Megatrends for Internet Purchasing

Author(s):

Brian G. Long, Ph.D., C.P.M.
Brian G. Long, Ph.D., C.P.M., President, Marketing & Management Inst., Kalamazoo, MI 49024, 616/323-1531, www.mmii.org

84th Annual International Conference Proceedings - 1999 

Abstract. Just like other aspects of computer technology, what is here today will be gone tomorrow. Unlike technological changes of the past such as the computerization of purchasing, software innovations such as MRP and ERP, and procedural changes such as credit card purchasing, purchasing will be pressured into making these changes in months rather than years. For purchasing, the internet is definitely coming. It is not just another passing fad. We can't stop it, we can't ignore it, and if we cannot grab hold of it and put it to work, the world will pass us by. The problem is defining what trends or "mega-trends" will probably prevail so that software, training, and other resources can be properly directed.

Megatrend #1: The WEB Will Substitute For, But Not Totally Replace, Many Aspects of the Current Buyer/Seller Marketplace

For over 100 years, buyers and sellers have communicated by mail and face-to-face discussions. With the coming of the internet, catalogs as well as most forms of direct mail fliers, line cards, and spec sheets will soon be found almost exclusively on the WEB. When updated daily, the seller's web page and catalog will provide the latest and greatest of almost all information that the seller has available. For meetings, buyers will simply print those pages which call for hard copy, or store electronic copies for quick retrieval.

In a broader sense, the seller's site will substitute for at least some functions of the salesperson. So-called cold sales calls will be made with E-mail instead of face-to-face. For the inquiry function, buyers will silently and anonymously page through the WEB site to investigate the viability of a seller and the appropriateness of the seller's product or service before any form of personal contact is made.

Megatrend #2: The WEB Will Provide New Aspects of Buying and Selling

For items of serious interest to the buyer, on-line video demos and "virtual reality" plant tours may take the place of many traditional sales presentations. Buyers will have the option of selecting the level of detail required based on several levels of demonstrations ranging from fifteen seconds to as much as an hour. At the same time, the seller may provide on-line testimonials and references.

The telephone, although still useful for some functions, will gradually be replaced by desktop video conferencing technology. Buyers will talk face-to-face with inside sales-people as well as other forms of sales support and customer service people.

Finally, most of the technical data associated with a product will be made available at a non-public site on the WEB. This will allow for easy transmission and storage of blueprints, specifications, repair instructions, MSDS sheets, and other information associated with the products.

Megatrend #3: Seller's Public WEB Site Will Become THE BIBLE For Buyers And Sellers

Everything you would want to know in the way of general information about a potential seller will be available by visiting the seller's home page. It will be easy to read background and historical information about the firm as well as any awards, certifications, major clients, and other accumulated accolades that the selling firm may find worthwhile posting for public view.

Second, the seller's current catalog will be the buyer's guide to the ENTIRE line of merchandise or services available for sale. New, user-friendly searching technology will allow the buyer to scan for specifications, part numbers, substitutes, and cross-references as well as traditional key words and indexes.

Megatrend #4: Most Orders and Requisitions Will Be Electronic

Almost all multipage general use catalogs for MRO and other products will have some form of point-and-click ordering. Buyers will write contracts with sellers which will allow them to step aside and allow the requisitioner to have direct access to the seller's catalog. Through "shopping basket" ordering technology, the requisitioner will select the items required in form of an electronic order. By inserting appropriate passwords and fund codes, an entire month's worth of accounting will be accumulated to form the backup for a single electronic invoice. Paperwork, as we know it, will be eliminated. The new role of the purchasing professional will be that of a contract administrator.

Megatrend #5: The Seller's Software Will Become An Important Evaluation Criterion

In a broad sense, the seller's software will perform some of the functions previously performed by our own accounting system. Therefore, an evaluation of the seller's software in order to make sure that it will provide the necessary information to plug into our accounting system is essential. For instance, some of the current electronic catalogs are set up to accept only a regular credit card but provide no additional accounting information at the end of the month.

In additional to making it easy for requisitioners to place orders, good software will provide a weekly or monthly breakdown of all expenditures based on departments, fund codes, part numbers, frequency, or any other data base category. Budgets should also be capable of being inserted so that the software can be used to keep departments from overspending. In some instances, department managers will request real-time reports for the purpose of monitoring the month's expenditures.

Megatrend #6: All Purchasing Departments Will Develop An Electronic Lobby

The WEB is already consider by some people to be the greatest communication medium invented in the last fifty years. Therefore, it will become essential for purchasing departments to post their own web site. This site will act something like an electronic receptionist and provide the essential information about the purchasing department such as commodities which the firm normally purchases, who to contact, phone numbers, site maps and directions, and snail mail addresses. Policies and other business information will be posted as well. Finally, through the use of log-in codes, the purchasing home page will become a repository for periodic updates on existing contracts and other information essential to the smooth operation of an existing contract.

Megatrend #7: In 3 Years, Most Primary Internet Problems Will Be Eliminated

Almost any manager over fifty years old who is not computer oriented is paranoid about the notion of doing business on the WEB. Stories abound about computer break-ins, viruses, stolen credit card numbers, and other potential catastrophes. Although the actual number of instances of anything actually going wrong are minimal, a few stories that circulate may still be enough to halt management approval of any form of electronic commerce. To make matters worse, the WEB is slow and loaded with transmission quirks that often make it look more like a toy than a serious business tool.

The good news is that most of these problems will disappear in the next two to four years. In the near future, a "business only" WEB will be introduced which will have plenty of capacity and will not have any of the security problems of the present WEB. New classes of modems, some of which are already being sold, will be at least one hundred to five hundred times faster than present systems. Security software will become so tight that it will be far easier to break into the firm and steal the entire computer than hack into the site from the WEB.

