Manufacturers to make least from e-procurement, but still worth having, says Oracle and the Institute of Purchasing and Supply

The research was commissioned to put real figures in front of business leaders – and to get away from both the damaging hype (claiming figures of 20% and more) and the equally worrying scepticism of the last few years – by setting the record straight. CIPS director of professional practice Roy Aycliffe says he believes the figure is lower for manufacturing simply because, “manufacturing is further advanced than most other sectors in terms of take-up of ERP and supply chain systems. It’s had to be, not just for cost savings but the need for continuity of supply.” And with much of the IT already there in the form of EDI and the rest, it’s clear that, at the top end at least, some of the sector is already ahead with procurement. But this is by no means the majority, says Oracle. The software giant points to recent reports by analyst Jupiter, stating that many procurement managers ‘see so little advantage in moving online’; that they will do less than 20% of their business buying on-line until 2003 at least; and that they are are finding that companies are moving their buying processes onto the Internet very slowly and many are hesitating to do so at all. And the firm says that one of the reasons is the need for IT departments to provide return on investment (ROI) guarantees before implementing any new solution. For those in this position, the consortium also launched a mechanism by which firms can not only benchmark themselves, but also formally justify investment in e-procurement projects against real ROI (return on investment) using their own figures. Dubbed I-Save (Independent Savings Analysis Verification and Evaluation), it’s a set of self-diagnostic tools that allow a purchasing manager to estimate savings opportunities available on an ongoing basis. “Oracle believes that I-Save marks the first time in the UK that a realistic benchmark mechanism, by which businesses can more accurately assess the likelihood of what can be saved, is available to procurement professionals to address their concerns,” says Phil Wood, e-business suite marketing manager at Oracle UK. The toolset is available free to all UK companies at www.oracle.com/uk/start/isave and on KPMG’s, CIPS’ and the University of West England’s websites. It’s applicable to all sizes of businesses. Says Aycliffe: “It gives figures for ROI calculations and will help users to make their business case and get appropriate funding. It will give purchasing people confidence and something to use to instil confidence in e-procurement projects. “Effective Purchasing and Supply Management is one of the key strategic drivers of successful enterprises, because it enables them to serve their customers proficiently at optimum cost and margin. This research and the tool will help Purchasing and Supply Management professionals to optimise their resources by focusing on achieving the full benefits of applying the new internet procurement techniques.” And he says the prize is worth having: “Those still in purchasing once this wave has gone through will have more interesting jobs and be more highly valued by their companies. It will free them up to do the things their employers wanted them to do when they first took them on.” The research was carried out by the University of West England, starting last October among all business sectors and sizes. Together with the University of West England, Oracle created a hypothesis to establish the best purchasing practices that can be applied across different commodities and industries. Research was then performed to seek verification of this hypothesis across a group of 80 commodity types, seeking the views of around 700 purchasing managers, the results of which have been used to form the basis of I-Save. Over the next six months, phase two of I-Save will involve further research by Bristol Business School to investigate savings in procurement that can be realised through implementing best practice around processes and relationships. BuyIT, one of the leading Best Practice groups in ICT is participating in phase two of the I-Save project, and is signposting the use of the benchmark tool. At the BuyIT summer party yesterday evening, e-Envoy, Andrew Pinder unveiled BuyIT’s strategy for the coming 12 months and launched the I-Save tool and the BuyIT on-line auctions guideline.