Purchasing better online

Pro

No matter what line of business you are in and no matter what size your company, at the end of the day it all boils down to buying and selling. You buy the inputs you need to run your company and then you sell your goods or services-hopefully at a profit.

Much of the discussion of how the Internet can help businesses focuses on the selling side of the equation, i.e. e-commerce. What often seems to be forgotten is that it’s also possible to add efficiencies to your business by moving purchasing to the Internet. It doesn’t matter whether you call it e-procurement, electronic tendering, or online purchasing-the fact remains if you can make your purchasing process more efficient and reel in maverick buying by your staff, you can save yourself a lot of euros. Rather than employees picking up the phone and ringing local suppliers on an ad hoc basis, with e-procurement you can ensure preferred suppliers who give contract pricing are always dealt with.

It should also be noted that e-procurement is generally used in reference to indirect inputs, i.e. the stuff that enables you to run the business rather than the direct inputs which you need for your manufacturing or other central processes. E-procurement can help you make savings on all the ancillary supplies your company buys because this is where most businesses put the least amount of effort into getting the best deal. Generally we buy our coffee from the local cash and carry and our paper from the local stationary, because it is convenient. With e-procurement we can potentially source these products from almost anywhere in the world.

Automate

The use of online technologies for the procurement process has the potential to automate much of what is a time and labour intensive activity. Rather than sitting down with the Yellow Pages ringing potential suppliers and faxing through requests for a quotation, you can avail of a tender site that allows you to send your request to multiple potential suppliers at once. Irish sites offering such services include Easyquote (www.easyquote.ie), Print Quote (www.printquote.ie) and Freelance Ireland (www.freelanceireland.com).

By moving from a paper based purchasing system to an electronic one, you can also make it much easier to collect data on your purchasing or look at purchasing patterns. This means that you have the necessary data the next time you put a contract out to tender or just decide to go out and talk to other suppliers.

The potential saving is obvious according to Mike Parkinson, head of EMEA development with online payment specialists Worldpay. ‘If you are buying a pack of highlighter pens for say EUR50, the cost of raising a purchase order will be more than the cost of the pens,’ says Parkinson. The alternative is to ring a supplier from the Yellow Pages and order it on a company credit card. A more efficient way would be to go online to a stationery supplier with which you already have an account and make the purchase online.

Unfortunately, according to industry players, not many small Irish businesses are making that leap. Based on his own experience rather than any hard and fast research, Lorcan O’Sullivan, manager of the E-Business Unit at Enterprise Ireland, believes that e-procurement is still only being systematically implemented in larger organisations. ‘SMEs are using the Net for certain things like airline tickets and computer peripherals,’ he says. ‘Beyond that very systematic online purchasing is only being done by large companies and in turn the companies supplying them.’ O’Sullivan believes that this trickle down effect is how e-procurement will eventually become ubiquitous as larger entities start to only deal electronically. A step in the right direction is the government’s public sector procurement opportunities Website (www.e-tenders.gov.ie) which lists published tenders from public bodies and in many cases allows companies to express an interest and submit a tender online.

‘SMEs can only buy online when suppliers are selling online,’ says O’Sullivan. There are economies of scale involved as well-‘General Motors can spend USD20 million to save 5 per cent on their purchases, but small business don’t have the same purchasing power.’

Encouraging signs

There are encouraging signs that business to business sales are moving online. Karl Donnelly, who looks after EsatBT’s E-Store line of e-commerce products, says that 60 to 70 per cent of the proposals that he is now seeing are in the business to business sector. ‘It’s where the interest is,’ he says. ‘The consumer space tends to be about very niche markets-all the players are already online.’ Customised versions of e-store are available with prices starting as low as EUR300 a month. These usually have restricted log-ins, user specific catalogues and pricing and other features that make it more suitable for business to business transactions.

