Buying Over the Internet Increases

If you sell OEM or other products directly to manufacturers and industrial

companies you need to position yourself on the WWW so that the 14 major

Search Engines and Indexes, which handle 95% of the 341,000,000 daily

search inquiries made on the WWW, are aware of your existence and would

refer potential customers to your website irrespective of which of up to

50,000 "keywords" or phrases the searcher uses to try to locate you.

Major listed corporations are gradually converting policies to "buying only 

on and over the internet to save money.

Two operating units of Siemens AG have made combined purchases of more

than $1 billion in the past year using the company's direct-materials Web

portal, Click2procure Direct Material. The system is based on Commerce One

Inc.'s Buy and Source E-procurement products and its Collaborative

Platform, which lets buyers and suppliers communicate over the Internet.

Siemens got its first taste of E-procurement nearly two years ago when it

started buying low-cost, low-value items such as office and maintenance

supplies over the Internet and realized savings of $40 to $60 per

transaction. Since then, the company has aggressively pushed adoption of

the indirect-procurement tools across 13 operating units in the United

States and Europe. It's also promoting the use of its E-procurement tools

for acquiring direct materials, the parts and materials used in

manufactured products, with Siemens manufacturing companies in those same

13 operating units.

The Siemens Westinghouse Power Generation and Siemens Energy and

Automation units have saved nearly 40% of the processing costs for the

orders placed on the system, says Klaus Haidacher, director of

Click2procure. Another operating company, Siemens Dematic AG, recently bid

a large contract for high-priced strategic materials and saved 46% by

negotiating the $880,000 deal over the Internet.

Together, the three operating units (and some others that are using only

the Commerce One collaborative capabilities) have saved more than $1

million in communications costs by using Click2procure to exchange more

than 100,000 documents and engineering specifications electronically with

suppliers. "We first saw the benefits of E-procurement in 2000, and we've

moved aggressively forward since then," Haidacher says.

Companies such as Siemens are on the right track, according to a recent

study by A.T. Kearney. The IT research and consulting firm's report, based

on a survey of 147 companies in 22 industries with average revenue of $9.5

billion, says that companies that push ahead on their E-procurement

plans--starting with low-cost, low-value supplies and materials and then

moving up to include high-cost strategic goods--can save $5.7 million on

every $100 million they spend. They also cut an average 41% from their

order-cycle time and reduce procurement staff by 10%, the study shows.

E-procurement offers a return on investment as high as 13-to-1.

Siemens Procurement and Logistics Services, which manages E-procurement

for the company globally, keeps return on investment at the top of its

priorities when it deploys E-procurement tools to new divisions and

business units. Deployments are begun only after it's been demonstrated

that the division or unit can achieve a 100% return on investment in the

first year. The company requires business units and divisions to achieve

that goal, Haidacher says. That quick ROI pays for the deployment. Savings

in subsequent years go directly to the bottom line.

Other companies are finding similar success with their E-procurement

initiatives. Jeff McKibben, director of worldwide E-procurement for

Hewlett-Packard, took Keychain, his company's private E-procurement

exchange, live in August 2000. In Keychain's first 12 months, HP achieved

savings of $33 million by aggregating purchases company-wide and reducing

by 30% the time employees spend managing the order process. Those savings

more than paid for the cost of the technologies from i2 Technologies, SAP,

and Sockeye Solutions, McKibben says.

HP also invested in the Converge Global Trading Exchange, an industry

exchange on which it auctions excess inventory and buys parts, such as

memory chips, on the spot market. The company plans to continue its

strategy of deploying its E-procurement tools across all its operations,

including those that are consolidated because of its merger with Compaq.

The original deployment date of 2004 for the companywide initiative may be

pushed back because of the merger, he says, but the emphasis on connecting

the now-combined company with its suppliers hasn't changed.

One thing that may help speed the process is HP's decision to consider

supplier-relationship management suites from a number of vendors to

replace much of the current technology. HP says a supplier-relationship

management suite could replace much of the custom-configured software and

would be easier to integrate with what it and Compaq have. Even if the

merger requires HP to deploy new technology, the idea behind using the

tools is the same.

"We've gotten a lot of value from our E-procurement strategy," McKibben

says. "We plan to use E-procurement to help us make the company after the

merger as efficient as possible."

If you sell OEM or other products directly to manufacturers and industrial

companies you need to position yourself on the WWW so that the 14 major

Search Engines and Indexes, which handle 95% of the 341,000,000 daily

search inquiries made on the WWW, are aware of your existence and would

refer potential customers to your website irrespective of which of up to

50,000 "keywords" or phrases the searcher uses to try to locate you.

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