Dr. Alan Raedels, C.P.M.
Dr. Alan Raedels, C.P.M., Professor, Portland State University, Portland, OR 97207, 503/725-3728
Dr. Lee Buddress, C.P.M.
Dr. Lee Buddress, C.P.M., Assistant Professor, Portland State University, Portland, OR 97207, 503/725-4869
Abstract. The Internet, a worldwide network of networks linking over four million computers, is experiencing increased use by both buyers and sellers as a source of information and a medium for conducting business. This article first identifies the functions available on the Internet and discusses tools to aid the user in navigating the "Net." The article then discusses how buyers can use the Internet in the purchasing process and describes many of the information resources available on the Internet. Lastly, the article presents many of the problems and risks associated with doing business electronically and gives a vision for what the future may hold.
Introduction. Much has been written recently in the popular press about the Internet. But the Internet is more than on-line chats, obscene pictures, movie previews or a place for hackers to trade programs. The Internet is becoming the information tool of the future for business, if not a vehicle for commerce. The challenges facing purchasing professionals in the next decade will include obtaining information about products and suppliers in light of shrinking new product introduction times and product life cycles. The Internet will be a tool to help purchasing professionals meet these challenges.
Internet Basics. The Internet is a worldwide network of over 40,000 networks connecting over four million computers ranging from PCs to supercomputers through a standard communications protocol. It is estimated the Internet is used by over 20 million individuals in over 75 different countries and the number is growing daily. Internet users have access to thousands of discussion groups; library catalogs and databases; gigabytes of software programs, text files, images, and music; electronic books and journals; the latest satellite weather maps; product and supplier information; and electronic mail.
Functions on the Internet. There are three major functions an individual can perform on the Internet: telnet, e-mail, and file transfer protocol (FTP). Telnet allows users to connect to other computers on the Internet where one can search for and view files and software. Applications include accessing on-line databases, library catalogs, phone books, and electronic publications. Electronic mail allows users to send messages to anyone who has an e-mail address anywhere in the world for free. No postage and no long-distance charges. Other uses include topicoriented discussion groups such as "Listserv discussion groups" and "Usenet newsgroups". FTP allows users to transfer computer files across the Internet. The files can include text, graphics, spreadsheets, software, or even music.
Navigating the Internet. Tools which aid the user in navigating the Internet include gophers, Veronica, WWW browsers, WAIS, and Archie. A gopher is a program that provides menu access to different Internet resources using linear, hierarchical relationships. Selection of an item on a gopher menu will connect you automatically with that item whether it is another menu or an application such a library catalog. Veronica is a search program that allows the user to do a keyword search of hundreds of gopher servers around the world and then creates a menu which the user can use to access any of the sites identified in the search.
WWW browsers such as Mosaic or Netscape allow the users to access and display documents throughout the WWW. The World Wide Web (WWW) uses documents as nodes that are connected to each other through a series of links based on the use of hypertext. Hypertext allows the linking of documents in a nonlinear, nonhierarchical relationship and allows images and sound as well as text to be displayed. When using the WWW, the user begins on a "home page" and then moves to other screens using the hypertext links.
WAIS (Wide Area Information Server) is a tool for searching through diverse databases across the Internet for documents which contain the words you select. The WAIS software then searches the WAIS servers on the Internet for all documents containing the key word or words you have specified and then presents you with a ranked list of documents likely to be of interest.
Archie is a program that maintains a catalog of anonymous FTP archives around the world and allows you to search its database to discover where a file or program is located. The user can then use FTP to access the desired file at the identified site and copy it to the desired location.
Using the Internet Today. There are many ways today's procurement professional can use the Internet to improve the acquisition of materials and services. At each stage in the purchasing process the on-line buyer can use the Internet as an effective tool. In the procurement request, step the Internet can help identify potential sources including minority, disadvantaged, and women-owned business through yellow pages, directories and on-line want ads. In the solicitation and evaluation of proposals, the Internet can be used to contact suppliers' home pages regarding product specifications or to access bulletin boards where specifications are kept. In the future there will be the capability to send and receive RFPs and RFQs through the Internet with confidentiality of the material ensured. Supplier analysis can be facilitated through on-line access to supplier information including financial data. In the negotiation stage of the purchasing process the Net can be used to find and collect relevant information from a variety of sources around the world including information on price and availability trends. Contract execution, implementation and administration can be facilitated through the use of electronic mail.
