International survey reveals e-procurement early adopters are three times more efficient than late adopting competitors

A survey of major companies in the US, Germany and UK, suggests that early investors in online procurement technology have a competitive advantage.

Organisations committed to an early investment in e-trading and e-procurement technology are benefiting from efficiencies up to three times greater than late adopters, according to a survey from UK-based Benchmark Research Company. Commissioned and funded by Commerce One, the business Internet company, the survey of companies with over 5 000 employees in the US, Germany and UK - across key industry sectors - was conducted during May and June 2002.

Key global findings of the survey in relation to e-procurement are as follows:

* 63% of high-performing companies have saved between 10% and nearly 50% in procurement budgets, compared to 3% of low-performing companies that have achieved similar savings in the same range.

* 41% of high-performing companies have achieved cost reductions of between 10% and almost 50% in the area of purchase-order management, compared to 4% of low-performing companies that have achieved similar savings in the same range.

* 40% of high-performing companies are making use of auctioning technology to source products and services compared to 12% of low-performing companies.

* 36% of high-performing companies are using e-procurement to manage internal requests for purchase compared to 16% of low performers.

* 27% of high performers have e-procurement or e-trading solutions that can cope with transactions in several different currencies compared to 9% of low performers.

* 10% of employees in high-performing companies request purchases online, via systems linked into a central purchasing department, compared to 2% of employees from low performers.

There is little doubt that these overwhelming performance gains have been driven by an effective deployment of e-procurement technology. It is only by putting processes on the Internet that companies have been able to achieve a step change in business performance. It is this that has help fuel the success of global high performers.

Data comparisons for the US, UK and Germany indicate that although the companies in the US have adopted e-procurement technology at a rate similar to those in the UK, they lead in areas such as use of Internet trading exchanges and online auctions. The study suggests that German companies tend to lag further behind in their use of online trading technologies.

For example, for the companies surveyed in the US, the proportion of overall procurement conducted online stands at 12% in the US compared to 13% in the UK and 7% in Germany. But 38% of US companies surveyed used online auctions compared to 32% in the UK and just 3% in Germany.

Furthermore, companies in the US appear to be achieving greater cost savings and return on investment through the online administration of purchase orders than businesses in the UK and Germany. Some 32% of US companies were achieving between 10% and almost 50% cost savings compared to 20% of UK companies and 4% of Germany companies.

Commenting on the survey, Michael Bosman CEO of Commerce One South Africa - Distributor Operations, said: "Organisations that were quick to recognise the advantages of online supply chain collaboration are benefiting from their investment in e-trading and e-procurement technology. We believe that the findings of this study not only reflect the advantages of the technology itself but also the entire process by which high-performance companies are improving efficiencies in procurement. An online approach means that the whole framework of source-to-pay - managing internal customer requests, sourcing supplier and automating payment - can be faster and more cost-effective."

He drew attention to local early adopters of e-procurement naming companies such as Sasol, Bidvest and FirstRand all leaders in their respective industries in SA. "Sasol has after two years achieved significant cost savings." They have seen a reduction in cycle time from 28 days to 10 days, and 0.5% saving on R7 billion spend estimated saving over the next five years. Other tangible benefits include reduction of their average cost per purchase order from R115 to R45, and they have also had a reduction in account queries from 50% to 5%.