MRO Magazine

Stall in on-line procurement by business likely to be temporary

Montreal, QC -- June 18, 2002 -- A new study of e-procurement practices calls into question assumptions that on-lin...


Industry

June 18, 2002
By MRO Magazine
MRO Magazine

Montreal, QC — June 18, 2002 — A new study of e-procurement practices calls into question assumptions that on-line procurement in Canada is growing. At the very least, the survey indicates a downward blip in the growth curve.

Results of the study, conducted for the Purchasing Management Association of Canada (PMAC) by the Conference Board of Canada (CBoC), indicate that the proportion of purchasing done on-line by this country’s procurement professionals is 5.0% of the total volume of private and public sector purchasing.

This is down from a similar study of procurement professionals, conducted for PMAC by Saint Mary’s University in 2000, which found that 7.48% of purchasing was being conducted on-line. It is also a decline from the findings of a PMAC/CBoC survey of CEOs in 2001, which indicated that 8% of the total volume of purchasing by their organizations was conducted on-line.

Minoo Kotwal, head, research and development for PMAC, said, "Despite the findings, momentum is still building because the same survey indicated that by the year 2005, on-line procurement is expected to represent 35% of the total volume of purchases. Perhaps the drift identified in this survey is partly reflective of the turbulent economic realities of the last year."

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Brian Guthrie, director, innovation and knowledge management at the CBoC, presented the study results in Montreal at PMAC’s annual national conference near the end of May. He told the conference, "It is possible that there is a ‘disconnect’ between the executive suite and the purchasing function — that the two groups are seeing the same thing differently. On the other hand, although we selected from the same professional group as the Saint Mary’s study, there could be enough variables to represent a different view."

Guthrie noted that the survey highlights further evidence of a gulf between senior management and middle managers. "Looking back to the first phase of the overall study which surveyed CEOs, 53% said that on-line procurement is a top-10 strategic issue, while today we find that 65% of procurement officers suggest that there is an absence of executive support."

The results also indicate that:

– 45% of procurement practitioners believe that an on-line procurement strategy is a top-10 strategic issue for the organizations for which they work.

– 37% of respondents believe that senior management does not see e-commerce as a top priority

– 40% say their organizations already have an on-line procurement strategy.

One key element of the study is its identification of both major drivers for electronic procurement and major barriers.

The drivers for e-procurement are:

– the potential benefits in terms of cost reductions and efficiency gains

– access to technical skills

– a strong and reliable information technology infrastructure

– customer/supplier demand or support.

The barriers are:

– a lack of dedicated resources

– the need to replace or modify existing systems

– the lack of an overall e-business strategy

– security or privacy concerns.

Jeanette Rennie, president of PMAC, said at the meeting in Montreal that identifying barriers to implementation of e-procurement was one of the primary reasons the association commissioned the Conference Board to conduct the study. "Our association is, first and foremost, a teaching agency," Rennie said. "We train and certify this country’s procurement professionals. To continue to prepare them for the evolving digital economy, we must understand how to implement electronic procurement.

"As we articulate the drivers and barriers, and identify best practices, we build education programs that put our members ahead of the curve, so that they are seeking opportunities rather than merely reacting to challenges."

Private and public sector procurement is estimated to account for about 35% of Canada’s Gross Domestic Product. With GDP at market prices of about $1,074 billion annually, that points to about $375 billion in purchasing spend.

The procurement survey targeted a random selection of procurement officers from 1,000 small, medium and large organizations in the private and public sectors.