In the world of business, CIOs have postponed their
IT investment and view fresh investment from a return-on-investment
perspective. What does this mean to the
e-business initiatives of companies?
The
writing is on the wall - investments that do not contribute to either top-line
growth or cost savings will be most negatively affected by the downturn. Does that mean that companies will shun all
their IT plans? The answer is no. Companies
will take initiatives which will create shareholder value and build competitive
advantage for them.
e-Business
initiatives focused on streamlining costs, improving sales and channel
management, and gaining transaction efficiencies will be implemented.
Traditional
purchasing of operating resources – office supplies, equipment, software – can
account for 50-70% of total operating
expenses of a business. Most companies
have decentralized their procurement operation across multiple business units
with a couple of thousand suppliers and an average of five to six contracts per
supplier. Yet many companies don’t have
a strategy in place or the tools to manage this expense as well as the purchase
turnaround time.
E-Procurement
is perhaps the most direct and effective way for an organization to leverage
the Internet to reduce costs, improve productivity, and boost profits. E-Procurement automates and streamlines the
process by creating a web-based, self-service environment that pushes product
selection and order initiation to the desktops of frontline employees while
maintaining corporate trading agreements, workflows and authorization
rules. The purchase department now
focuses on upstream activities such as supply source development, negotiation
and vendor management.
Companies
looking to implement an e-Procurement solution must establish a flexible
architecture that can withstand the rapid change and market consolidation
characteristic of the expanding digital market space.
The
procurement solution should support multiple buying organizations. A company
with multiple plants or distribution centers may procure goods and services
differently and may want to control the purchase of goods and services
separately. That could mean that they
use different suppliers, have access to different catalogs, have different
rules as far as the approval process goes, or have different accounting
requirements.
The need for effective supplier enablement is a recurring theme throughout all e-Procurement activities. Connecting with vendors electronically in order to receive content, such as catalogues, and to exchange purchase orders and invoices is critical to the success of the project.
e-Procurement
have been able to realize the following benefits (source: Aberdeen Group):
reduce prices paid for materials by 5% to 10%; shorten
requisition-to-fulfillment cycles by 70%-80%, lower administrative costs by
73%, cut off-contract (“maverick’) buying in half; reduce inventory costs by
25% to 50% on an average.
Harita
Gupta
The
writer is practice leader, custom
Software
development and maintenance practice, NIIT