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by Sonia Tellez

The Internet is overhauling the procurement process, enabling government organizations of all types and sizes to reach out to new suppliers, automate work processes, streamline operations, and make strategic purchasing decisions.

Internet procurement eliminates time-consuming paperwork and procedures, and provides more accurate information about competing suppliers by creating an application framework within a Web-enabled database. This allows procurement functions, such as sourcing, approval, routing and payments to be centralized and automated, while decentralizing the requisition and receiving process.

Organizations can also broaden their supplier base to help ensure better quality, price and service by using Web-enabled purchasing to invite more suppliers to participate in a formalized closed bidding process.

"We have been using the Internet for purchasing since 1996," says Gord Allen, manager of policy and systems at the British Columbia Purchasing Commission. "By putting our bid opportunities on the Web we have reduced our administrative costs. For example, we have eliminated most of the hard copies of bid opportunities we used to print and distribute."

The broadest impact of Internet procurement within the organization is the automation of workflow and procedures, while providing each employee with access to the requisition process from their desktop.

Previously, when an employee needed to purchase goods or services, a hard-copy purchase order had to be generated and signed by several levels of management. Through the use of Internet-enabled self-service procurement software, which incorporates all procurement rules, this process is automated, reducing the cost and time necessary for each transaction.

Once data is entered, it doesn't have to be re-entered or reformatted as it moves through the system. "Touchless" procurement means professionals no longer have to engage in redundant tasks that are eliminated along with paper, mailing and sorting costs.

"By distributing self-serve purchasing applications to every government ministry in British Columbia, we will be working toward eliminating all paper-based transactions and the bottlenecks they cause," says Allen. "This requires a system that is universally accessible and scaleable to meet the needs of 40,000 government employees and countless potential suppliers."

Internet procurement applications are database driven. This allows data, business rules, user settings and applications to be located in the same system. In turn, this enables self-service applications. Because the database uses such Internet standards as XML and Java, it can make self-service applications accessible to any predetermined user through their generic web-browser. It also means that each front-line employee can initiate a purchase order without the need for intervention by procurement staff.

With strategic procurement, the administration and maintenance of both online supplier catalogues and business rules take place in a central location. This ensures users have access to the latest catalogues and correct suppliers, while reducing the likelihood that employees will inadvertently use an unapproved supplier. Strategic procurement solutions minimize this type of contract leakage and maverick buying.

Automation doesn't end with requisitioning; the entire process from the initial request though ordering, receiving and payment can occur with minimal human intervention. Because all these activities occur in the context of a database, each element of the transaction is recorded and can be placed in a data warehouse.

"In the long term, we want to collect data from all purchasing and related transactions and place it into a data warehouse for strategic analysis," says Allen. "By drilling down into the accumulated data, we will be able to identify the real cost of goods from a specific supplier. In other words, we can use business intelligence tools to determine if the product arrived on time, whether it met quality standards or whether it needed to be returned. We want the best value possible out of the goods and services we purchase."

It is this type of strategic analysis that guides companies to achieve the lowest cost of doing business. The supplier offering the lowest price may not be offering the lowest total cost. By developing a broad understanding of supplier performance, companies can negotiate more effective contracts and facilitate change and consolidation around particular suppliers.

Sonia Tellez is senior marketing manager, applications, for Oracle Corporation Canada Inc. in Mississauga, Ontario.

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