E-procurement could save companies trillions

- Last updated on GMT

Related tags: Procurement

Companies worldwide could save on aggregate $2.3 trillion (€2.6
trillion) a year by using the Internet to purchase resources
ranging from office supplies to plane tickets, a study released on
Monday said.

Companies worldwide could save on aggregate $2.3 trillion (€2.6 trillion) a year by using the Internet to purchase resources ranging from office supplies to plane tickets, a study released on Monday said.

The report, by Boston-based analysts Aberdeen Group, is an uncommon piece of positive news for the moribund business-to-business, or B2B, e-commerce sector.

At the height of the Internet boom, numerous firms, including Ariba and Commerce One were launched on a promise to save large corporations millions with their ``e-procurement'' software that automates purchase orders.

Aberdeen studied over 25 multi-national corporations since August and found that the firms employing e-procurement are beginning to realise savings.

"It really does offer companies an ability to cut costs off the bottom line. And in this economy, that's where companies want to be,''​ said Frances Howarth, research director for Aberdeen's e-business group.

Howarth said that in 2001, eight to 10 per cent of the largest 5,000 companies were using e-procurement software. By 2003, she estimated it could grow to 80-90 per cent.

The study states that companies around the globe spend $20 trillion (€22.2 trillion) annually on external goods and services, contracting with a variety of vendors for everything from consultants to pens and paper clips.

Aberdeen said that based on the companies it surveyed, corporations could save between eight and 10 per cent on these expenditures, or an aggregate of $2.3 trillion for companies worldwide.

Unilever, one of the companies studied, has been using Transora, an online marketplace that links household products manufacturers with a variety of vendors.

Tim Cooper Jones, the European e-procurement director for Unilever, told Reuters that the company hopes to trim five to eight per cent off all indirect purchases, including items such as office supplies, promotional materials and travel bookings.

"We never knew how much business we were giving to BA, KLM or United Airlines,''​ Cooper Jones said. "Part of what we're doing now in strategic sourcing is to collect all this information.''

Streamlining basic expenditures, known as ``indirect expenses,'' could translate into large corporate savings. At Unilever, ``indirect expenses'' account for roughly 40 per cent of total expenditures, Cooper Jones said.

Related topics: Market Trends

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