General Electric formed the Trading Process Network (TPN) where it posts requests for proposals (RFP) negotiates terms, and places orders.
Moving into e-procurement involves more than acquiring software it requires changing purchasing strategy and structure. However, the benefits are many. Aggregating purchasing across multiple departments gains larger, centrally negotiated volume discounts. There is less buying of substandard goods from outside the approved list of suppliers, and a smaller purchasing staff is required.
In 2001, the Owens Corning purchasing Organization set a goal of wiping out 80% of its paper invoices by the end of 2004. The strategic objectives underlying this goal were cost reduction, supply chain visibility, business process integration, and a common standardization process for all suppliers. To accomplish these objectives, Owens corning signed on with Advanced Data Exchange (ADX), an outsourced provider of EDI and XML, which takes whatever suppliers have to work with and effectively translates it into a usable electronic format for Owens Corning. The electronic invoicing initiative worked with the companyâ€™s use of e- auctions, Starting in 2004, all suppliers participating in e-auctions were told that as part of online auction bids they must agree to exchange invoices and purchase orders electronically if they are awarded the contract. With a $3 billion annual spending budget, Owens Corning has the king of clout to ensure suppliers get online.
The supplierâ€™s task is to get listed in major online catalogs or services, develop a strong advertising and promotion program, and build a god reputation in the marketplace. This often means creating a well designed and easy-to-use Website.
In 2003, Hewlett Packard Co was named number one in B to B magazine annual ranking of the top B-to-B Website. The site www.hp.com was launched after HPâ€™s merger with Compaq Computer and has 2.5 million pages and roughly 1,900 site areas. The challenge for HP was to integrate this enormous amount of information and present it coherently. Upon entering the site, users can click directly into their customer segment and search for information by product or by solution or click into a product category. The site allows companies to create customized catalogs for frequently purchased products, set up automatic approval routing for orders, and conduct end-to-end transaction processing. To further build relationships with customers, HP.com features Flash demos that show how to use the site, e-newsletters, live chat with sales reps, online classes, and real time customer support. HPâ€™s Web efforts are paying off big: roughly 55% of the companyâ€™s total sales come from Web site.
Suppliers who lack the required production capacity or suffer from a poor reputation will be rejected. Those who qualify may be visited by the buyerâ€™s agents, who will examine the suppliersâ€™ manufacturing facilities and meet their personnel. After evaluating each company, the buyer will end up with a short list of qualified suppliers. Many professional buyers have forced suppliers to change their marketing to increase their likelihood of making the cut.