Unique buy presents unique problems
By Mark A. Brunelli -- Purchasing, 11/18/1999
Seeking out the best e-commerce "solution" for your company can oftentimes present its own unique set of problems. After all, e-commerce providers are everywhere these days, and new ones are popping up all the time.This onslaught can be confusing, especially since many purchasers today are still learning the best ways to use the Internet. Adding to the confusion is the pressure of making the right decision. The wrong choice could be a career ender for a purchasing professional, because the implementation of most of these systems is a major investment that can cost millions of dollars.
So what exactly should buyers look for in an e-commerce system? Buyers with experience in this arena say it's important to consider ease of use and content. But beyond that, and perhaps more important, buyers need to have a clear plan in mind. Steven Wright, director of e-procurement for Ingersoll-Rand, perhaps sums this up best.
Buyers looking for the best solution, he says, need to be clear on the level of business process re-engineering involved in making a change and the level of technology required to enable the new processes. And it's critical that they have a plan in place for acclimating workers to the new system.
"You have to make all three of those processes work together to achieve your goals," says Wright.
John Ramacciotti of Cypress Semiconductor--a company that recently completed phase-one deployment of the Ariba eCommerce system to 1,100 potential users at two company sites--says that while shopping around he looked for a solution that was easy to use and that offered a good deal of supplier content. But most important, he says he wanted an e-commerce provider who was able to recognize and utilize the best practices of other companies.
"I was looking for a company that would not only provide a software solution, but by access to their other customers, be able to pull in best practices and integrate them into their solution," says Ramacciotti.
Cypress completed the first phase of deployment of the Ariba eCommerce solution at the end of September and has since been using the system to reduce off-contract spending, aggregate spending across the company, and direct that spending to preferred suppliers at pre-negotiated prices. The company currently is accessing supplier content from more than twenty catalogs.
During its implementation of phase two, Cypress expects to expand the solution to 2,000 potential users. The company also plans to utilize the Ariba Network, which is an Internet-based eCommerce service that provides access to supplier content and routes transactions between buyers and suppliers.
Ramacciotti predicts that seeing how other companies conduct online business will be a major boon for his medium-size company. He says it will become a tool that will allow Cypress Semiconductor to leverage suppliers more efficiently.
"We'll get our heads together and say that the things [bigger companies] are doing are the things I need to be doing," Ramacciotti says. "It brings me the tools of the big guys for a medium-size company."
Scott Walker, director of finance and business processes, procurement and supply management at Weyerhauser, says the company he works for has recently launched the pilot phase of Commerce One's e-commerce solution.
In addition to ease of use and total cost, Walker says that while seeking out the best system for Weyerhauser there were other things to consider. Those doing the shopping had to be clear on the goals of the company.
Weyerhauser didn't want to take part in third-party enabled or auction sites because, generally, they don't offer a complete end-to-end solution. Auction sites allow companies to make bids on whatever is needed, but many don't provide methods for payment.
"We wanted an interoperable tool that would process orders from needs identification through payment," says Walker. "We looked at [the catalog model] as a potential model because we want to process transactions end to end, which means we want them to connect to our financial systems."
Interoperability, Walker says, was a major consideration. The company wanted to be sure whatever solution they signed on for had a proven track record of being able to interact with existing ERP systems. While the company has yet to hook the solution up with their ERP system, he says the provider chosen by Weyerhauser needed to have that kind of flexibility in order to meet any future goals of the company.
"We looked at the fit with our technology and we looked at the fit with our procurement strategies," says Walker.
Using the Commerce One solution, Walker says, Weyerhauser has incorporated portions of the suppliers' catalogs into the company intranet. This is another aspect of the solution the company found attractive because users do not need to sift through entire catalogs over and over again.
"The strategy is to help focus our people to the correct suppliers and also to their most effective products," says Walker.
Other buyers have said that being able to incorporate portions of catalogs into corporate intranets is also attractive because those subsets can be tailored to reflect pre-negotiated prices between buyer and supplier.
Walker says that so far the pilot phase has been working well. Weyerhauser currently has twenty users interacting with catalogs provided by three suppliers.
"There were no real roadblocks with the application itself," he says. "We recognize that the whole [e-commerce] industry is immature, so it will get nothing but more powerful."
In addition to considering the overall goals of their company, a buyer looking for the proper e-commerce solution should also take into account the abilities of their company's suppliers. For some companies, it simply isn't necessary to spend millions on an e-commerce solution, especially if that company's supplier base consists of smaller businesses.
John Briant, the vice president of materials for EFTC--a company that has been using EDI and Oracle systems for several years--says that upgrading to a complete end-to-end solution isn't really feasible for EFTC at this time.
The reason for this, he says, is because EFTC in general is a high-mix, low-volume manufacturer, and sometimes the materials they need are very specific in nature and oftentimes they come from relatively small suppliers. Many of those suppliers aren't willing to go through the expense of instituting the hardware and software necessary for a company intranet, which is generally required for a complete end-to-end solution.
"We found that most [suppliers] aren't willing to get an EDI system," says Briant.
Briant says that many of those suppliers are, however, on the Internet and are willing to go through the simple process of calling up a Web page to check if they have any orders. So, to find a middle ground, EFTC is currently in the process of upgrading their Oracle system so that suppliers can call up a Web page within EFTC's intranet.
"We're trying to find the solution that best fits the spectrum of suppliers," says Briant.
Using their browsers, the suppliers can get inside EFTC's firewall to check forecast reports, and see if there are any orders to be filled. This will significantly cut down on the paperwork EFTC's buyers need to do, because many of the company's suppliers still request hard copies of invoices.
"The thing we're looking for first is to take the day-to-day workload off the buyer," says Briant.
The Ingersoll-Rand Company, a diversified industrial and components manufacturer, recently chose Requisite Technology's Unified Catalog Management Service as its catalog content e-commerce provider. The company used Requisite's catalog management service in conjunction with Oracle's Strategic Procurement 4.0, making a complete end-to-end solution.
Wright says Oracle provides the ability to communicate electronically with suppliers from procurement to payment, while Requisite formats and manages supplier catalogs, or subsets of those catalogs, so they can be available to buyers via Ingersoll-Rand's intranet.
Wright echoed the notion that buyers looking for the best solution need to be clear on the goals of the company and its supplier strategy.
"You have to look at what your company's strategic needs are," says Wright.
For Ingersoll-Rand, that meant finding a paperless solution which provided complete procure-to-pay capabilities, strong internal controls over business processes, a reduction of contract leakage, and an overall streamlining of the buying process.
"You're really looking at how you can achieve your lowest total cost to acquire goods and services," says Wright.
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