Internet purchasing is already being implemented in many sectors as organisations appreciate the profit maximisation benefit of electronic business procedures.
The first focus will almost inevitably continue to be on indirect expenditure - Maintenance, Repair and Operational (MRO) supplies. It is estimated that $250billion per annum is spent on MRO supplies and 30% is spent outside corporate purchasing agreements [META Group]. Significant cost savings are possible and the quick wins produce the return on investment (RoI) requirement to justify e-projects.
Implementation of e-procurement will fundamentally change the nature of trading and the relationship between buyers and sellers.
Buyers will demand a far wider range of value propositions from their suppliers, including electronic cataloguing, access to line pricing and inventory management.
Most e-procurement service providers and legacy Enterprise Resource Planning (ERP) vendors are broadening their approach and offering direct links to trading portals such as Ariba. Commerce One, Tradex etc. as well as a range of dynamic pricing tools, Requests for Information (RFI) and bid systems to facilitate on-line purchases. Additional support and related services will become available, covering catalogues and content management, online credit references and access to vertical marketplaces.
Accelerating the change are the new 'e-entrants' or new market makers (NMM), who are shifting the emphasis from physical to virtual trading entities. The primary value driver of NMM businesses is to drive out cost and inefficiencies in the supply chain, addressing client needs and maximising return (see Figure 10). The NMM trading model is evolving rapidly, leading to dynamic online trading, auto replenishment and supplier 'clearing houses' with auction and exchange capability.
Figure 1: Adding value by making new kinds of markets
Driven by e-business, the traditional supply chains will change from a chain into a network covering the entire e-extended enterprise. The new trading nets will differ by industry and market sector for unique customer segments.
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