The potential of the Internet from a supplier's viewpoint is overwhelming. SunExpress, the direct marketing division of Sun Microsystems, had 58,000 accesses of its home page in January 1995, 71,000 in February, and 133,499 in March. Around 25 percent of those accessing the home page searched the on-line catalog [Seideman]. The potential of the Internet from the buyer's perspective is best illustrated through the following scenario. A buyer has just received a requisition for an item the organization has never previously purchased. Traditionally, the buyer would begin the search for a supplier by accessing a variety of information sources such as yellow pages, the Thomas Register, and trade publications. The buyer would then telephone potential sources requesting that product and price information be faxed or mailed. The buyer then sets the requisition aside until the information is received. Once the information is received, the buyer selects a supplier and places an order by phone or fax. Using the Internet, the buyer could call up the Thomas Register on-line and identify potential sources within minutes. A jump using the WWW could be made directly to the potential supplier's home page where the buyer finds the relevant information and downloads the data to his or her computer. After accessing several different sources the buyer reviews the information and selects a supplier. The order can then be placed via the traditional methods, telephone or fax, or in the future by e-mail or through a secure order entry program on the supplier's home page.
Tips on Using the Internet in Purchasing. To make effective use of the Internet on a daily basis, all buyers need solid training. They will need to be taught how to access the Internet from their work stations and how to use the software to find and capture information. Preliminary work to identify relevant indexes, directories, information sources and current supplier Internet addresses prior to implementation will reduce the startup time for the new user. One of the most important requirements is that buyers be given time to explore the Internet.
Buyers need to maintain an annotated database of information sources including Internet address and what information is available at each address. This will allow buyers to reduce their search time. A buyer can also take advantage of the browsing software's features like bookmarks that capture and maintain an address allowing the buyer to go directly to the desired location quickly. One tip while navigating the Internet is to keep track of where you are and how you got there. There is nothing more frustrating than finding a good source and forgetting where it was and how you got there. Read trade publications for information on new services from either articles or advertisements. Ask your existing suppliers if they have a presence on the Internet and if so, their addresses.
When you begin a search on the Internet, know what you are looking for and maintain your focus. If you spot other things that are interest make a note of their location for later investigation. It is very easy to become distracted while surfing the net. When you find relevant information, either print it out or copy the file for review at a later time.
Surfing the Net. Some common sources of information available on the Internet include yellow pages, trade directories, want ads, product information, supplier information, pricing trends, financial information, economic data, and publications. The following are examples:
Yellow and White Pages
The NYNEX Interactive Yellow Pages allow the user to search the information in almost 300 yellow pages directories covering the northeast region by business name, category or by map. (www.vtcom.fr/nynex)
BizWeb provides a catalog of commercial and business related Internet sites by market.
CommerceNet operates an Internet-based WWW server with directories and information that facilitate an open electronic marketplace for business-tobusiness transactions.
IndustryNet provides new product information, marketplace information, buying guides and trade shows.
Professionals Online is a directory of WWW sites categorized by profession
The National Materials Exchange Network provides on-line lists of available and wanted items which are accessible on the WWW (www.earthcycle.com/nmen). Manufacturing Resource and Information World includes manufacturers' directory, equipment and machinery classifieds, software and a list of other manufacturing related Internet sites (www.csi-infinet.com/mriwhome.htm). Electronics Buyers' Bulletin Board Service is designed to allow OEMs to reduce excess component inventories or locate needed parts for an annual subscription fee of $1,000. ["New BBS for OEMs"]
TradeEx on-line service allows buyers to search for, locate and order hard to find computer components and peripherals. Suppliers post offerings, price and availability directly and pay transaction fees. The service is free to the buyer but requires special software from the developer, Dynabit USA [Hyman, 7/10/95].
