers are generally buying very small quantities. They seem to be experimenting with the Web as a purchasing tool.
Jon Rodrick, a buyer at Unitrode Corporation in Merrimack, N.H., estimates about 10% of the computer peripherals and software he buys is over the Internet. "I'd like to use it more often. The benefit is it has the ability to fulfill the transaction immediately instead of having to play phone tag or be put on hold."
Most buyers--83%--see the Internet as a useful tool to check out component suppliers and distributors. Those buyers say they would like to use the Internet to automate the purchasing process and use the Web for EDI-type transactions. Eighty-nine percent say they would like to use the Web to send out requests for quotations; 71% want to use it for shipping schedules; 66% want it for pricing information; and 63% want to send purchase orders via the Internet.
While most buyers have access to the Internet and use it to research suppliers, when it comes to purchase orders and other transactions, EDI is the preferred electronic-commerce tool. Fifty-six of those surveyed say they are using EDI with distributors or component manufacturers. Purchase orders and purchase-order changes top the list of the transactions performed.
Most EDI transactions are conducted between OEMs and distributors. Fifty-three percent report that distributors are their EDI partners, and only 7% say they use EDI with just component manufacturers. However, 40% say they use EDI with both distributors and manufacturers.
Deborah Johnson, a buyer at Energyline in Berkeley, Calif, says her company has used EDI for about a year. About 60%-70% of the semiconductors and passives she buys are purchased via EDI. Johnson says setting up EDI was initially difficult, due in large part to internal part numbers not cross-referencing to manufacturer part numbers. But once that was worked out, EDI has cut procurement time and reduced errors. "You don't have to spend time at a fax machine faxing purchase orders, and you don't have to worry about data-entry mistakes," she says.
Saving time is the chief benefit says Karyn Kroening-Swiler, planner/ buyer for Multitech Systems in Mounds View, Minn. She says about 50% of her electronic-component purchase orders are transmitted through EDI. "We have about 15,000 part numbers and six buyers. It cuts down on time and reduces inventory."
Some companies see the Internet and EDI as a strategic tool to be used to make their companies competitive. Case in point: Electronic Manufacturing Systems, a contract manufacturer. EMS uses EDI with both its OEM customers and suppliers and is experimenting with using the Internet in its supply chain management strategies.
EMS wants to systematize the entire supply demand process, says Bob Beckett, corporate vice president of supply chain management. He says over 50% of procurement costs will disappear when the process is automated. That kind of cost reduction will make EMS more competitive, he says.
"If I'm competing for your business, and I can come in 35% cheaper than the other guy because I'm using a systemized process, where are you going to take your business," says Beckett.
"We consider systems a competitive advantage weapon. We believe that in the next three to five years, the whole supply chain, from the customer through the supply base, will be handled via systems with little, if any, manual intervention," says Beckett.
He says purchase orders, acknowledgment of orders, and the acceptance of forecasts and POs involve huge amounts of administrative effort. "We can offer our customers a better cost structure by having as much of the supply-demand process automated as possible." He says currently, 35%-50% of business is done via EDI with customers, and that percentage will grow.
"Our goal is to have everything from ordering, delivery, inventorying, and invoicing, to transfer of funds all done electronically," says Beckett.
EMS has an experiment with component suppliers at its Maine facility that uses the Internet, but does not use EDI formats because within 10 years the EDI formats won't be used.
He says purchasing people often are afraid of electronic commerce. "Purchasing people say 'God! My job is going away.' But the reality is it's not. Purchasing is going to take a much broader responsibility. Purchasers are going to become purchasing program managers."
Beckett says more companies will automate the supply chain management process. "There will be two kinds of companies in the future--those which embrace it and those companies which are out of business."
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