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E-procurement proves its buying power

Supplier News

WHILE often associated with the hype and negativity of the dot com era, Internet-based procurement automation (e-procurement) has been growing steadily, delivering measurable value to a rising number of companies, reducing material and operating costs and improving compliance, says a recent US study.

Conducted by the Aberdeen Group, the study examined the hurdles, strategies, and results of nearly 150 companies using e-procurement today.

On average, companies participating in the 2004 benchmark slashed off-contract spending by 64%, reduced prices by 7.3% for spend brought back onto contract, cut requisition-to-order cycles by 66% and reduced requisition-to-order costs by 58%.

According to the survey, companies reaping the greatest value from their e-procurement investments used a range of strategies and approaches. These included elevating e-procurement from a tactical transaction management activity to a strategic source-to-pay initiative for driving compliance, securing senior executives support, plus transferring supplier enablement and catalogue management tasks to supplier networks managed by their e-procurement vendor, procurement service provider, or another third-party.

With the largest supplier network in Australia, around 700 companies, Quadrem’s recently appointed regional VP, Ian Hollingworth, describes e-procurement as an ideal way for companies to lower the cost of buying materials, especially for large manufacturing and mining companies.

Hollingworth, who recently returned to his hometown of Perth from the US, has been the company’s CTO since its inception in May 2000.

“Due to the significance of the mining industry in Australia, Quadrem has an opportunity to reach out to other companies looking to benefit from improved supplier relationship management,” said Hollingworth.

“Our mining customers continue to expand their supply chain automation programs, and we expect further expansion of the Quadrem trading partner community over the coming months. This in turn will benefit other companies looking to leverage the efficiencies supply chain automation can deliver.”

“Industrial MRO is where we get involved; parts ordered off a catalogue. However, the orders must be big enough to be able to drive some real benefits from having national/global contracts for a particular spend category,” he told Manufacturers Monthly.

“For example, if you buy lots of bearings, you want to be able to consolidate that spend on bearings with a preferred supplier, and establish a contract with them at a good price. But if you don’t put systems in place to control that spend, buyers in your company might go to another supplier, and pay more.”

According to Hollingworth, companies should put in place systems that enable the people who need the parts to be able to quickly procure them, but from the right sources. “We offer a systematic process for purchasing the things that they want.

“For smaller manufacturers, suppling to mining industry for example, they could use the system through electronic catalogues and procurement.

“Part of our goal is to work with SMEs and equip them to deal with the larger companies, the Nestles, the BHPs and the Rio Tintos of this world.

“For large company who wants to be able to interchange with its suppliers electronically, we have specific Internet-based tools and catalogue-based tools that allow the SME to interact with the large company in exactly the same way as larger companies interact with a large company.

Hollingworth admits the SME does pay for this service,” but it is linked to the company’s size.

“As a supplier, companies can equip themselves at a reasonably low cost to deal with the big guys electronically. ROI can be quite short, as these companies are now more likely to deal with you,” he said.

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