The opportunity to get government departments procuring efficiently is too good to be missed and certainly not something to be deterred by negetive sentiment from a now de-hyped industry, nor the failings of those that have not been able to make e-procurement work in the past.

The fact of the matter is that e-procurement can work and as with anything in life it can take some time to learn ‘how’ to make it work from both a technical and management perspective.  Right from the times when two of Benjamin Franklins colleagues were electrocuted by lightening, people have experimented with electricity to improve their lives.

And so it has been with e-procurement – plenty of costly experimentation globally with New Zealand being able to sit behind the bleeding-edge and pick up on the models that work.  Now all of a sudden, we find ourselves in position to leap-frog the OECD efficient government rankings.  The timing could not be better for GoProcure, but do we have the leadership to see it through?

August 2002

By Marty Verry

Misguided Media

There has been some misleading comments in the press lately and one recent IDG article in particular, "Logistics specialist doubts portal value", quoting joint chairman of New Zealand's Logistics Association Tim Munro, needs to be addressed as it highlights some of the common misconceptions and could potentially misinform agency decision-makers. 

For those that didn’t read it, it made no mention of the processing cost savings by automating purchasing.  This is important as eliminating the cost of re-keying purchase orders is now proving to the tangible driver behind most online B2B initiatives.

Munro also states procurement portal owners clip the ticket.  However, this depends on who owns and runs the system and is not a consideration with GoProcure. 

Claims that strong personal relationships between buyer and seller cannot be built with an intermediary system are not altogether accurate either.  In actual fact, relationships can be enhanced by making the transaction process less expensive for each and, by having lower processing costs, trading parties have more time and resources to spend building relationships in other ways, such as site visits, product demos and training etc.  

Those close to the GoProcure negotiations tell us suppliers are actually welcoming the initiative - it means they will have just the one catalogue to maintain and one purchase order process for all the departments they supply.  Importantly, their GoProcure catalogue supports multiple pricing structures based on the supply contracts negotiated with each individual department.

Munro also claims that analysis of buying/selling patterns and preventing rouge buying can be controlled in other ways.  Maybe, but at what manual cost to get the same purchasing "intelligence"?  And, will it actually get done and enforced manually?  Experience says not.

The only procurement portals he has seen work well because they are portals, he says, are the ones organised on an auction framework, like SouthFresh for fish and Woolnet for wool.  Yet Woolnet was established to replace the auction system and in reality has been a complete failure in that industry. And so one must also question the depth of analysis that some in the industry have performed in assessing workable models.

Government agencies must play as a team

One thing we have all learned about e-business is that organisations will all embrace it in their own time, when their own cost/benefit balance tilts in favour of doing so.  Some agencies will not quite be there yet and so the challenge will be for their leadership to see the bigger picture over the longer term by prioritising their early subscription to GoProcure now and giving it their full support to get it’s usage habitualised into the daily processes of their staff. 

Their collective action now will have several flow on effects which they may not have factored in to their own individual agency analysis:

• It will ensure GoProcure’s success and mean the goal of $20 million in savings over the next five years is realisable.
• It will save a considerable amount on what they will spend otherwise on e-procurement tools if they implement 49 independent solutions in the coming years.
• The GoProcure project will give the economy as a whole a boost in both activity and efficiency.  By having supplier catalogues online it tilts the cost/benefit scale in favour of e-procurement for other purchasing organisations, which in turn makes it more attractive for all suppliers in the country to get their catalogues transacting online.

GoProcure is the chance for the government agencies to not only lay the foundations for their own future efficiency, but also to take a leadership role in developing the country's e-business capability.

And whilst Hon. Paul Swain made the commitment last year that all government procurement will be done online by January 2003, let’s hope the stick won’t be necessary.

___

What are your thoughts? Comments? Analysis?  Do you want to receive purchase orders electronically?  Or, what are the GoProcure issues in your organisation?

Email us: marty.verry@istart.co.nz

Further reading:

e-Procurement  - including how it works, New Zealand case studies and solution providers

e-Government site