Barney Joyce, director of Easyquote.ie, a site that enables users to get quotes for a range of products and services, says that the Internet boom and subsequent bust hampered the adoption of e-procurement. ‘People are taking it more seriously now,’ says Joyce. ‘You can legitimately justify using the Web for purchasing-six or twelve months ago people were saying to us that their boss mightn’t approve.’ To prove the point, Easyquote.ie lists thousands of products and services ranging from cleaning to Web site design, and according to Joyce the value of the goods and services that people are enquiring after is getting higher.

Security has also been a concern in the past-with high profile consumer sites having high profile security breaches in the past, it’s no wonder that business people were anxious about moving their processes online. Improvements have been made in this respect and companies such as Esat BT and Worldpay now have low cost hosted solutions that enable companies to move purchasing and selling online for a relatively low monthly cost. With the service hosted by a third party such as these, it means you can benefit from their security infrastructure rather than the cost of implementing something on your own.

Up and online

Travel and computer supplies are two of the most obvious areas where savings can be made by purchasing online. Ryanair (www.ryanair.com) and Aer Lingus (www.aerlingus.com) both have online only specials that are significantly cheaper than anything you can get by booking through a travel agent. The newest Irish airline, JetMagic (www.jetmagic.ie) which operates out of Cork, also encourages passengers to book online.

As you might expect there is a wide range of computer and office supplies available online, as well as PCs and other computer hardware-far too many to list them all here. Wizard Direct Office Supplies (www.wizard.ie) offers a five per cent discount for online orders on everything from pre-paid envelopes to hardware such as printers. Hunt Office Technology (www.hot.ie) has both a secure consumer site and a facility for account holders to log on and purchase stationary, furniture and consumables with free delivery. Compupac Ireland (www.compupac.ie) is a real world business with an online facility and it has a corporate buying facility for regular shoppers.

More broadly based portals that simplify the sourcing of quotes include such Irish sites as Easyquote (www.easyquote.ie), Print Quote (www.printquote.ie) and Freelance Ireland (www.freelanceireland.com). When dealing with sites that allow you to receive multiple quotes it’s important to be as specific as possible with what you are looking for. While you clearly want as many qualified companies as possible to quote for the business, you also don’t want one of your staff to have to trawl through hundreds of quotes, and thus eliminating any potential savings you might make.

Also worth considering are online auctions sites such as EBay (http://pages.ebay.com/ie), E-bid (www.ebid.ie) and Exsell Auctions (www.exsellauctions.com). The first two are mainly consumer focused but you can still pick up bargains on goods such as mobile phones and laptops, while Exsell focuses on liquidation stock and is worth keeping an eye if you have capital investments to make in the near future. Directory sites such as Kompass’s Business.ie (www.business.ie) can also be used to find out if suppliers have an online presence.

To take the leap?

While there are definite upsides for SMEs in the widespread use of e-procurement and online purchasing, there are also potential downsides, as Lorcan O’Sullivan cautions. ‘The implications of big companies going online is that their whole pattern of buying can change. They generally reduce the number of suppliers they deal with. Small companies may find that rather than supplying a company directly, they are supplying their suppliers and that’s going to mean a reduced margin.’

Ten Things to Consider

What potential saving can you make? Do they justify the cost of setting yourself up for online purchases?

1. How will purchases be approved? Can your existing processes be mapped to the online world?
2. How will payments be made online-will you use a company card or is it possible to set up an account?
3. Don’t be afraid to leverage online quotations to get a better deal from existing suppliers
4. What is the returns policy if you purchase online?
5. Don’t just consider price-look at issues such as support, delivery times and quality of products supplied.
6. Can you reduce the number of suppliers you deal with by going online?
7. Compare apples with applies-online procurement can eliminate errors from orders, but ensure you are comparing similar products.
8. Expand your vision-every one likes to buy Irish but could it be possible you’ll get a better deal from an international supplier with an online presence?
9. Now that you are purchasing online, shouldn’t you be selling online?

05/09/2003

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