Technology/business week – Slow start to e-purchasing.

Software provider Oracle has launched a set of free self-diagnostic tools to allow purchasing managers to estimate cost savings opportunities through e-procurement.

Their launch follows reports suggesting that many procurement managers saw ‘so little advantage in moving online’ that they were expected do less than 20% of their business buying online until 2003 at least.

One reason mooted for this has been the over-riding need for IT departments to provide returns on investment guarantees to their board before implementing any new solution.

The Independent Savings Analysis Verification and Evaluation tools, called I-SAVE, have been launched in association with the University of West England, the Chartered Institute of Purchasing and Supply and KPMG Consulting.

‘To date, many vendors have been attracting customers with the promise of return on investment figures of 20% and beyond. But businesses have many procurement practices so this broad brush approach is unscientific and very often inaccurate, resulting in unrealistic expectations and therefore a reticence to implement internet procurement,’ said an Oracle e-business spokesman.

Based on the experience of a random selection of purchasing managers in the UK, the overall percentage saving (assuming the same level of spend per commodity), was found to be 7.9%.

According to analyst Jupiter, in addition, it was found that the private and public sector registered a similar level of savings of approximately 7.3% and the savings for the manufacturing sector were slightly lower at 5.4%. Over the next six months, further research will be undertaken to investigate procurement savings that can be made through implementing best practice around processes and relationships.

However, a recent statement by the government suggested it had saved up to #100m because it had applied electronic techniques to the payment of procurement goods and services. Chief Treasury secretary Andrew Smith said that methods such as raising process orders through telephone, fax and e-mail, paying invoices through BACS, and the government’s own procurement card, has enabled massive savings.

He said: ‘The savings achieved from the electronic agenda shows that scope within government’s procurement business is huge.

‘Doing business electronically demonstrates the efficiency gains achieved by encouraging departments to adapt to doing business the electronic way.’

But in a parliamentary written answer, Smith said that around half of low-value transactions are conducted electronically. The target was to purchase 90% of low value goods and services electronically by March 2001.

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