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OK - you survived the much-hyped dot com revolution.
Most of those new economy start-ups which threatened to eat
your lunch are no more. Your brick-and-mortar business proved resilient and
you feel vindicated that the traditional business principles you fervently
defended still count. Your business is running smoothly, albeit in a tight sales
environment. Those ERP consultants are finally off your back and you are
enjoying focusing on “pure” business issues. So why should you even consider going “e” for the procurement
of all your indirect goods? Your
Chief Purchasing Officer (CPO) has built a team to do the purchasing of both
direct and indirect goods. The ERP
system you implemented two years ago largely takes care of the direct goods
procurement. However, upon reflection, there are a few issues of concern to
you in the area of indirect goods procurement: The headcount in the indirect goods division of the purchasing
department seems to be growing disproportionately to other cost centres and
service departments. Although these
are fairly low level employees (you surmise), you can’t understand why so
many people are needed to collate purchase requisitions, and fax purchase
orders to suppliers. The CPO spent most of his first months in office negotiating
contracts for your operating spend items - stationery, travel, computer
consumables and capex, as well as the maintenance and repair type items
required by the manufacturing division. But you have yet to see the benefits of this in your monthly
management accounts. You asked the CPO, but he said he had great difficulty in
implementing and communicating these contracts to all the branches. And, he added, the branch managers found
it less cumbersome to do their own thing in this regard. Meanwhile, indications are that the sales performance for the
coming year will be flat and you’ll be under huge pressure to deliver on your
budget. This will have to come from below the gross margin line and you are
looking for ideas. You feel you’re not getting the best from your suppliers and
think an RFP process may be the catalyst to ignite them. However, the CPO
says you don’t have the right tools to manage this. You remember the business case report on an e-Procurement service that the CPO emailed to you, and read it again. This time it excites you because, according to the report, this service:
The CPO further explains in his document that while this
service must be rolled out to the entire company, you only pay for what you
use. And you realise this could be a relatively painless way to
embrace the e-world and that if you were to implement this service, it could
save the company money and provide the answer to budget pressures. You can visualise the powerpoint presso to the board “ Why
e-Procurement Actually Makes Cents” and how well this will go down with the
board members. First things first. You email your CPO to set up a meeting and a demo with these guys and you also want to visit their live customers and …………
Forester
Research
estimates that the global value of the business-to-business (B2B) e-commerce
market could total R21,6 trillion by 2004. That total B2B spend represents
about 25 times SA’s current gross domestic product (GDP). If you consider the size of that
market, it’s obvious why South African companies can’t afford to fall behind
in their quest to participate in this business opportunity. It is obvious how
critical it is to choose the right B2B implementation partner. The stakes are
high and at a time of such rapidly-evolving technologies, no company can
afford to make a mistake. But the deployment of an e-commerce
system is complex. Getting it wrong will not only impact your organisation
directly, but also indirectly. If your suppliers and customers don’t like
what you’re doing, they’re just a mouse click away from dealing with another
company. When it comes to evaluating any e-commerce solution, you must
consider four key areas:
Remember that the issue of cost goes beyond the purchase price
of the system. E-commerce solutions are expensive both in terms of up
front costs, as well as time and resources. All these should be taken into
account before embarking on such an investment. When it comes to value, the system must be measured in terms
of tangible benefits as well as the payback and the return on investment
(ROI) period. But there’s no fixed
ROI here. Organisations such as Accenture, Coopers & Lybrand and the
Aberdeen Group have found the potential savings associated with an integrated
e-enabled supply chain can range from 5% to 50%. The average is now estimated
at about 20%. Value is not an easy calculation. Savings are realised across
several aspects involved in the supply chain and inefficiencies related to
any of these will reduce the value of your chosen system. These aspects include improved contact leverage resulting from
the availability of all relevant data. You also need to take into account
sustainable supply chain efficiencies because of the faster communication of more
accurate information. Other value factors incorporate reduced contract leakage
because system users are channelled towards pre-approved suppliers for their
purchasing needs, improved internal process efficiencies and improved
infrastructure efficiencies as older multiple systems are replaced with a
single, integrated internet-based solution. The security of the solution is absolutely critical to its
success, as it must be able to guarantee the confidentiality of all
transactions and all stakeholders. Any system implemented must therefore
conform to international security standards. All these issues underscore the importance of choosing the
right e-commerce implementation partner. But be warned. Because of the exponential growth in the e-commerce market, there has been a proliferation of partners and vendors in this space. There is a lot of hype out there. So before choosing an e-commerce technology partner evaluate the competitive advantage offered by the different players. Assess whether they have the resources to meet the technology and business requirements of the implementation, and finally, whether the technology offered suits your company’s e-business needs, and is able to integrate with any current legacy technology platforms within your organisation. It’s the only way to reduce the risk of e-commerce implementation.
Miraculum is proud to welcome new members to the community. Canon According to "AMR Outlook: Top Trading Exchange Services for Industry Verticals", nine out of the top 10 independent trading exchanges run Oracle. The trading exchange services AMR Research has selected as leaders in their industry verticals have ridden out a storm of corporate scepticism, economic downturn, and investor flight. They have shown that they not only can survive but can also create value for companies within their industry. Oracle once again proves to be the solution of choice for leading B2B Exchanges.
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