eProcurement: Beyond tickets and turkeys

By William C. Copacino -- Logistics Management, 7/1/1999

Internet-based technologies are revolutionizing how we do business. Electronic commerce is now a reality in both the business-to-business and business-to-consumer worlds and is rapidly accelerating its penetration in both areas. I discovered just how deeply it had penetrated the consumer market when my 3 1/2-year-old daughter approached me six months ago and asked if we could go online to www.barbie.com to custom design and order a Barbie doll!

An increasing number of companies are developing Internet strategies, usually in three stages. Most begin with an Internet "presence"--they have a Web site and use it to provide information about their company. In the second stage, they fully integrate the Internet into their business processes. For example, they may use an Internet billing capability for purchasing selected items, or they may use a process redesign enabled by Internet-based technologies to integrate their purchasing process with their suppliers' systems. In the final stage, companies place the Internet at the core of their business model. They may position the Internet as a significant enabler of such key processes as managing customer relationships, distributing product information, ordering, fulfillment, procurement, billing, payment, and infrastructure support activities, such as human resources. (See diagram.)

This strategic evolution is fundamentally changing how companies conduct business, and it has profound implications for our entire business structure.

For example, the Internet is markedly changing the role of the wholesaler, distributor, and sales agent. Not only are direct selling, order taking, and customer service now feasible online, they also are very efficient and economical. To survive, therefore, the "middlemen" need to change or refocus their offerings and value propositions.

In addition, Internet-based technology is making integrated business processes across the supply chain not just feasible but the preferred way to do business. Such cross-company integrated business processes are most prevalent in the procurement area. In many companies, "eProcurement" is now a common way of doing business because it allows buyers to design efficient approaches to purchasing that assure they secure the lowest prices.

Although this new business model offers companies numerous benefits, I have seen many buyers resist the move to eProcurement. For one thing, getting involved in online procurement requires them to learn new skills, a situation that some people view as threatening. Many buyers, moreover, continue to prefer the old "relationship" method of doing business. One buyer explained his concerns this way: "If we go to eProcurement, what's going to happen to my tickets to the ballgame and my holiday turkey?"

Like many technological developments--the rise of the now-ubiquitous PC among them--the movement toward Internet-based business is permanent and irreversible. People who resist technological progress do so at their peril. It is important for your own future and that of your company that you embrace this change--to move beyond baseball tickets and holiday turkeys. Make sure you are ready, willing, and able to take advantage of the new world of opportunity eProcurement has to offer.

William C. Copacino is managing partner of Andersen Consulting's Strategic Services Practice for the Americas. A frequent speaker before business and professional groups, Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Andersen Consulting's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.