Study: E-procurement still in early stages

Businesses view the Internet as a key component in their purchasing plans, but many are dissatisfied with their suppliers' online capabilities, and less than 10 percent say the Internet has dramatically changed their procurement procedures, according to the latest edition of the National Association of Purchasing Management/Forrester Research Inc. "Report on eBusiness" (available online at http://www.napm.org/).

The quarterly report, based on survey data from 407 supply management executives from firms belonging to the NAPM Business Survey Committees, tracks the online activity of both manufacturing and non-manufacturing firms. While 88.1 percent of the surveyed firms said the Internet is an important part of their purchasing plans for the next year, a mere 6.3 percent said that it has significantly altered their procurement procedures. Less than half of the respondents -- 45.7 percent -- said they had directly purchased goods or services online, although 70.9 percent reported indirect purchases.

Surveyed organizations cited three key barriers to their Internet activities: the overall slowdown in business growth; integration difficulties; and the lack of data standards.

A growing number of businesses are unhappy with their suppliers. In the January NAPM/Forrester report, 9.4 percent of respondents rated their suppliers' online capabilities as very good or excellent. That figure slipped to 7.6 percent in the current report, with 36.6 percent of those surveyed saying their suppliers' capabilities are very bad or poor. Manufacturers were the least satisfied group, with 43.7 percent assigning a very bad or poor rating to their suppliers. Despite (or perhaps because of) that dissatisfaction. 80.7 percent of respondents said they use the Internet to identify new suppliers, and 48.8 percent said they use the Internet in their RFP (request for proposals) process.

The manufacturing sector also showed a sharp decline in interest in tapping the Internet. In January, 41.3 percent said utilizing the Internet is very important or critical. That number dropped to 31 percent in the current survey. Small volume purchasers also posted a steep drop, from 33 percent to 23.8 percent.

Organizations overwhelmingly agreed that they have just begun integrating the Internet into their purchasing activities, with more than half (50.9 percent) saying they are less than 5 percent of the way toward full adoption.

The Internet's much-heralded potential to save businesses money doesn't appear to be materializing -- or, if it is, those cost savings aren't being passed on to consumers. Only a quarter of the respondents (26.1 percent) said their online purchasing activities have lowered the cost of ownership of their products -- and 8.1 percent said their online purchasing has actually increased the cost of ownership.