E-Procurement and E-Commerce

E-Procurement and E-Commerce

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Perhaps the most-touted, "meatiest", Internet application area is e-procurement, the application of online information, services and processes to the procurement function in organisations. The expectation is generating major activity – 2,400 B2B exchanges have supposedly been launched this year; major US corporates are claiming to have saved billions of dollars already; the government is setting demanding online purchasing targets amounting to several percent of GDP. Estimates of B2B penetration are that 30% to 60% of non-labour procurement could be web-based today. London Economics suggests that if all small and medium-sized firms in Britain used the Internet to buy indirect inputs, £24 billion ($36 billion) a year could be saved - an overall boost to productivity of 2% of GDP.

Z/Yen has been involved in this procurement revolution for several years. Z/Yen people have been working in the non-internet precursor, electronic data interchange (EDI) and in internet-based procurement since 1995, originally with office supplies, stationery and cleaning equipment. Since then, Z/Yen has branched out to working with large purchasers and suppliers in oil, steel, health, retail, energy and government. As an example, we worked with a small office supplier, developing their strategy, moving them to the internet and helping them increase their scale. They were purchased by a large internet firm for many times their earlier value. We also worked with a large government agency, automating their purchase ledger and their procurement for high-volume items. Focusing in this way helped speed processing, reduce supplier numbers and obtain better terms. Some of our most recent work has involved commodities, financial and other B2B exchanges. In one case we designed, selected suppliers and project managed the implementation of an exchange handling up to 5,000 orders per minute.

Z/Yen’s work in e-commerce and e-procurement involves:

strategy: assisting both purchasers and suppliers to define their objectives, establish the risk/reward framework and develop their business plan for moving online;

systems: working from IT strategy through specification, design, prototyping, supplier selection, contracts, project management, quality assurance, testing, implementation, roll-out and training;

people: including training, development of processes and procedures and change management;

organisation: which can involve supplier relationship management, customer relationship management, financing, contractual conditions, key performance and satisfaction measures.

Experimentation is already underway on procurement portfolio maximisation over time periods, dynamic satisfaction indices, procurement information games, improved information assemblage for decision-making, real-option valuation of procurement strategies and optimising tool selection for types of procurement. Some of this work has involved simulating potential large procurement markets and working out optimal matching, e.g. the right type and auction rules to apply to a situation.

Z/Yen is excited about the potential of e-commerce and e-procurement. Z/Yen believes not just in improved throughput time, cost savings or better measurement and tracking, but in changing the emphasis from processing information to meeting client requirements. Z/Yen’s risk/reward methodology has proven itself in the successful development and application of e-commerce, and looks set for many more.

Z/Yen has developed a simple HTML workbook to help demystify the Internet for clients.

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Copyright © 1994-2008 - The Z/Yen Group of Companies
Last modified: 03 September 2008

Copyright © 1994-2008 - The Z/Yen Group of Companies Last modified: 03 September 2008

Copyright © 1994-2008 - The Z/Yen Group of Companies
Last modified: 03 September 2008