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R. Savitha

eProcurement, a form of electronic auction, might have started off damply. But now, companies that have stuck with it are seeing gains. Maybe it's time for a relook.

WE are saving crores of rupees while many others are still in the analysis stage as to whether they should also jump on to this bandwagon. You can do it right or you can do it wrong. The only thing you can't afford is to not do it." These are the words that the industry seems to be echoing.

The `it' is online purchasing, often referred to as e-procurement. This fast-growing way of doing business with suppliers promises not only lower prices for goods but also savings from the automation of the traditionally labour-intensive processes of ordering and payment. This might seem like old wine in a new bottle, but the very fact that the Indian public sector enterprises (PSUs) are also making an entry into this segment is what makes it interesting.

In a typical large PSU, procurement runs into hundreds of crores and complexity is inherent in the procurement process. What is required to be procured is wholly dependent on the nature of its business, and therefore varies from enterprise to enterprise. In today's scenario, adopting an effective cost saving mechanism is integral to any company's continued existence. Companies across different sectors of industry have been trying to simplify this extremely crucial aspect of their business, in extracting optimal quality, and timely, speedy transactions at the minimum possible cost.

E-procurement, a new avenue for buying direct and indirect goods and services, is an effective procurement system, making waves in purchasing circles. The service provider plays a crucial role in offering sourcing and procuring solutions that satisfy customer needs and provide ample value addition to the service provided.

In the past, traditional methods of procurement offered little transparency and lesser satisfaction of negotiation with suppliers. "E-procurement offers the benefits of greater transparency, wider geographical reach and lesser time of transaction. Not only that but we, the PSUs, are also able to get better pricing," is what one leading PSU who has entered into e-procurement has to say.

It assumes a significant role in the context of PSUs who are in the process of revitalising the existing systems through Internet technologies with new concepts of e-governance.

Karnataka State Police Housing Corporation (KSHPC) has successfully implemented and used its web tendering solution to rake in major cost takeouts and streamlined its procurement process. This is the first major instance of a State Government arm using e-procurement technology successfully in Karnataka.

"The whole process was extremely transparent and in line with the existing policies and an extension of the e-governance initiative taken up by us in line with our state government's policies. Further the eTendering process which was conducted online helped us in knowing the existing trends in the market and for getting commercially beneficial offers," says R. Sri Kumar IPS, Additional Director, General of Police and Chairman and Managing Director KSPHC. With this in place, KSPHC has been able to make a savings of atleast five per cent in the total revenue.

According to him, the benefits gleaned by KSPHC included reductions in cost of procurement, drastic reduction in transactions, cycle times, transparency in the whole procurement process (which is one of the main goals of the e-governance initiatives), compliance to State Government policies and the facility to purchase a wider range of materials by levering the web-tendering solution. Pradip Bahirwani, Head, Global Sales, Wipro 01 markets, a player in the e-procurement space, says they have been able to generate on an average 10 to 12 per cent in savings for the clients. Depending on the particular buying opportunity, he says that his company has also been able to cut cycle times by as high as 50 per cent.

But for companies conducting the auctions, the technology translates into reduced administrative costs and a reduced cycle time of purchasing. And in a time when large manufacturers are feeling squeezed to reduce costs to stay competitive, the online auction looks like the hands-down winner. With that comes a better data exchange, with real-time information, between trading partners that increases each party's ability to manage the procurement process

All said and done, is this a trend that is catching up in the Indian scenario or would it also face the same fate as the dotcom with not much of response after a couple of years? Mr. Bahirwani notes that unlike the dotcom boom, e-procurement has a compelling business proposition, which is cost savings and this affects the bottom line directly. Hence it is a sustainable business model and the trend is expected to be on the rise in the future, just as it has been in the last three years of Wipro 01 markets operations. Sri Kumar agrees, adding that this trend is catching up within the industry as requirements for transparency, be it in the Government or the PSU sector, are catching up.

But the flip side to it is that if it has to sustain itself, it not only has to have enough to pamper the existing clientele, but newer additions of products and an expansion of supplier base would need to be carried out. "There is no point in expecting higher revenues every year from the same existing lines of business or the panel. They have to diversify and bring in newer products as also larger number of clients," a leading PSU points out. Market potential for the e-procurement segment?

Though there are no formal industry estimates, which size up the Indian market for e-procurement, Bahirwani says that unaudited reports estimate the Indian e-sourcing market for the year 2003 at Rs. 5,000 crores in terms of transaction.

And now the million-dollar question: Security and transparency of operation. Experts say that the solution comes with necessary security features to cater to the requirements.

And transparency is maintained by involving multiple individuals instead of one official within the buyer organisation, in transaction processes.

rsavitha@hotmail.com

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