E-Business Report 5
E-Procurement – Poised to Become the Defining Enabler
The business-to-business (B2B) portion of the e-Business marketplace is expected to grow at a phenomenal rate over the next few years and will account for $842 billion dollars, dwarfing the business-to-consumer (B2C) market in comparison.
More importantly, though, the B2B market is poised to become the key enabler in integrating supply chains among buyers and sellers. In this new competitive landscape a company’s supply arrangements will become a key competitive element of its overall success. Integrating supply chains across businesses has always been a goal, but the ability to fuse the management of materials, information and funds from supplier to the ultimate consumer has always been difficult — until now.
| As the study makes clear, e-Procurement’s average return on investment can top 300 percent in the first two to three years. |
This viewpoint is substantiated by Deloitte Research’s recently-published study “Leveraging the e-Business Marketplace: Business-to-Business e-Procurement Trends, Opportunities and Challenges.” The study, which explores the various trends and issues facing e-Business purchasing, supplier management and partnerships, reveals the growing importance that global corporations are placing on e-Business, in particular e-Procurement to deliver dramatic returns on investment (ROI).
As the study makes clear, e-procurement’s average return on investment can top 300 percent in the first two to three years. “Such high ROIs are dependent on a number of factors, including the amount of external spend addressed, the number of users embracing the system, and the extent to which companies improve their business processes and procedures.
As a result, the study suggests that as more organizations move to adopt e-Procurement capabilities, the overall impact will be to transform and lower overall industry supply chain costs. Planned implementations in the near future will reach a market penetration in excess of 80 percent.
Its findings underscore the need for immediacy in e-Procurement implementation. According to John Ferreira, a co-author of the study and a principal at Deloitte Consulting: “Clearly, the question for today’s company should be, ‘How soon can we move to an e-Procurement solution in order to fundamentally change our competitive position?’ Where better for companies to reduce overhead, than in the millions of dollars they spend each year just to run their business? E-Procurement goes a long way to significantly reducing costs and, potentially, providing new opportunities to generate revenue.”
“Some organizations, those at the forefront, are even shifting the process from cost-focused to revenue enhancing,” adds Robert Derocher, a co-author of the study and a senior manager at Deloitte Consulting.
“Companies can now leverage their supercharged procurement capabilities to create new revenue streams by providing buying networks for their own customers. In fact, e-Procurement is poised to become the defining enabler which seamlessly integrates supply chains between different buyers and sellers, “he continues, “which makes a company’s supply chain a key competitive advantage.”
The study notes that of the companies that had developed an e-Business strategy, 50 percent incorporated supplier partnerships and buying into their plans. Given the broad possibilities offered by e-Procurement, a strategy can be invaluable in helping companies define supplier partnerships, goods and services to focus on, and functionality/technology that fulfills e-Procurement requirements.
Yet the real challenge, it appears, lies in developing an overall e-Procurement plan that matches the needs of the business and supply category to the most appropriate solution, while realizing that not all products and/or services will be handled using the same approach. In fact, the purchasing transaction for some complex products and services may not be executed over the Internet, but rather may be supported by it through functionality, including online bids and vendor qualifications.
Indeed, companies report that key suppliers are prepared for Internet-based procurement - an integral ingredient for success. This is borne out by the fact that almost 70 percent of survey respondents indicated their suppliers are prepared to collaborate through e-Business.
This attitude, feel the co-authors, is indeed good news for those companies who are planning or considering e-Procurement. They are likely to find their core suppliers prepared to provide Web-based catalogs and maintenance, as well as electronic receipt and processing of orders.
As the new e-Business world takes shape, B2B marketplaces are forming across and within every industry. Today the opportunity for businesses to dramatically alter their competitive ability is great. Companies that can connect and leverage this e-Market will ensure their place among the leaders in the e-Business supply chains of the future.