Using the Internet to Enhance Purchasing Productivity

Author(s):

Charles Hofacker, Ph.D.
Charles Hofacker, Ph.D., Professor of Marketing, Florida State University, Tallahassee, Florida 32306-1042.
Larry C. Giunipero, Ph.D.
Larry C. Giunipero, Ph.D., Professor of Purchasing & Marketing, Florida State University, Tallahassee, Florida 32306-1042, (904) 644-8224.

82nd Annual International Conference Proceedings - 1997 

Introduction. The Internet is affecting the way business markets and sells its products. The number of homepages on the Internet is increasing at a phenomenal rate. Purchasers can use the net to improve their business performance. The Internet can be used by purchasing for sourcing, research, and order placement. In addition to these uses there are obstacles which need to be addressed prior to transferring sensitive data over the Internet.

The Internet's Growing Importance. The Internet will have a dramatic impact on the Purchasing function of the future. It's development as a tool for business and consumer use has occurred during the past 5 years. Growth in the past two years has been phenomenal. Active Media Inc., a market research firm projects that total Web sales will increase from $436 million in 1995 to an estimated $2.6 billion in 1996. Further Active Media estimates there will be 220,000 commercial web sites up and running by the end of 1996 compared to 23,000 at the end of 1995. In another study, Advanced Manufacturing Research found that eight six percent of manufacturers it surveyed are planning to connect with their suppliers over the Internet. While only 13% are currently connected with their suppliers another 43% plan to link up in the next two years and another 24% by the year 2000. Further over 50% of these manufacturers provide company wide Internet access and over 80% have established home pages.

Performing an adequate search requires the use of Web Browsers which enable the user to input certain keywords and obtain desired locations. Another technique involves directly obtaining the suppliers world wide web address and storing it in a bookmark for retrieval as required. As the growth of companies adding home pages increases it becomes much easier to use the Net in lieu of conventional marketing information such as product brochures and catalogues for the preliminary sourcing inquiry.

As companies add more information to their Web sites purchasers begin to check availability and eventually order goods directly on the Net. Implementing automated purchasing systems on the Net requires extreme caution under current practices since security is not guaranteed and proper controls must be implemented prior to developing an order transaction system on the Net. The "Common Gateway Interface" can be utilized to transmit orders electronically via the Internet.

One effort at providing security is being developed by VISA and Mastercard to promote electronic commerce. The Secure Electronic Transactions specification which they have jointly developed will provide digital certificates to users to provide protection against unauthorized card use. These certificates will be issued via the Internet to cardholders, Internet sellers and firms who process these transactions.

Another valuable use of the Net is performing a price analysis. The buyer can check Government data from the Producer Price Index or the Bureau of Labor Statistics hourly wage rates for job classifications and quickly verify the competitiveness of a suppliers price.

The increasing importance of the Net to both buyers and sellers require that it be understood and used as a productivity enhancement tool within the supply chain it has potential for significant cost reductions.

The Internet is potentially an extremely powerful tool to improve the efficiency in business transactions. The use of public computer networks to facilitate the links between suppliers and purchasers could save American firms billions of dollars now spent on the development of private and/or proprietary networks. In addition, the Internet contains a vast storehouse of data which can be of relevance to purchasers.

Conclusion. The growth of the Internet will require that purchasers' become aware of its many benefits. Some of the main obstacles which appear to currently hinder its growth as a commercial tool are security and lack of investment in equipment at smaller firms. However, it has the potential to make tremendous productivity gains in the purchasing field. Use of the Internet can simplify and reduce the buyers search time, provide a method to service users efficiently, reduce cycle time, and lower the transaction costs associated with placing purchase orders. For those supply arrangements which are carried out through strategic alliances or partnering it will allow for rapid accurate transfer of information. Finally it will provide the buyer a tool for professional growth and development through web sites such as the NAPM home page. NAPM's site features information on membership, educational products, seminars, publications, accreditation, certification and the Center for Advanced Purchasing Studies (CAPS). It can be located at http://www.ism.ws.

Sources

Ives, Blake and Jarvenpara, Sirkka, "Will the Internet Revolutionize Business Education and Research?" Sloan Management Review, Spring 1996.

Frommer, Diane, "Visa and Mastercard Choose Different Partners for SET", Electronic Buyers' News, August 6, 1996.

Frommer, Diane, "OEM's Bullish on Internet", Electronic Buyers' News, August 12, 1996, p. 50.


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