Net-based procurement ups profits
- 22 November, 2000 15:26
Streamlining a company's purchasing activities is not a new frontier, but thanks to the Internet it is proving to be a lot more feasible to get your business partners to agree to go online with you than it was with electronic data interchange (EDI).
Although the figures vary wildly, the cost of purchasing is often a wasteful expense, as was highlighted in the 80s.
EDI was invented more than a decade ago to help businesses get a handle on procurement costs, but it failed to capture the market share it should have. This was largely due to the proprietary nature of EDI solutions, which required both buyers and sellers to adhere to a rigid set of protocols and procedures, to which many smaller suppliers were not able to conform.
Internet-based e-procurement solutions are proving to be one possible answer by providing an open infrastructure that allows companies to automate the procurement process. Thus, time and complication, which in the past made a $US20 wrench cost $125 to acquire, can be effectively reduced.
The main advantage of adopting e-procurement is that it can transform manually driven communication processes into electronic exchanges that keep all parties involved on the same page. Using a network such as the Internet as the communication medium and connecting applications across companies, e-procurement solutions make purchasing goods simpler and more efficient than the proprietary systems of the past.
Working with what you have
Of particular interest to us was a new release from Consolidated Commerce Called eMarketPlace 2.1. It offers a standards-based architecture to connect you with your suppliers and is ideally suited for companies that do not want to get locked in to the inherent rigidity of turnkey solutions such as those offered by Commerce One, Oracle, or SAP AG.
Probably the most effective capability that eMarketPlace offers is to leverage the Internet and middleware technologies to create instantaneous communication channels among all companies involved in a purchasing transaction. Moreover, it offers a more effective way than paper-based procedures to enforce management control over the purchasing process.
The Internet creates unprecedented possibilities for inter-company interaction, allowing participants to attain unsurpassed efficiency and effectiveness. As such, Consolidated Commerce has employed open-standard technologies to leverage as much of your current infrastructure as possible, allowing for a very flexible solution.
We were impressed with the innovative way in which eMarketPlace employs technology such as XML to simplify the process of creating procurement architecture, allowing information to be passed to and from virtually any system, even those with the ungainly "legacy" label.
The downside, of course, is development. Solutions from Oracle and SAP integrate easily with their respective database products, but with eMarketPlace, you have to provide your own integration and foot the bill for developing it.
Rather than creating a turnkey solution, eMarketPlace offers a monolithic suite that includes centralised electronic hubs, called eHubs, to which buyers, suppliers, and other parties can connect using a specialised interface.
This is different from SAP, which offers a standard portal that buyers and suppliers can use to initiate their transactions. With eMarketPlace, you translate your data into an XML-based layer independent of any proprietary database legacy. The result is your suppliers can access your information easily using XML as their lingua franca.
Your suppliers won't have to be proficient with your proprietary database system, and you won't have to know theirs. Granted, you have to create the interface to convert relevant existing data to XML. But after that is done, you gain an open platform that facilitates data exchange with your partners and allows you to easily enforce company policy.
Among its advantages, eMarketPlace offers a set of predefined but easily customisable business rules. Its XML-based data engine and XSLT (Extensible Stylesheet Language Transformation) simplifies data transformation tasks, such as creating a new data structure to match your suppliers' or formatting that data into a Web page.
Rather than adopting existing databases, Consolidated Commerce chose to develop their own XML-based data engineforeMarketPlace. Interestingly, the XML data resides in memory so that data operations are faster and not burdened by delays in disk device operations.
Furthermore, eMarketPlace manages all internal references in Uniform Resource Identifier (URI) format, which makes the name of the resource independent from its physical location and adds flexibility in managing the system.
If you decide to go with eMarketPlace, know that it may take some work to implement it properly. Once done, however, you will have a framework for your e-procurement application, optimised for fast access and free of proprietary baggage.
Creating an environment that allows your buyers and your suppliers to communicate easily and quickly is one of the major strengths of eMarketPlace, and the savvy technological features that Consolidated Commerce has implemented in its suite make for easier development of your e-commerce applications.
The flexibility of eMarketPlace as a tool for building e-procurement communities is tempered by a hefty price tag of $US500,000.
If a company doubts the future market place will ever be crowded, they might be better advised to use an already established network of suppliers.
Nevertheless, the characteristics of the suite can be appealing to many companies, and we found it to be an attractive alternative to options such as Ariba and Commerce One, which appeal primarily to companies seeking a solution that does not require much development effort. But such companies will have to trade away flexibility in the bargain.
You can very well have the most efficient manufacturing plant, but if you spend more than your competitors on acquisition costs, your products enter the market with a significant handicap.
The Bottom Line
Busin-ess Case: Internet-based procurement systems create e-commerce applications that buyers and suppliers can easily connect to their existing systems. Although these connections can require some development activity, for many companies they offer better flexibility than turnkey solutions.
Techn-ology Case: Current technologies, including Java and XML, promise easy integration and a rapid implementation cycle, even though they lack built-in links to major enterprise resource planning (ERP) systems.
Pros:-l Simplifies integration with existing systems through the use of technologies such as Java, XML and XSLT (Extensible Stylesheet Language Transformation)Cons-:l Requires significant development timel Must licence expensive software rather than pay a percentage of sales