E-Procurement Equals Savings

Your company's business is valuable. We're not talking about your relationship with customers, though that too is vital to your continued health. We're talking about the business you give to other firms that supply you with everything from pencils to employees. So why is it that companies like yours don't open up their patronage to multiple bids? You can let vendors know that your company has a need and invite them to make you an offer. And it doesn't involve using an auction site. This week we interviewed Ofer Ben-Shachar, CEO of cross-enterprise collaboration software provider Noosh. He told us some pretty impressive things about the savings possible with e-procurement collaboration. Analyst firm Meta Group estimates that typical procurement costs in organizations using traditional methods can be as high as $150 per purchase order. But using Noosh's services, one Fortune 100 insurance company saved 12% on the cost of procurement last year. That's 12% off the cost of doing business, and a real, genuine boost to the bottomline. Why try e-procurement? Ben-Shachar gives his point of view.

The Case for E-Procurement

It seems simple on the face of it. Why not use the Internet, with its grand power, to get multiple parties at one place at the same time, to streamline the purchasing chain? Well, purchasing departments do, at least to an extent. "Today people use a lot of paper and e-mail and it's a little bit of a mess because the information is spread around on everybody's desks. Everybody has slightly different information and it's very hard to consolidate that," says Ben-Shachar. "If I want to put out some kind of a change order and I have to communicate it to fifteen people across three companies, it's a very lengthy process - especially if you want five of them to approve it. There's really no system that will cross an organization." Yes, yes, traditional procurement is slow and laden with snafus. Who hasn't had projects or an order go unfilled due to a hold-up in authorization? But why bother installing and learning a whole new system? And why not stick to long-term vendors, who give you good prices because of your tight relationship? Because they may not be giving you their very best deals. "If you don't have an Internet system to do bids, it's hard. It sometimes can be so hard that it's not worth the effort. It's very easy with an Internet system so it's worth the effort. I think some of it is also that people don't realize the savings they can get," he says. "Maybe the people who do realize this are not in control of their transactions. It might be that the CFO is very interested in getting better pricing, but without the system, there's no way to track everything so nobody can spend the resources to make sure they actually use the best purchasing practices." With the systems put forth by Noosh and others, companies can open up an online project and invite whomever they like to join in. If a company needs, say, a million business cards, they can describe exactly what they need and invite vendors to submit a bid. Once a vendor is chosen, the buyer and the vendor can dicker back and forth using the same system before the order is finally filled. And at any time, anyone on the system with permission can track what's going on. It's simple, it's streamlined, and it can help businesses keep a firm grip on procurement costs. And it represents one important way the Internet can really help your business clamp down on unnecessary costs. "I think the Internet is the way people are going to run their businesses," says the prescient Ben-Schchar. "I know that right now with the stock market and the way it behaved people are saying, 'Well, maybe the Internet is not so great.' But if you look at the way people are using a system like this and consider the benefits they're getting, it's very clear. When you're getting savings of 20-25% within a few months time, when you can cut time cycles by 60%, there's a very big incentive to move to the Internet and a very big competitive advantage for people to use Internet-based systems to both gain market share and to reduce cost significantly." Right now, particularly, staying alive in business is all about hunkering down and keeping costs low. With e-procurement you can do that and never even feel the bite. Is it right for your company?