There is a Republic of China WWW page called ROC OnLine which provides a trade directory for over 14,000 companies, over 5000 product categories, information on trade and industry associations, trade show and conference information as well as cultural and travel information (www.roc.com).
Quote.Com provides business news, market analysis, company profiles, stock data and other data of interest to business people. (www.quote.com) Financial information electronically filed with the SEC is available through the SEC EDGAR project (www.town.hall.org/edgar). In ten minutes you could download a copy of a supplier's most recent 10-K filing.
Pricing and Availability Trends
Current and past gas and oil prices are available on-line at baervan.nmt.edu/prices. Hamilton Hallmark provides trend information on a variety of electronic components on its homepage (www.tsc.hh.avnet.com).
Economic and industry data is available through the University of Michigan's database of government statistics (gopher://una.hh.lib.umich.edu/11/ebb) and the NAPM Report on Business through NAPM (www.napm.org).
Example publications include Time-Warner publications; wirenet news summaries; computer industry news summaries; software that creates personalized editions of the Wall Street Journal, New York Times, and Investor's Business Daily; an eight page summary of The New York Times; Computer News Daily; Electronics Buyers' News; San Francisco Examiner and Chronicle; and Commerce Business Daily.
A variety of information sources is available on the Internet. Examples are Internet directories such as EINet Galaxy (www.einet.net/galaxy.html), Yahoo (www.yahoo.com), Global Network Navigator (gnn.com), Federal Information Exchange List of WWW Servers (www.fie.com/www/us_gov.htm), and Lycos (www.lycos.com); NAPM (www.napm.org); NAPM-Silicon Valley (nw.com/napmsv); and the Uniform Commercial Code (www.law.cornell.edu/ucc/ucc.table.html) to name just a few.
Doing Business On-Line. Doing business on-line may be the wave of the future in purchasing but it is still fraught with many dangers and issues yet to be resolved. In this section the potential benefits, costs, pitfalls, legal and security issues will be examined.
The major benefit of the Internet in Purchasing Today is the ability to access and communicate a wide variety of information quickly at a very low cost. The buyer has access to information on thousands of suppliers and hundreds of thousands of products without incurring a long distance call or worrying about the time of day. For example, Western Micro Technology has an on-line database covering 350 companies and 500,000 part numbers [Scouras]. Time zones are no longer a problem as WWW sites can be accessed any time of the day or night. Thus buyers can also communicate with a supplier half way around the world via e-mail without having to come in early or stay late. Additionally, the ability to interact with suppliers electronically, including sending specifications and even graphic information can reduce new product introduction lead times as well as procurement lead times. Another benefit is the reduction in the amount of paper required. Supplier product specifications are available electronically and the most current information should always be available on the Internet as opposed to trying to keep the most current information on file in purchasing.
What does it cost to use the Internet if your organization is not already online? The first cost to an organization is the necessary hardware and software and Internet access charges. The hardware will consist of a gateway or bridge from your organization's computer system to the Internet. The organization will need software to manage the interface to the Internet and for each person's machine that will be accessing the Internet. This software could include both communication packages and network browsers such as Netscape or Mosaic. There is also an annual access charge to the Internet for the organization which is based on the estimated volume of traffic the organization will generate on the Internet.
Additionally, there may be costs to use particular on-line services such as Electronics Buyers' Bulletin Board Service and the McKinley Online Directory. Some services may require the use of special software designed to interface only with the service's system.
The cost to obtain information depends on the source. For example to obtain a 10-K form from an on-line source such as CompuServe would cost about $17.00 or could be obtained for free over the Internet [Stewart].
Using the Internet is not problem free. Sometimes connections do not go through on the first try. The system can be slow especially if the supplier uses a large amount of graphics. Large searches across the Internet may take a long time and will get even worse as use of the Internet multiplies. A second pitfall is the buyer spending more time searching for and collecting information than the purchase deserves simply because the information is so easily available. Third, is the potential for increased "back door" selling as others in the organization may have the same access to suppliers through the Internet.
