1. Will eCommerce Eliminate
Purchasing?
R=IQi

2. Agenda
 Purchasing today, Sourcing tomorrow
 eCommerce to Business
 eBenefits
 eCosts and eRisks
 eNext steps
 Purchasing, eliminated or revolutionized?
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3. Purchasing Today
 75% of time spent on transactional tasks
– Order placement
– Order tracking
– Expediting orders
– Claims processing
– Invoice payment and audit
– Validating perpetual inventory
– Bill of material creation / re-creation
– Inspection
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4. Sourcing Today and Tomorrow
 Select capable suppliers & build relationship
 Lay foundation of information exchange
– Trust & connectivity
 Provide suppliers what they need to leverage
their infrastructure for you:
– Commitment of supply
– Demand visibility
– Strategic plans
– Customer needs
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5. Sourcing Today and Tomorrow
 Align processes to take advantage of tools
and technology
 Measure and reward
– The supplier
– Your organization
– The supply chain (or the supply grid!)
 Prepare and support change
– Leverage supplier expertise
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6. The Plan Must Tie to the
Organization’s Interests
 Customer AND Shareholder
“Nothing is worse than doing efficiently what
should not be done at all”
Peter Drucker
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7. Strategic Sourcing
(Eyes / Senses)
(Brain)
(Muscles)
(Skeleton)
(Skin)
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8. Paradigm Shifts
eBusiness supply chain demand
visibility - End User POS to
mother earth Supplier
Pull - Customer from Supplier
Push - Supplier to Customer
Utility
Time
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9. A Paradigm Shift
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10. CAPS - Future of Purchasing & Supply - 5 &
10 Year Forecast
 The Internet will become the backbone of electronic order
communication and metrics publishing.
 Systems for low strategic value purchases will emphasize electronic
efficiency
 Tactical purchasing will become more automated and consortia and
third-party purchasing will become more prevalent
– head counts will be reduced
 The Internet will be the front end for proprietary information systems,
combining databases accessible by suppliers, purchasing, and
customers, to create a seamless link
 Internet commerce will be commonplace and businesses that do not
adopt the world of e-commerce will be faced with extinction
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11. The Role of the Web
1,000’s of Suppliers - each with their own system
VERY COMPLEX
1,000’s of Buyers - each with their own system
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12. The Role of the Web
1,000’s of Suppliers - each with their own system
The WEB
1,000’s of Buyers - each with their own system
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13. eCommerce to Business
 Web storefront  Unassisted selling (VMI)
 Web marketing  Personalized marketing
 Integrated selling  ERP / Legacy integrated
 Catalog searching  Web configurator
 Individual to supplier  Community to many
suppliers
V=C^i ™
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14. Companies Address Business
 Enterprise procurement
– Ariba, Commerce1
– Suitable for large companies
 Vertical marketplaces
– Independent Funeral Director’s Cooperative, Chemdex,
PlasticsNet, Vertical Net
 Community Sourcing
– 3PLEX (Sourcing capacity / shipments)
– Creates a ―virtual Fortune 100‖ company
 Research and Sourcing
– Find
– Qualify
– Obtain quotes
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15. The Purchasing Community
Depth of boxes
determined by
time factor
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
Dept
negotiated (zero
depth for spot
buying)
Loca Loca Loca Loca Loca Loca Loca Loca Loca Loca
tion tion tion tion tion tion tion tion tion tion
Division Division Division Division Division Division
Sister Company Sister Company Sister Company
Time
Multi-Company Purchasing Volume
Volume - units
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16. eStatistics
 1997: B to B: $8B
 1999: B to B: $137B (Yankee)
 2002: B to B: $327B (Forrester)
 5% savings increases profits 28%
(Killan)
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17. eBenefits
 eBusiness saves money
 eBusiness reduces inventory
 eBusiness provides good service
 eBusiness provides good information quickly
 eBusiness makes other systems more effective
 eBusiness provides a new set of internal controls
 eBusiness simplifies administration
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18. The Ink is InDellible
“In the future, it will be possible for
component suppliers to have a direct
window into factory workflow via the
Internet. This will enable them to use
information to deliver parts in real time,
essentially eliminating inventory and
further accelerating the pace of
commerce.”
Michael Dell, Chairman of the Board and CEO, Dell Computer Corp.
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19. eBenefits
 Global
 24 x 7
 Incremental revenues w/o incremental costs
 Personalized
 Customers receive information when it’s
convenient for them
 Reduced in-house customer service
requirements
 Provides backbone for multi-link demand
visibility
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20. eBenefits (con’t.)
 Up-to-minute information
 70% of calls placed to companies are:
– What is the price of the product?
– Is the product in stock?
– What’s the status of my order?
 (source: Open Market)
 All can be answered with no marginal
cost via the internet
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21. eBenefits (con’t.)
 Orders placed can be verified for
accuracy (algorithms)
 Confirm order placement /
shipment system to system
 Use systems to audit and
process payments
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22. eBenefits (con’t.)
 Reduce #, frequency, size of physical
catalogs
 Internet catalogs can be:
– Searched
– Views analyzed
– Secured
– Personalized by individual / dept / company
/ group
– Updated with not printing or postage costs
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23. eBenefits (con’t.)
 Web sites tracking
– Where views come from
– Path traverse through the site
– Where they leave from
– How long they stay
– Page views
 Integrate with existing systems
– Inventory control
– Order processing
– Fulfillment
– Customer service
– Accounts payable
– Cash forecasting
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24. eCosts
 System integration
 System development (primarily borne by
suppliers)
 Re-engineering process to enable company
to take advantage of e-business
 Change management
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25. eRisks
 Faster communication reduces option to
rethink decisions
 Internet security
 If implemented without holistic approach,
benefits may not materialize
 Requires specific set of internal controls
 Requires acceptance of paperless
purchasing
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26. eNext
 Understand the capabilities of eBusiness
 Select an approach to eBusiness (enterprise,
vertical, community)
 Review sourcing tasks and company needs
 Select capable suppliers and applications
 Reengineer processes to capitalize on new
tools and suppliers
 Test, implement, and monitor
Copyright The ProAction Group 2001

