Business use of the worldwide network mostly involves
information gathering with relatively few organizations actually
purchasing products or services over the Internet. Yet the Internet
is already proving its cost-effectiveness in purchasing and supply
management, according to trade sources as diverse as leading
business newspapers, specialized purchasing and supply management
magazines, and reports from international organizations.
Purchasing-related sites are on the rise, such as ones allowing
businesses to track costs of raw materials and ones with on-line
procurement requests. As telecommunication infrastructure improves,
and people become more comfortable with using the Internet,
organizations are starting to use a variety of tools (ranging from
simple e-mails to more sophisticated Internet-based Electronic Data
Interchange systems) to track purchases, manage stock levels,
streamline ordering and payment processes, and build better
relations with suppliers.
Six reasons to use the Internet
• Cut purchasing costs. You can negotiate better prices for the
products you purchase by using the Internet to monitor the material
and labour costs of your suppliers. If your product material
contains a high percentage of commodities, you can monitor current
market prices and trends in public on-line databases, and use this
information when negotiating with suppliers. Sources like Reuters
commodities (http://www.commods.reuters.com)
provide you with both current and historical data on commodity
futures and options prices, which can help you to hedge against
future price rises.
The Internet can also help you analyze the labour costs involved
in your purchased product. For an example, visit the web site of
the United States Department of Labour (http://www.bls.gov/datahome.htm),
where you can obtain information on International Comparisons of
Manufacturing Productivity and Unit Labour Cost Trends for
1997.
Even without analyzing the detailed material or labour costs of
your supplies, you can use the Internet as a benchmark for
comparison with current prices paid, or for negotiating anticipated
price rises. Try to access a server specialized in the market from
which you are buying. You can often gather commercial information
on your supply market, and also request suppliers connected to this
site to quote you a price according to your specifications. For
example, buyers of office supplies in developing countries can now
use the Internet and sites such as Buyerszone (http://www.buyerszone.com) to
identify which local equipment is overpriced when compared with
competitively-priced international market items, enabling them to
negotiate discounts with their local suppliers.
Using the Internet allows you in some cases to directly access
manufacturers, and save money by avoiding costs of intermediaries.
This was the experience of a rural Kenyan farming cooperative,
which managed to bypass distributors and obtain lower prices by
establishing a direct relationship through e-mail with the US-based
Earth Marketplace, whose main business is selling directly to North
American consumers.
• Reduce operating costs. The Internet-when coupled with
web-based Electronic Data Interchange systems that incorporate a
purchase order facility-reduces costs involved in order processing
and invoice processing. It also lowers costs by reducing the number
of dedicated telephone lines for fax machines normally required to
move data.
• Improve management of suppliers. Strengthen relationships with
suppliers that are linked with you electronically. For example, you
can communicate by e-mail, involve them at an early stage in your
design process, exchange ideas for product improvements and
encourage them to send you information regularly on your supply
market by e-mail. The more you improve information flows and
communication (both with your internal customers and with
suppliers), the faster you can react and cut lead times.
• Control stock levels. One of the greatest benefits
organizations can achieve by electronic linking with suppliers is
substantial savings in inventory. Better communication links will
decrease supply risks and shorten lead times, enabling you to adapt
stock levels to the variations in demand more rapidly.
• Take advantage of government and international organization
calls for bids. Businesses are responding to a growing use of the
Internet by governments to disseminate procurement opportunities
and receive quotations from interested providers. International
organizations are also using Internet for purchasing activities.
The United Nations, for example, recently launched UN Development
Business Online (http://www.devbusiness.com),
a site providing procurement opportunities from multilateral
development banks, such as the World Bank, and other international
agencies. Over the next five years, the major development banks
will pay over US$ 190 billion to companies worldwide.
• Reduce problems. Other concrete advantages of using
Internet-based tools include eliminating errors due to rewriting or
re-keying data, and speeding up the payment process by processing
invoices electronically.
Where do I start?
If you are new to the Internet and interested in using it to
improve purchasing and supply management in your organization, you
may have two concerns: where to start, and how to find
resources.
You do not know where to look
You may not be an information technology professional, so each
time you search the Internet, you spend hours on web sites
unrelated to your original query.
The first step is to use on-line tips for beginners that are
available on the Internet. Good starting points are sites which
show you how to use the best available Internet search engines and
give other advice on facilities (browsers, multimedia, sounds, and
video) that can be used with the web. Try the Helpweb (http://www.imaginarylandscape.com/helpweb/www/www.html),
Internet101 (http://www2.famvid.com/i101/),
or Getrade (
http://stage.intracen.org) for specific countries and markets
(section "Infobases"); the ITC web site will also feature a
collection of international purchasing bookmarks later this year.
In addition, ask your colleagues, suppliers or buyers of similar
products to recommend web sites they visit regularly.
You do not have resources
Companies that believe they do not have the time or money to
invest in the Internet for purchasing should consider how quickly
the investment will be offset by reduced telecommunications costs.
By way of example, a small shipping company in the United Republic
of Tanzania, Regent and Forwarding, now uses US$ 0.10 e-mail
messages and US$ 1 e-mail fax gateway instead of US$ 20 faxes to
place orders in North America and Europe. As a result, they have
seen their monthly telecommunications bill drop from US$ 500 to US$
45. E-mail can be used with existing suppliers for most forms of
communications, including sending engineering specifications,
negotiating, drafting contracts and exchanging information at the
price of a local phone call.
The Internet and web-based Electronic Data Interchange
continuously improve information access and simplify the processes
of ordering and payment. While they do not replace important
routine purchasing activities such as supplier evaluations, visits
or meetings, they offer an important opportunity to develop and
manage day-to-day relations with suppliers that can lead to
increased effectiveness and reduced costs in your purchasing
operations.
Catherine Taupiac, ITC Associate Officer, conducts research
in international purchasing and supply management including those
related to Internet purchasing trends. Contact taupiac@intracen.org for
more information.
Public Sector Electronic Tenders
Australia: Transigo: (http://www.transigo.net.au/wci/home)
Canada: MERX: (http://www.merx.cebra.com/)
European Union: Tenders Electronic Daily:
(http://www2.echo.lu/echo/databases/ted/en/ted)
Hong Kong Special Administrative Region of China: Government
Supplies Department: (http://www.info.gov.hk/gsd/tender.htm)
India: India Invest:
(http://www.india-invest.com/tender.htm)
Poland: Office of Public Procurement:
(http://www.uzp.gov.p1/a_index.html)
United States: General Services Administration: (http://www.
fss. gsa. gov/index.html) or US government tenders:
(http://www.govcon.com)
United Nations: UN Development Business:
(http://www.devbusiness.com)