Procurement put into perspective

The International Federation of Purchasing and Materials Management (IFPMM) held its 12th annual conference at Sun City last week. Hosted by the Institute of Purchasing and Supply South Africa, which represents the purchasing and supply management profession in SA, the conference was attended by over 300 procurement managers.

The conference covered a range of issues pertinent to procurement from supply chain management, to e-business and its impact on procurement as a result of new technologies such as e-procurement and e-marketplaces.

In addition, Cyril Ramaphosa, non-executive chairman of Johnnic Holdings, raised the question of the use of procurement as a powerful tool for black economic empowerment in Africa to get a share of the projected R6 billion predicted spend. Ramamphosa said companies need to "increase the current affirmative spend and look for innovative solutions to find more BEE [black economic empowerment] to trade with".

Author and management guru Tom Peters recently called purchasing managers the "Rock stars of the B2B age". About two years ago these same "rock stars" were given some new toys to play with - e-procurement and e-marketplaces.

But it hasn`t been plain sailing for the adoption of new e-business tools for procurement managers. The challenges that e-procurement projects have faced stemmed from a resistance to changing age-old buyer-supplier relationships, lack of adequate communication and education, to slow movement of suppliers to put their catalogues online, and a lack of recognition of what an e-procurement project can do for the bottom line.

Michael Jordaan, CEO of eBucks.com, a member of the FirstRand Group, believes in the immense business benefits of e-procurement. "If particular staff members greatly resist your plans to implement e-procurement, you should start wondering why," he said in his presentation at the IFPMM.

According to International Data Corporation definitions, e-procurement is a browser-based system that employees can use for directly ordering goods and services where the entire workflow surrounding the approval process is automated. Orders are then transferred automatically via the Internet.

Leon Raath, president of Institute of Procurement SA, pointed out that procurement managers have a significant role to play in businesses today - a role that is often underrated.

"Many CEOs do not realise that this is the biggest untapped golden goose and have failed to create the right workable climate for procurement managers," he said. He pointed to the immense benefits in costs savings brought to large buying organisations - especially at the billion-plus level - by strategic sourcing and other e-procurement initiatives.

He said companies with successful implementations, like Sasol, have the support of their senior management in implementing their procurement initiatives. This does, however, depend on the company. Jordaan noted that at the FirstRand Group "[we] had to convince each of our management teams of the benefits of e-procurement". Jordaan said that another stumbling block to the adoption of e-procurement lies in the lack of payment options.

"The role of e-marketplaces remains important to procurement managers," said Professor Atilla Chikan, president of IFPMM. "There were a lot of illusions about what they could do, but e-marketplaces are going through a cyclic movement. This includes a phase where the e-marketplaces were being established. While e-marketplaces are not limited to maintenance, repair and operational supply, this is in practice where it is used most," he said.

But increasingly he sees a role for this technology in procuring direct materials.

"E-procurement needs to be driven by commercial requirements and not by the IT department or else it will be fundamentally flawed. E-procurement is after all a tool for greater control," concluded Raath.