27. Sourcing Approach
• Supplier Alliance • Strategic Supplier
High • Community Alliance Supported
Dollar Purchasing by eBusiness
Volume • Integrated Supplier
• Community • Supplier Alliance
Purchasing • Approved Supplier
Low
• Outsource to Lists
Dollar
Primary Supplier
Volume
• Integrated Supplier
Non-Critical Critical Product Family
Product Family
Copyright The ProAction Group 2001

28. eNext
 Understand the capabilities of eBusiness
 Select an approach to eBusiness (enterprise,
vertical, community)
 Review sourcing tasks and company needs
 Select capable suppliers and applications
 Reengineer processes to capitalize on new
tools and suppliers
 Test, implement, and monitor
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29. ―The Web is an insidious process-
reengineering tool‖
Graeber Jordan, Boeing
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30. Eliminate or Revolutionize?
 Eliminate  Revolutionize
– Purchase orders – Inventory management
– Invoices – Product evolution
– Checks – Distribution options
– Order tracking phone – Expanded community
calls – Internal controls
– Order taking – Order process
Copyright The ProAction Group 2001

31. One machine can do the work of fifty
ordinary men. No machine can do
the work of one extraordinary man.
— Elbert Hubbard

32. From
 Thanks!
 Do not hesitate to call us with any questions
Timothy Van Mieghem
tvanmieghem@proactiongroup.com
www.proactiongroup.com
Copyright The ProAction Group 2001

33. References
 VanMieghem, Timothy, Implementing Supplier Partnerships. New
York. Prentice Hall, 1995.
 Anthony J. Bingham, director of operations, Apartments.com.
Interview conducted in September, 1998.
 CNEC; ―CNEC – Insights into Electronic Commerce.‖
www.cnec.org/ecinsight/insight.html. June 17, 1997.
 Bronwin Fryer ―Straight from the screen. Newfangled software may
revolutionize procurement, but not without some old-fashioned
reengineering.‖ CFO Magazine, November, 1998
 V=C^i™ developed by Dan Tiernan of Aatlas Commerce, additional
information available at www.aatlas.com
 ―The Beer Game.‖ Published by Harvard Business School February
24, 1997, Boston, MA
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