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

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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. 27
The European E-Business Report 2005 Exhibit 1.3-1: Online sourcing and procurement in 2004/05 Make online purchases Online purchases 50% Use specific ICT systems for e-sourcing Weighting firms empl firms empl. firms empl. firms empl. firms empl. firms empl. Total (EU-7) 44 51 42 47 34 34 11 11 13 8 11 19 By sector (EU-7) Food & beverages 22 43 67 62 28 29 4 5 1 4 5 18 Textile & clothing 30 44 62 65 31 29 4 3 3 4 8 14 Publishing & printing 48 57 41 44 41 39 11 6 7 12 8 16 Pharmaceutical 38 48 50 40 32 44 8 8 11 8 14 32 Machinery & equipment 36 53 50 59 39 32 7 7 4 2 10 18 Automotive 41 60 58 44 30 52 7
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