E-Procurement Vision of the Future: Tomorrow
With e-procurement, life is very different. Any employee can be provided on his or her desktop PC with access to a user-friendly point-and-click system on which he or she can browse through online catalogs of the company's approved vendors. Products can be identified by features or by model numbers or names, and the search will prioritize the results according to how well items match the buyer's requirements. The system will provide a side-by-side comparison of the products. Prices can be compared between suppliers, and discounts calculated easily. Information concerning availability, delivery, and payment of supplies is readily available, and payments can be made electronically.
Approvals for standard supplies are automatic, and exceptions are immediately routed through a list of approval deputies, ensuring that if no response is received in a matter of minutes, the approval is routed quickly to another prenamed deputy. There is a complete audit trail of the request, price, approval, and payment information, and transaction information is captured and recorded for vendor performance analysis. There is an instant update for other interested partiesaccounts payable and receivingand most transactions will take only a few minutes. All purchase order and delivery details are available online for both the supplier and the buyer to see.
This level of functionality, particularly for indirect goods, is already available, although the choice for the infrastructuremaintained as in-house software or outsourced through third-party providers or through online auctionsis still very fluid, and these strategic choices are explored in the following chapters.
The equivalent level of functionality and ease-of-use on the direct materials side of procurement is less universally available now, but that functionality promises to explode in the near-term. The same functionality in terms of electronic requisitioning, online pricing, and streamlined approval exist, of course; but although the potential for purchasing through the growing number of online auctions, reverse auctions, and industry exchanges exists, only the most stout-hearted and progressive multinationals have plunged fully into electronic procurement of direct manufacturing materials.
But, whether direct procurement takes place through a third-party or through industry-focused supply portals (which are explored in the following chapters), advanced companies are already able to tap the Internet to source parts globally, manage inventory collaboratively, forecast and plan production and manufacturing starts with key suppliers, and provide transparency between ERP systems so that suppliers can "see" and participate in the planning and execution of manufacturing forecasts. All of this can be done in real time, greatly reducing the need to carry excess safety stock or to maintain complex contractual relationships with preferred vendors.
In its most perfect state, the simultaneous availability of data to all the parties in the extended supply chain means thatwith the elimination of uncertainty, people, and papertransaction time will be reduced to very little more than the actual time it takes to physically transport the materials. If tight integration can be achieved between well-integrated systems, the need for the now disparate third-party software systems found today in many manufacturing companiesto monitor safety stocks or manage material flowsimply disappears. At best, this can dramatically increase service levels, smooth out the supply chain, and reduce costs.
But for many industry watchers, the benefits and effects go well beyond cost savings. E-procurement becomes the catalyst that will allow companies to finally integrate their supply chains from end to end, from sales to supplier, with shared pricing, availability, and performance data that will allow buyers and suppliers to work to optimum and mutually beneficial prices and schedules. In short, for many people, it is the key to collaborative commerce and success in the extended enterprisethe "Holy Grail" of production specialists everywhere. Fortunately, the question is not whether or not this level of functionality can be achieved; it is more a question for individual companies of how to achieve it, and at what price.