Magazine article International Trade Forum

Manage Purchasing with the Internet

Magazine article International Trade Forum

Manage Purchasing with the Internet

Article excerpt

Most organizations do not use the Internet to buy goods and services - yet ITC's trend-trackers in international purchasing and supply management expect this to change, however, as Internet use becomes more widespread. Companies and governments in developing countries and economies in transition should take a second look at using the Internet to save time and money on purchases, and build better relations with suppliers.

Business use of the worldwide network mostly involves information gathering with relatively few organizations actually purchasing products or services over the Internet. Yet the Internet is already proving its cost-effectiveness in purchasing and supply management, according to trade sources as diverse as leading business newspapers, specialized purchasing and supply management magazines, and reports from international organizations.

Purchasing-related sites are on the rise, such as ones allowing businesses to track costs of raw materials and ones with online procurement requests. As telecommunication infrastructure improves, and people become more comfortable with using the Internet, organizations are starting to use a variety of tools (ranging from simple e-mails to more sophisticated Internet-based Electronic Data Interchange systems) to track purchases, manage stock levels, streamline ordering and payment processes, and build better relations with suppliers.

Six reasons to use the Internet

* Cut purchasing costs. You can negotiate better prices for the products you purchase by using the Internet to monitor the material and labour costs of your suppliers. If your product material contains a high percentage of commodities, you can monitor current market prices and trends in public on-line databases, and use this information when negotiating with suppliers. Sources like Reuters commodities (http://www.commods.reuters.com) provide you with both current and historical data on commodity futures and options prices, which can help you to hedge against future price rises.

The Internet can also help you analyze the labour costs involved in your purchased product. For an example, visit the web site of the United States Department of Labour (http://www.bls.gov/datahome.htm), where you can obtain information on International Comparisons of Manufacturing Productivity and Unit Labour Cost Trends for 1997.

Even without analyzing the detailed material or labour costs of your supplies, you can use the Internet as a benchmark for comparison with current prices paid, or for negotiating anticipated price rises. Try to access a server specialized in the market from which you are buying. You can often gather commercial information on your supply market, and also request suppliers connected to this site to quote you a price according to your specifications. For example, buyers of office supplies in developing countries can now use the Internet and sites such as Buyerszone (http://www.buyerszone.com) to identify which local equipment is overpriced when compared with competitively-priced international market items, enabling them to negotiate discounts with their local suppliers.

Using the Internet allows you in some cases to directly access manufacturers, and save money by avoiding costs of intermediaries. This was the experience of a rural Kenyan farming cooperative, which managed to bypass distributors and obtain lower prices by establishing a direct relationship through e-mail with the US-based Earth Marketplace, whose main business is selling directly to North American consumers.

* Reduce operating costs. The Internet - when coupled with web-based Electronic Data Interchange systems that incorporate a purchase order facility - reduces costs involved in order processing and invoice processing. It also lowers costs by reducing the number of dedicated telephone lines for fax machines normally required to move data.

* Improve management of suppliers. …

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