ADVICE on E--Procurement.

Few companies are enjoying the big savings that come from creating a true end-to-end e procurement system. In this interview Mike Parker, chief operating officer of CODA, an international developer of financial accounting and procurement software, explains why companies are missing out on larger savings and what they can do about it.

What is e-procurement, and why are companies turning to it?

A At its most basic, e-procurement simply means buying products and services over the Internet. In this sense, most companies are already using e-procurement. However, the term is coming more and more to mean automating the whole purchasing process and making order and requisition information available along the entire length of the value chain via the Internet. Such automation allows two-way communication of real-time financial and purchasing information without the need for electronic data exchange (EDI), middleware or value-added networks. Management at both the buying and selling end can see what's happening at any given moment and identify trends and problems. A shorter purchasing cycle enables companies to maintain lower inventory levels and respond more quickly to stock-outs.

Why not simply order products and services over the Internet and leave it at that? Wouldn't that still save you quite a bit?

A Actually, a lot of e-procurement packages simply automate the ordering process. Using a system like this to place orders over the Internet can save time and cut postage and paper costs. But, without integration to back-office finance systems, you miss out on the largest opportunities for savings. To take full advantage of e-procurement, you have to tie your procurement system not only into your financial system and but also into the systems of your customers and suppliers. You can then create a virtually paperless system from one end of the value chain to the other.

This sounds like something for large companies. What about smaller companies?

A Right now, large companies are leading the way into e-procurement. Getting such systems up and running does take time and money, although a recent study by Deloitte Consulting shows that return on investment reported by more than 200 survey respondents will average 300 percent over the first two to three years. Because of the costs, smaller companies are lagging.

What we're recommending to them is that they consider using application service providers (ASPs). By running their e-procurement and finance soft...