--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---



Navigating the E-Commerce Rapids

Author(s):

Richard G. Weissman, C.P.M.
Richard G. Weissman, C.P.M., Managing Director, Weissman Training & Development, Hamilton, MA 01982 978/468-6390, rich@weissmantraining.com

86th Annual International Conference Proceedings - 2001 

Introduction. The New Economy demands both innovative and fundamental approaches to managing the supply chain. The explosion of Web-based business-to-business services, coupled with rapid advances in electronic commerce applications, is transforming the business landscape. Purchasing professionals and all members of the supply chain management team must continue to keep abreast of the evolution of the electronic marketplace.

Buyers, even with the best of intentions, may be at a distinct disadvantage when trying to increase the use of e-commerce within their organizations. This paper will focus on the issues surrounding the many companies that are just beginning to recognize and integrate the use of e-commerce in their organizations. Changes in the e-commerce landscape seemingly occur on an hourly basis. Who can keep up with the hype, let alone the sort out and understand the tools necessary to implement or forward an e-purchasing or e-commerce initiative? Supply chain professionals continue to be at a distinct disadvantage due to the enormity of the task. Implementing an e-commerce process is not an overnight endeavor, and organizations my not have the energy, budget, or drive to jump on the e-commerce bandwagon.

While there are a lot of rocks in the Ecommerce River, three large ones are looming up ahead! Tighten your helmet, get a grip on the oar, and let's tackle the three largest rapids. Those rapids are named technology, supplier readiness, and organizational fatigue. This paper will discuss these three major issues and also provide some activities that purchasing professionals can do immediately to improve their e-purchasing initiatives.

Technology. Let's start this river journey with a couple of questions. What is e-commerce and what is e-procurement? E-commerce can be defined as operating in a digital environment. This would include the use of the Intranet, e-mail, computer aided manufacturing applications, and even faxes and telecommunications. E-procurement, or e-purchasing, could be defined as using some or all of these tools to manage the supply chain. This management may include communicating by e-mail, browsing an on-line supplier catalog, downloading technical information, or actually placing orders on line. Some of the larger e-commerce software organizations may portray an effortless and seamless point-and-click procurement solution as being the true definition of e-commerce, but except for the largest organizations, this is an inaccurate portrayal. The terms e-commerce and e-procurement will be used interchangeably in this paper.

Statistics show that most buyers have Internet access at their desks, and most are using the Web for some manner of supplier related tasks. They may be using e-mail to communicate with suppliers, and even send quotes, documentation files, or purchase orders through e-mail. They may also visit supplier Web sites for technical information, product catalogs, order status, or to place an order via a procurement card. Some organizations allow their suppliers access information on the buyer's system through an extranet. Many organizations are utilizing several elements of e-procurement and e-commerce without even realizing it!

But, that large rock looming ahead in the Ecommerce River has technology written on it. Buyers are lagging behind the hardware and software curve when they look at the systems on their desks. Often times, buyers have more up to date computer systems at home than in the office! Many of today's websites are designed to be viewed on the latest browser. They also include significant graphics and files that just do not play well on many systems. So, buyers may have trouble accessing features on many suppliers' web sites, or even have trouble accessing the sites at all. All buyers do not have the latest and most powerful systems that are available today. They may have slow processors, insufficient memory, older software, lack of speakers, and may even lack a CD player. Many companies do not have high speed Internet access. The buyers may also be under trained or technology averse.

There is also a certain amount of Web snobbery at work by web designers who are trying to build the tools to reach these customers. Often times these designers are quite technologically proficient, and use the latest design tools and platforms to differentiate their sites and make an interesting experience for the customer. When confronted, some of these designers expect the buyers to simply upgrade their hardware (maybe an unreasonable budget request) or download the latest browser or graphics software (maybe an unreasonable technical or company policy request). This gulf is creating frustration for both the buyer and the supplier. An appreciation and understanding of both points of view are in order.

The technology rapid may show signs of smoothing out. The cost of equipment continues to fall, and the increased focus on the use and need of e-commerce tools by both buying and selling organizations is forging an additional layer of inter-organizational communication. However, buyers should not be silent! Let your suppliers know about problems and issues with their sites. Tell them what you would like to see on those sites! Also, see if you can upgrade your systems. A technology compromise may allow you to navigate that first rapid!

Supplier Readiness. What does your technology roadmap look like? It is important for organizations to develop a technology roadmap. After careful analysis of the strategic business goals and objectives, an e-commerce roadmap may include the following actions:

  • Align the business goals of your organization with your e-commerce initiatives. Strategic initiatives must line up.
  • Assemble a cross-functional e-commerce team. Include suppliers.
  • Determine processes best suited for e-commerce.
  • Ascertain supplier readiness.
  • Develop a technology plan and budget that meets the organizational and business needs.
  • Train employees and suppliers.
  • Use and reinforce the technology and new business processes.
  • Review, revise, and revisit.

