Industry News: Companies Report Savings as Internet-Based Procurement Grows Online purchasing continues to grow, especially among larger companies, according to the latest Report on Technology in Supply Management by the Institute for Supply Management (ISM) and Forrester Research, Inc. This report, formerly called the “Report on eBusiness,” tracks online purchasing activity among 300 participating organizations in both manufacturing and nonmanufacturing sectors for the third quarter of 2003. (The report tracking fourth quarter results is expected in late January.) The report found that more of these companies are using the Internet to purchase direct and indirect goods and services and, as a result, are saving money. Key findings of the report include: Adoption of online purchasing continues to increase. ISM and Forrester have reported a steady rise in adoption of online purchasing since the quarterly surveys were first published in 2001. In the third quarter of 2003, 85 percent of the companies surveyed have made at least some progress toward fully adopting the Internet for purchasing activities. Only 4 percent of the respondents don’t plan to use Internet purchasing at all. For the second quarter in a row, companies purchased a greater percentage of direct materials than indirect materials through the Internet. Average amounts of both direct and indirect materials purchased on line grew with the purchasing of indirect materials experiencing the biggest increase. A majority of companies—89 percent—bought at least some indirect materials using the Internet. Larger organizations—those with annual procurement spend of more than $100 million—are leading in Internet-based purchasing. More companies are saving as a result of online purchasing. The percentage of companies reporting savings increased in the third quarter. Among companies using online auctions, 45 percent reported they had increased their usage of auctions compared with the previous quarter. Among companies using e-marketplaces, 42 percent increased their level of activity in the third quarter. The use of online RFP tools continues to grow. Sixty-nine percent of companies used the Internet in their RFP process during the third quarter, up from 62 percent in the previous quarter. Forty-six percent of the companies surveyed use enterprisewide e-procurement tools, an increase over the previous quarter. Among companies with more than $100 million in procurement spend, 44 percent reported a decline in total cost of ownership (TCO) for buy-side solutions. According to the report, the real value of an e-procurement system lies in using enterprisewide tools to ensure compliance with strategic sourcing agreements. Large companies in particular are starting to use e-sourcing tools such as online auctions, more agressively to get better contract terms enforceable through existing e-procurement systems. For more information about quarterly releases of the ISM/Forrester Research Report on Technology in Supply Management, visit the Web site at www.ism.ws. The report measures adoption of Internet-based procurement by surveying supply management executives from both manufacturing and nonmanufacturing organizations. The report analyzes results of all organizations, compares manufacturing and nonmanufacturing organizations, and compares large-volume (more than $100 million annual spend) versus small-volume (less than $100 million annual spend) purchasers. Go back