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No Fast Track to E-Procurement
The dot-com boom promised commercial and institutional facilities more competitive prices, quicker ordering and wider selections of products and services. While some of those benefits have proven true, managers involved in purchasing maintenance, repair and operation (MRO) products and equipment say their organizations are joining the move online at a slower pace than was once expected.
To be sure, some institutions have taken advantage of e-commerce and online procurement, and those that haven’t say it is just a matter of time before they embrace e-procurement. But why is it taking so long?
Some organizations do not have an efficient computer or Internet access, for example. Other managers say they are still waiting for their MRO vendors to get online.
Each organization seems to have its own set of hurdles to clear before it can proceed to the e-checkout.
Making sure maintenance managers and supervisors have the right computers, Internet access and training to do the purchasing has proven to be a stubborn challenge.
“Getting people trained to use online ordering is a challenge,” says Charlie Simonson, purchasing manager for the facility planning and management department at the University of Wisconsin-Madison, which implemented its e-procurement system in 2000 and is buying about 25 percent of its products and equipment online. “It’s something they’re not familiar with. They’re used to picking up the phone.”
With many years of experience strictly ordering from local vendors over the phone, managers often find sitting in front of a computer screen to be a challenge, especially when using outdated equipment.
Sometimes, maintenance managers use the Internet to find a part or product, then handwrite the order and send it down to the purchasing department because this process is easier and more comfortable than ordering online.
One reason organizations switch to e-procurement is because they believe it will be faster. Getting managers trained and comfortable with the technology, and giving them efficient computer equipment is supposed to save time. Challenges remain, though.
“Having a computer that’s fast enough to make it [buying online] so it’s not a horrendous process is a challenge,” Simonson says. Also, having to get new computers and equipment is going to add to the upfront costs of implementing an e-procurement system. Such investments cut into another benefit of buying online — bottom-line savings.
Purchasing new computers and routing the equipment and Internet access to the people purchasing MRO products is among the challenges facing many large organizations, such as Kaiser Permanente Hospitals. The organization, a major nonprofit managed-care organization with health care facilities in nine states, is rolling out the pilot of its e-procurement system, says Don King, national director of maintenance and operations consulting services.
Making sure employees responsible for purchasing MRO products have access to computers and are trained to use the e-procurement system are hurdles the organization currently is facing, King says.
In most cases, vendors — especially smaller local vendors — do not have their products available for purchase online, creating yet another challenge. Many vendors are not online at all.
“E-commerce vendors are a dime a dozen when you’re looking for computer equipment, but most maintenance vendors don’t even have a Web site,” Simonson says. “Vendors have to come up to speed with where we’re at, and then we’ll see an increase in the percentage of what we buy online.”
Managers say they are waiting for their regular, local vendors to catch up on technology.
“Some industries are better at [getting online] than others,” says Patrick Kennedy, director of procurement and contract services for the Glendale (Calif.) Unified School District. “A lot of office supplies are bought online. There is extensive Internet usage in the facilities and support operations departments, so we would gladly involve them in e-commerce. I wish more companies would get themselves Web-enabled.”
The district’s facilities and support operations make up less than 10 percent of online purchases. The district started buying products online gradually over the last three to five years, Kennedy says. He says the amount purchased online will increase as fast as MRO products become available.
Most MRO products and equipment are available through large dot-com companies’ Web sites, but managers say these vendors do not always have the best prices or local delivery.
“The larger available national companies have a lot of overhead,” Kennedy says. “If it was close, we would consider paying a little more [for products and services].”
He says when buying large quantities of a certain MRO product or piece of equipment, he is more likely to buy from larger, national vendors or distributors for lower prices. For smaller-sized purchases, however, he usually sticks to a local vendor.
Managers say they also are waiting for local vendors to collect electronic catalogs so vendors could send facilities quotes or e-mail answers to questions or so buyers could check order status.
Rules and Limits
Once facilities have cleared the technology hurdles, many still must wrestle with applying age-old purchasing rules and limitations to the new world of e-procurement. Managers in many public organizations, for example, struggle with determining how to handle big-ticket MRO purchases that must go out for public bid.
“By law, we have to get sealed bids on purchases (over $5,000),” says Ron Roe, manager of purchasing services for the Shawnee Mission (Kan.) School District. “Whether sealed bids can come in electronically, I don’t know.”
Depending on the dollar amount, Simonson says she can buy products from any vendor she chooses. The university is a public entity, so purchases of more than $5,000 require three bids.
Besides the dollar amount, many MRO product buyers are limited by contracts between their organizations and distributors.
The next hurdle for Kaiser Permanente is to select which 10,000 products out of a 50,000-item catalog will be available for purchase on its e-procurement site. If one part or product is cheaper from one vendor than another, shoppers will see only that product on the site.
“I am in the process of choosing what products we will be allowed to order from this vendor and what from others,” King says. “Certain items are blocked from the e-procurement system, and only the approved items will show on the site. This keeps people from going around corporate standards.”
Another hurdle toward successful e-procurement of MRO products has been identifying who does the purchasing for each department — and who should have that authority online. Purchasing authority varies by organization and by department. Identifying buying responsibilities will help streamline the purchasing process and avoid confusion. Large multi-facility organizations have a particularly tough task.
“The problem is, no one knows [who does the purchasing],” King says. “It varies from facility to facility. It could be office clerks, maintenance mechanics, the tool crib clerk or parts person.”
When purchasing MRO products online, organizations have to ask themselves if they are ready to institute policy changes. For example, employees who have been purchasing parts and equipment for years are going to be reluctant to give up their buying authority.
“With e-commerce, you have to train people to streamline the procurement process,” King says. “Who can buy? What are the approvement levels? It’s a huge issue to face.”
Too often, employees and departments do not embrace such change. If an organization decides to appoint new people to do the purchasing, former buyers might think they can continue to buy and it can be difficult to track purchases when a number of different people make them.
“The maintenance mechanic is not going to like that someone else is doing the purchasing, and they are going to continually generate manual orders,” King says. He says it is important to identify where the organization is headed with commodity purchasing.
“Otherwise, you’re heading for chaos,” he says.
An advantage of online ordering is the ability to track an order’s shipping status on the Internet. But that advantage hasn’t proven to be such a success. Once a shipment arrives at a facility, matching that order to the right invoice has proven to be a continuing challenge.
“Some invoices don’t carry any detail, no reference or number,” Simonson says. “When placing 20 orders with one vendor in a week, and the orders come in with no reference number, you can’t find what is what.”
Simonson says it is important to be able to track the university’s orders with invoices so purchasing departments can charge the right customers for their orders.
The Finish Line
Despite the hurdles they face on the way, managers see their organizations moving ahead on the track toward e-procurement.
“Next year, things might look a lot different than they do now,” Roe says. Within the next year or so, many managers expect to see an increase in e-commerce activity within their organizations.
“Greater Web activity is inevitable,” Kennedy says. “It’s all in the timing. Those companies not online now in the next five years will be. Those that are not will be left in the lurch.”