Megatrend #8: Platform Searching Will Evolve

Anyone who has ever used a platform program like www.dogpile.com know that it is possible to SIMULTANEOUSLY search as many as twenty or thirty WEB sites at the same time. Although it has yet to be invented, there will soon evolve a purchasing WEB site that will allow a purchaser to SIMULTANEOUSLY insert a part number, specification, brand name, or regular product name and let the program surf all the major general directories, WEB sites, and other sites in an effort to find the requested product, service, part, or material.

Megatrend #9: EDI Will Merge Into The Web

EDI or Electronic Data Interchange has been in general use for at least fifteen years. When EDI as we know it is finally declared dead, it is the WEB that will be credited with replacing it.

In actuality, EDI will probably die of its own stagnation. It was originally designed for the electronic transmission of forms, but except for adding more and more forms to the programs, it made little progress in fifteen years. In the final analysis, the biggest killer will turn out to be the software itself. Whereas the EDI software has become fairly standardized, the software packages with which it must interface have become increasingly proliferated. Almost no one thought ahead to the computer interface software that was necessary to allow EDI to reach its maximum potential. Even today, four out of five sellers that are forced by a major customer to install EDI are simply printing a paper copy of the EDI transmission and processing the orders the same way as they did before.

However, the contribution to the electronic forms technology that the proponents of EDI developed will probably survive. The WEB will therefore become the transmission tool for EDI, and the standardization of software at both the buyer's and seller's site will make use of existing protocols such as IEEE X-12.

Megatrend #10: New Bidding Systems Will Evolve

Many observers have noted that the WEB will create a competitive merchandising environment such as the world has never seen. Altogether too many commercial buyers and sellers think that this competition will be limited to the consumer market. In actuality, the concept of on-line bidding has already opened the commercial markets to these new forms of competition.

Although still in the development stage, many of these new commercial sites are allowing buyers to post bids for a much larger and more diverse worldwide market than was ever practical without the WEB medium. In additional to cyberfying the traditional paperwork process, these electronic sites will make the entire communication process far more standardized. Most proponents are reporting cost savings as result of this form of electronic commerce.

In the age of strategic alliances, supplier consolidation, and long term agreements, some observers believer that bidding may soon become a thing of the past. However, the current trend says that this idea is only partially correct. Indeed, some products and services can be more easily and inexpensively purchased by other methods. However, there are still other products that will lend themselves to the broader market that the WEB will make available. The resulting cyber-competition will yield some significant savings for some purchases, both in terms of time and "bottom line" money.

Megatrend #11: The WEB Will Institutionalize Back Door Selling

The WEB is, of course, world wide. Therefore, the electronic home pages and seller catalogs are open to anyone with internet access. Even with the limited electronic catalogs currently available, many purchasers are already finding that their requisitioners have already visited various seller WEB sites and, in instances, made contact with the sellers themselves. Because there is no guarded door to pass through, no one to screen calls, and no security guard to stop them, the open WEB has encouraged some sellers to make electronic contact with various engineers, company presidents, secretaries, production supervisors, and other potentially vulnerable people within the organization.

Purchasers will find it necessary to guard against unwarranted intrusions with additional training and communication with the requisitioners. In addition, it will be necessary to put new policies in place regarding contact with outside sales organizations. Such a policy should be a part of a complete new policy regarding the proper use of the internet.

Megatrend #12: The Internet Will Challenge the Purchasing Profession Itself

In general, the traditional role of purchasing is dead. The concept of the so-called "in-basket" buyer will soon be replaced with electronic systems. For the past eighty years, buyers have been handed paper requisitions for each and every conceivable need of the organization. These purchasers spent their days sourcing and negotiating each of these needs and writing purchase orders for each of these requisitions with little regard to the size of the order or to the concept of adding value as far as the transaction was concerned.

A new breed of purchasers is evolving that will function exclusively as contract managers. These purchasers will write and manage the electronic contracts of the future. Purchasers who fail to retool themselves for the electronic environment will find that this function will be taken over by some of the non-purchasing areas of the firm or organization.

Megatrend #13: New Internet Players Will Emerge

For the consumer world, it is clear that the internet revolution is already upon us. For the commercial market, the revolution is just beginning. The internet advocates are just now beginning to realize that the commercial potential for the internet is well over a trillion dollars per year. When this potential is realized, the purchasing professionals of the world will be bombarded with new software, new internet sites, new sales pitches, and new promises.

Among the probable long term winners that are just now jumping in to the commercial side of the internet are the phone companies. At first, the phone companies hoped that the internet fad would blow over and that they could continue to make large sums of money selling traditional long distance service. They now realize that they have been renting their long distance lines out at cheap rates to other firms who are in turn making money on the internet. With deep pockets, they will be able research and finance many new internet commerce products. One place they are sure to develop further is the on-line yellow pages.

Finally, many of the traditional business directory firms will be players as well. Thomas Register has launched a significant new internet directory aimed at eventually replacing their large green books altogether. Asian Sources, which began with a paper directory, now does most of their business on a WEB directory.

Megatrend #14: Time Is Running Out

In short, these are exciting and challenging times for the purchasing profession. Most of the internet products that will be used ten years from now have not even been invented. An old television commercial declares that the future belongs to those who prepare for it. However, even this same commercial never anticipated the astronomical pace of the changes that would be taking place on the internet for the purchasing profession.

Every purchaser will be left with the choice of whether to lead, follow, or get out of the way. The purchasing profession has redefined itself many times in its relatively short professional history. This change will be just one of many.


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