E-procurement - companies blindly jump on the bandwagon.

Companies looking to jump onto the latest internet bandwagon - corporate purchasing online - are blindly rushing into it without understanding the impact it will have on their businesses, according to a report by e-Net Software. In a reflection of the original internet `gold rash', where businesses herded onto the net with ill thought out and largely ineffectual web sites, large organisations are adopting e-procurement technologies without properly investigating the full business implications.'

According to the report, despite the fact that 81 per cent of respondents are either currently using (20 per cent) or expecting to use (61 per cent) e-procurement, very few have any real understanding of its business benefits. For most corporates, return on investment seems to be the last thing on their minds, although a recent KPMG report into e-procurement indicates that it could provide companies with up to 15 per cent savings. Over half of those surveyed for the e-Net research had no idea what kind of investment they should be making into the burgeoning area and over two thirds could make no estimation of annual savings they may make by using e-procurement. More disturbing a quarter of those currently using e-procurement are not aware of savings being made.

e-Net commissioned the report - based on original research among purchasing managers - for the launch of its new online purchasing software, esparto e-procurement, an application that brings together orders from different parts of an organisation with individual budgets into a single requisition. The effect is to achieve economies of scale, simplifying and speeding up the purchasing process, and potentially saving establishments millions of pounds.

Industry sector

Local government and hospitals accounted for a quarter of all respondents (25% and 24% respectively), with retail finance and manufacturing each accounting for a fifth of all respondents. One in ten (11%) interviews wore conducted in the pharmaceutical sector. It was originally intended to conduct 20 interviews in each of the five industry sectors. However with 45 large pharmaceutical companies available for interview, additional interviews were conducted in two of the other industry sectors (i.e. local government and hospitals) to achieve the required 100 interviews.

Job title

Purchasing managers/heads of purchasing accounted for a quarter of respondents, with purchasing officers/senior purchasing officers accounting for a tenth of respondents. Procurement managers accounted for a fifth (22%) of all respondents. While one in ten (12%) respondents were senior buyers.

Other respondents included supply chain managers (5%), finance directors (4%), project business managers (4%), network/IT/technical mangers (4%), services managers (3%) and facilities managers (2%), Below one in ten (9%) described themselves as some other job title.

Internet purchasing

A third (31%) of all companies interviewed use the internet in order to purchase goods or services, with retail finance the most likely to report using internet-based purchasing (70% retail finance compared with 45% pharmaceuticals, 32% manufacturing and 20% local government). No hospitals reported using this form of purchasing. Internet purchasing was a relatively new procedure for those whose organisation uses the interact for purchasing. A quarter (29%) started within the last six months and a third between 6 months and a year ago. Manufacturing were the newest to this form of purchasing. A wide range of goods and services have been purchased on the internet, with the most common purchases being office supplies (48%), computer hardware (23%), computer software (23%) and travel bookings(16%).

The majority (84%) indicated that internet-based purchasing accounts for less than 10% of all the purchasing conducted by the organisation. All respondents using internet-based purchasing expect this proportion to increase over the next five years, with most (87%) expecting this proportion to increase significantly.

E-procurement

Awareness of e-procurement

All respondents were read a detailed description of e-procurement and asked to indicate whether or not they had heard of this application before today. The majority (87%) responded positively. Pharmaceuticals reported the highest awareness (100%) of e-procurement and hospitals the lowest awareness (79%). As highlighted above in section 3.3, none of the hospitals interviewed are currently using the internet for purchasing

Use of e-procurement

A fifth of respondents aware of e-procurement reported that their organisation is already using e-procurement, with three- fifths (61%) indicating that their organisation is likely to use e-procurement. Under a fifth (16%) indicated that their organisation is not likely to use this application. Pharmaceuticals and retail finance were most likely to report that their organisation is already using e-procurement (27% and 25% respectively). Approximately a fifth of local government (22%) and manufacturing (17%) indicated that their organisation is already using this application. Not surprisingly, hospitals were the least likely to report using e-procurement (11%).

More than a third (37%) of respondents whose organisation uses the internet for purchasing are already using e-procurement, while 48% indicated that their organisation is likely to use e-procurement. Two-thirds (67%) of respondents whose organisation is not using the internet for purchasing indicated that their organisation is likely to use e-procurement.

Respondents who had not heard of e-procurement before today were asked to indicate the appropriateness of the application for their organisation. An equal proportion responded positively and negatively. Only one respondent did not know. Those whose organisation uses the interact for purchasing were more likely to respond positively.

Current and future savings from use ore-procurement

The majority (71%) of respondents whose organisations are already using e-procurement were unable to provide an estimate of the savings made through using this application. One respondent reported company savings of more than 5,000 [pounds sterling], and a quarter reported no savings.

Among respondents whose organisation is likely to use e-procurement, a third (30%) hoped to make savings of more than 5,000 [pounds sterling] through use of this application

Perceived investment to use e-procurement

A quarter (26%) of those whose organisation is likely to use e-procurement expected to have to make an investment of up to 100,000 [pounds sterling], with a further 10% expecting to have to make an investment of up to 250,000 [pounds sterling]. Just under a tenth (9%) expected to have to make an investment over 250,000. However, more than half (53%) did not know the investment their organisation would have to make in order to use this application.

www.enetgroup.co.uk