Currently there is very little security of information sent over the Internet. In fact many applications will display a warning before transmitting information which might be considered confidential. There is substantial effort being applied toward development of encryption standards to ensure confidentiality. Most organizations have orders placed by fax, phone or snail mail (as opposed to e-mail). As standards are developed, the ability to complete secure on-line transactions will soar. For information about Internet security see the Internet Security home page (www.isoc.org/).
Another concern is related to the risk to the buyer's organization. For example, Pepsi-Cola North America recently instituted a policy for controlling and monitoring Internet use out of concern for viruses, pornography, and wasted time. The policy states the use of the Internet for personal purposes may be considered cause for disciplinary action and/or termination. In a similar vein, a Boston area bank removed Netscape from employee PCs to stop them from downloading pornography.
These examples raise some Internet policy issues organizations will now have to consider such as:
There are also the legal issues regarding electronic transactions. If the Internet is used for commercial transactions, organizations will need to follow the same guidelines as for using fax or EDI. The parties involved should make prior arrangements regarding terms and conditions, how to resolve errors and transaction authorizations.
Purchasing and the Internet in the Future. How will the Internet develop in the future and how will this affect the purchasing function in the future? Buyers will continue to be faced with an explosion in the information which is potentially available both in the printed media and on-line. The real problems in the next decade will be in finding out how to keep track of what's available, database management, and dealing with shrinking product life cycles. Additionally there will be technical issues dealing with encryption and security which will allow increased use of the Internet for RFPs and RFQs as well as ordering.
One way to deal with the proliferation of information is the use of worms, spiders, robots and other internet agents. These agents are programs that cruise the Internet automatically gathering information regarding web links, on-line catalogs, or capturing information. One such agent is Lycos, a robot-based catalog of web, gopher, and FTP sites developed at Carnegie-Mellon (lycos.cs.cmu.edu). Eventually a buyer will be able to turn an agent loose to search the internet and create a database of supplier, specification, and/or price information unique to the individual's needs.
The future of the Internet from purchasing's perspective can best be illustrated by the following examples which are happening today.
Hamilton Hallmark, an electronics distributor, has created a WWW home page where the user can access reference designs, application notes, and product cross references as well as on-line design advice. Also accessible from the home page are product data sheets, product catalogs on CD-ROM, the IC master catalog, a technical library with over 170 articles, newsletter, technical presentations, and lead time and pricing trends (www.tsc.hh.avnet.com).
MROP Online, created for the Industrial Distribution Association, allows a supplier to open an electronic "Business Center" which customers can access free to obtain information about products and services 24 hours per day. The service is also a part of IndustryNet Online Marketplace which provides access to an audience of 150,000 buyers who purchase more than $126 billion worth of goods and services [Industrial Distribution Association].
The FAST Electronic Broker uses e-mail to perform electronic purchasing of electronic parts, components and products, test instruments, and laboratory equipment. Purchasers send RFQs via e-mail to FAST. FAST stores the requests in a database, identifies suppliers which carry the requested items and contacts them via e-mail for quotes. Quotes are sent to buyer automatically as they are received and are maintained in a FAST database. The buyer chooses which quote to accept and sends the order to FAST which places the order with the supplier who ships directly to the customer. The service also includes a hands-off quote and order feature which allows the buyer to prespecify criteria, which if met, allow the system to automatically place the order. FAST charges a service charge of 8 percent on each order (info.broker.isi.edu/1/fast).
There also exists the potential for interactive video and audio using the Internet. Voice systems which use the Internet are currently available. Dedicated line two-way video systems are presently available and work is being done on developing multipoint systems as well as using the Internet as a data transfer medium for simultaneous video, audio and data. Using the Internet for audio and or video still has technical problems and if widely used, could seriously overload the network's current capacity.
The future of EDI will no doubt be affected by the development of the Internet. Many smaller companies will probably favor using the Internet because of its relatively low setup cost, especially as security issues are resolved. The advantages of EDI relating to one-time data entry and the resulting error reduction and the variety of transactions available are not addressed by using the Internet and will remain key reasons why EDI will continue to be used by larger organizations.