Supplier readiness and participation in e-commerce initiatives is another major hurdle. Most procurement organizations are utilizing some form of e-commerce, even if it only to communicate with suppliers via e-mail. Some are already buying on line, through marketplaces, exchanges, or auctions. Others are using procurement cards and accessing their existing suppliers' sites for commerce. If all procurement organizations were asked to rate their e-procurement efforts on a scale of one (low) to ten (high), most could. Let's assume for demonstration purposes, that the average ranking is a five.

As part of this ranking effort, where would your suppliers rank? Often times while the procurement organization wants to move along the e-commerce continuum towards the promised land of ten, many suppliers would rank significantly lower on the scale. What does your supplier's technology roadmap look like? Does it include you? As you electrify your procurement processes, will your supplier keep up? Catch up? Move ahead and leave you behind?

A major effort of e-procurement should include strategic sourcing. There may be capable suppliers waiting for you in the land of e-commerce, but they might not be the suppliers that you want or need. All organizations have suppliers that may not be very sophisticated, but they are very valuable. This may be a sole source supplier who holds the key to your entire manufacturing process. Or, this supplier may be a local supply house that the facilities department has come to depend on to keep the factory running. These excellent suppliers may not even have e-mail, or even a computerized invoicing system. As you evolve along the continuum, where do these suppliers fit? Do you bring them along, or find new suppliers? This issue needs to be addressed early in the e-commerce / e-procurement planning process.

Organizational Fatigue. As our raft gets further down the Ecommerce River, the crew gets tired. It is not so easy to steer around the rocks and through the rapids. Organizations, like the river crew, may also be tired. Companies have gone through a massive amount of change during the past decade, creating stress on the employees.

During the past ten years, many companies have undergone significant company-wide quality improvement efforts to try to improve customer satisfaction. Companies have also gone through major, and sometimes massive, reengineering efforts to streamline operations, reduce costs, and improve shareholder value. ISO 9000 registration programs were also becoming popular as a method not only sell into the European Community, but to validate and market their approved quality processes. On the heals of ISO, many organizations also began to implement complex ERP systems. Unfortunately, many of the recently reengineered ISO 9000 procedures had to be retooled due to the effect of the ERP process! The recent Y2K scare also forced many organizations to once again review and revise documented processes and procedures. Many companies were forced to spend considerable amounts of money for new computer equipment and software.

While not all organizations have gone through all of these stresses, many have. Some have gone through several of them at the same time! Now, the next frontier is e-commerce. E-commerce may utilize some of the tools recently acquired, such as new computers and an ERP system, but once again processes and procedures need to be mapped, analyzed, and perhaps modified to comply with changes that e-commerce brings. Add a significant amount of training, and it is evident that some organizations may not have the stamina and drive that e-commerce initiatives bring. These organizational behavior issues need to be addressed, as negative attitudes may serve short circuit, or limit, the adaptation of e-procurement processes.

Immediate Results. E-procurement success is achieved in small pieces. It is evolutionary, not revolutionary. Buyers can implement some small steps that will help them in their e-procurement efforts. While simple, these steps may help to build some momentum, and show that successful e-procurement can built in small steps.

Supply management organizations must ask themselves:

  • Is your department or company technology compliant?
  • Is there adequate training in the use of the technology?
  • Does senior management support e-commerce initiatives?
  • How many of your suppliers have e-mail and what can you do with it?
  • How many of your suppliers have Web sites and what can you do with them?

These may seem like simple questions, but let's take the supplier e-mail question as an example. Many suppliers have underpowered or non-existent e-mail systems. There are some that cannot accept large document files, and in some cases suppliers access e-mail on an irregular basis. Enforcement of e-mail protocols with suppliers may be a significant first step in the e-commerce journey.

But what can you do today to enhance your e-procurement processes?

  • Survey existing Web sites of your critical suppliers. Determine what you can do on the site, what you cannot do, and what you would like to do. Provide feedback to the supplier. They do want to know.
  • Query suppliers as to their e-commerce plans. Add an e-commerce section to your supplier survey and supplier evaluation documents.
  • Enforce e-mail protocols for communication. Force suppliers to utilize e-mail as an important means of communication.
  • Create an e-mail database to broadcast important messages to your critical suppliers.
  • Establish a purchasing intranet site to expand the use of e-commerce internally.
  • Ask for a supply management link on your organization's home page. This sends a clear message about the importance of e-procurement as well as your supply management efforts.

Conclusion. Initiating or enhancing e-commerce or e-procurement processes can be a daunting, but not impossible task. It is not an all or nothing process, but one that occurs in incremental steps. It need not be expensive nor demand organizational reengineering. A positive attitude, a commitment to training and education, and a broad vision are required.

Our concept of rapids on the Ecommerce River is an apt one. Some of the expedition will be smooth, and some will be rough. We looked at three special areas of rapids, technology, supplier readiness, and organizational fatigue. There are three very real issues facing supply management organizations today. There is a lot of confusion and uncertainty in the e-commerce marketplace. We must be open minded, vigilant, and willing to change with the times. E-procurement is here. May your journey be a smooth and a safe one.


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