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’ on-line capabilities, and less than 10 per cent 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 on-line at


The quarterly report, based on survey data from 407 supply management executives from firms belonging to the NAPM Business Survey Committees, tracks the on-line activity of both manufacturing and non-manufacturing firms. While 88.1 per cent of the surveyed firms said the Internet is an important part of their purchasing plans for the next year, a mere 6.3 per cent said that it has significantly altered their procurement procedures. Less than half of the respondents – 45.7 per cent – said they had directly purchased goods or services on-line, although 70.9 per cent 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 per cent of respondents rated their suppliers’ on-line capabilities as very good or excellent. That figure slipped to 7.6 per cent in the current report, with 36.6 per cent of those surveyed saying their suppliers’ capabilities are very bad or poor. Manufacturers were the least satisfied group, with 43.7 per cent assigning a very bad or poor rating to their suppliers. Despite (or perhaps because of) that dissatisfaction. 80.7 per cent of respondents said they use the Internet to identify new suppliers, and 48.8 per cent said they use the Internet in their request for proposals (RFP) process.

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

Organizations overwhelmingly agreed that they have just begun integrating the Internet into their purchasing activities, with more than half (50.9 per cent) saying they are less than 5 per cent 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 per cent) said their on-line purchasing activities have lowered the cost of ownership of their products – and 8.1 per cent said their on-line purchasing has actually increased the cost of ownership.

Forrester Research in Cambridge, Mass., can be contacted at (617) 613-6000 or via the Internet at