The European e-Business Report The European e ... - empirica

The European E-Business Report 2005
1.3 The Supply Side: Electronic Procurement
1.3.1 Adoption of online purchasing
The drivers: saving direct procurement costs, increasing process efficiency
The drivers for procuring supplies electronically remain the same as in previous years: companies aim
at decreasing direct costs for supplies and, at the same time, increasing the efficiency of the
underlying processes within the firm and in communicating with suppliers. In theory, electronic
procurement offers the greatest potential to companies from manufacturing industries: as many firms
in these sectors have to manage a large number of transactions with their suppliers on a day-to-day
basis, even fractional improvements in these processes can aggregate to quite substantial savings.
However, empirical findings indicate that not only manufacturing sectors benefit from e-procurement;
some of the service sectors are also making intensive use of online buying.
Standardisation and interoperability are important requirements to increase the efficiency in B2B
procurement processes. Ultimately, the benefit of e-procurement systems relies on the degree to
which documents can be exchanged in a standardised format, for example product catalogues,
orders, invoices and payments. If the ICT systems of two companies can easily 'communicate' with
each other, i.e. if the system of one company 'recognises' the data transmitted (for example as an
order with its various specifications, such as type of product, volumes ordered, delivery address), then
e-procurement can lead to substantial cost savings. Reduced processing time per item ordered and
reduced error rates are common metrics to measure such improvements.
Electronic purchasing activity in 2004/05
44% of all companies from the 10 sectors studied in 2005, accounting for more than 50% of
respective employment, said in early 2005 that they ordered at least some of their supply goods
online (see Exhibit 1.3-1), for example from their suppliers’ websites, on internet trading platforms
or via dedicated firm-to-firm connections.
B2B online trade has reached a significant level across all industries. In most of the 10
sectors studied, 40-60% of firms (by their employment share) make online purchases. Among IT
services companies, e-procurement is even more common (80%). However, leaving aside
companies which say that online purchases account for less than 5% of their total purchases,
figures fall to almost half that level. This is a consistent finding over the past few years.
In fact, differences by sector are more pronounced if occasional online purchasers (with a
total volume of less than 5%) are not considered. Interestingly, it was not companies from
typical manufacturing sectors with large dominant players and deep supply chains which
reported the most intensive use of online purchasing. The IT services sector is outstanding in
this regard (with more than 40% of firms saying that they buy at least 25% of supplies
electronically). In tourism, publishing & printing, and in aeronautics, the share of firms that buy
at least 5% of their supplies online is also significant (about 30%). Service sectors and sectors
where a lot of digital goods and components are traded (e.g. publishing) may have surpassed
typical manufacturing sectors on the more intensive levels of e-purchasing.
There is not much difference between companies of different size-bands. The adoption rate for
micro and small enterprises is about 45%, and for medium-sized and large firms about 55%.
The difference diminishes even further if only companies that buy at least 5% of their supplies
online are considered.
In contrast to other applications whose adoption rates depend largely on firm size, online
purchasing activities differs more by sector as well as by country. For example, firms from the
UK and from Germany tend to make more use of online purchasing than those from the other
five EU Member States covered by the survey of 2005.
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