Steps to faster procurement

E-procurement promises huge benefits by streamlining systems to save money.

E-procurement systems can streamline order processes and save firms money, say analysts, but many companies are currently reluctant to invest in the necessary integrated ebusiness technology.

In a survey of 300 UK IT managers earlier this year, research firm Rhetorik found that although companies are keen to invest in corporate websites, only 17 per cent of respondents said their companies had automated supply chain systems.

The main reasons for this lack of investment are budget restrictions, security fears and cultural issues, according to Rhetorik research manager Claire Cook. She explained that many firms are used to traditional ways of managing their supply chains, and that "it is very difficult for people to detach themselves from a paper-based office".

Regarding security, Cook said that users doubt the reliability of storing and recovering electronic data. The initial costs of setting up e-procurement systems could also be deterring investment, as companies need to finance not only the licences, but also rollout and staff training, said Cook.

Steve Morse, business development manager at e-procurement software provider Clarus, agreed that firms are wary of implementing costly systems at present.

He said: "There is some scepticism over investing in e-procurement systems, as in the past companies have had their fingers burnt by overly long implementations of ERP (enterprise resource planning) systems."

However, automated supply chains can offer firms a healthy return on investment and cost savings, said Morse. He argued that companies concerned about the huge costs of complete e-procurement systems should implement such systems in stages.

The first stage is the sourcing process, whereby companies find and contact suitable suppliers. Morse advised that this does not just mean selecting the cheapest option, but "considering which supplier offers the best terms and conditions, delivery options and payment terms".

The second stage is electronic procurement, which automates purchasing processes. Morse said the traditional procurement process is a long one, which entails staff filling in forms manually, passing these on for approval, sending them out by post, and then waiting for product delivery.

With an automated procurement system, a purchase request goes through equivalent processes online, but the whole chain is speeded up, as requests, approvals and orders are all carried out online, said Morse. This means that orders can often go through within hours rather than days, he added.

The last stage of the supply chain is the settlement process. Morse said that allowing payments to be made online could save firms a lot of time, as the whole process of sending, receiving and disputing invoices and bills can be done electronically.

Morse said the first step for any firm considering automating its supply chain should be to create a business case and decide which of the three elements should be implemented, and in which order. Morse added: "Although the obvious way is to start with the sourcing process and then move on to the next component, some firms might be able to implement the settlement system straight away."

Rhetorik's Cook advised e-procurement software providers to work with companies to put together a business case for investment and "outline where the cost savings are". She added that e-procurement could offer benefits in various ways, including reduced paperwork, improved stock control, and more frequent and simplified communications with suppliers and partners.

Ian Walker, European technical director at security company Entrust, said automated supply chain systems open up corporate networks to external visitors, raising security problems.

"Companies need strong authentication in place to identify who comes in, and strong entitlement systems to control what they're allowed to do," warned Walker.

www.rhetorik.com
www.claruscorp.com
www.entrust.com

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