E-procurement buy-in

Why go e-procurement? Well, when your business buys 278 tonnes of pineapples a year and places 1.37 orders every minute, doing it manually is becoming virtually impossible.

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By  Team ACN Published  June 1, 2006

|~|eproc200.jpg|~||~|Despite the many obvious business advantages of e-procurement, there are challenges, according to Suzan Shirley, assistant director of supply chain and logistics at the Jumeirah chain of hotels.

Delegates at the inaugural Middle East e-sourcing and e-procurement conference, were told of some the challenges she faced in introducing e-procurement to the group.

Jumeirah, which has landmarks such as the Burj Al Arab in its chain, adopted e-procurement six months ago, the conference, organised by CIPS (Chartered Institute of Purchasing and Supply) heard. The business had a group procurement department and five purchasing offices, but last year the purchasing offices were consolidated into one.

With a workload of placing an average of 1.37 orders every minute of every day, it became clear that there must be a way to benefit from purchasing on such a large scale.

Shirley told delegates: “We were asking the same questions you were all asking earlier. Would it work in this competitive environment?”

Jumeirah initially applied e-procurement to its purchasing of fruit and vegetables, meat and poultry, and has now rolled it out to seafood. Bakery and dairy goods are currently being input and dry goods will be next.

The biggest challenge has come from the number of different products Jumeirah purchases, around 65,000 at the last count. Each food item needs to be identified and its specifications agreed with chefs before it can be defined on the system. This led to some confusion when the same products were being referred to in different terms: for example, zucchinis and courgettes were listed separately, even though they are the same vegetable.

“We didn't know before we set up this system where we were spending our money. We were just spending it,” said Shirley. Now, all of the business units place orders through one central system and it is easy to see what was ordered, by whom, and at what cost. “Wherever I dial in from anywhere in the world, I can see what's happening on our system,” she added.

Jumeirah now intends to roll out e-procurement to the rest of its products, and to begin using it in all of its properties worldwide.

In a panel discussion, Ibrahim Yaqob, director of contracting and purchasing, Dubai Municipality, said there could be technical limitations to the use of e-procurement. “The current bandwidth does not allow us to put everything online and send attachments,” he said. “Once we increase the bandwidth, 90 to 95% of our ordering and tendering will be done online.”

Security was an issue raised, but the panel considered this could be easily addressed. Thani Alzaffin, director of Government Information Resources Planning Department, H.H. The Ruler's Court, told delegates: “It is more secure than the paper-based system.”

Dubai Municipality's Yaqob added: “There are ways to make the system more secure. You can segregate the servers. You have to ensure you have a good back end system.” One delegate, Mahfood Mohamed Abdul Rahman, lead purchasing officer at the Abu Dhabi Marine Operating Company (ADMA OPCO), said that his company had used Ariba for two reverse auctions, achieving cost savings of 24% for one of them.||**|||~|rensburg200a.jpg|~|Van Rensburg: Keen to focus on the oil and gas sector.|~|But vendors in the Middle East are definitely seeing e-procurement take off. Tejari will shortly establish a presence in Saudi Arabia, according to Omar Hijazi, CEO. “This is very exciting because Saudi Arabia is the cornerstone of the Middle Eastern continent,” he told the audience. Tejari recently began operations in Oman, through Omania E-Commerce.

“Saudi Arabia has an advanced business-to-business payment system which we're investigating to facilitate financial settlement on Tejari. We'll see some significant advances in e-procurement in the coming years once the Saudi office is wrapped up.”

Alongside the longstanding presence of Tejari, and the newly-arrived Ariba, other e-procurement vendors are working to establish themselves in the Middle East.
Quadrem, a US company originally set up by mining concerns, but now servicing everything from oil and gas to fast-moving consumer goods, has been in Dubai a year.

“There's enormous potential in the Middle East for e-procurement to take off,” said Leo Van Rensburg, Quadrem’s general manager Middle East. “We're particularly keen to focus on the oil and gas sector in the region, but all companies can benefit from an e-procurement exchange. One of the key points is that, looking at electronic purchasing and document exchange, both the buyer and seller benefit - it's not a one-way saving.”

Van Rensburg said the main factor in the region's readiness for e-procurement has come out of the Middle East's high rate of ERP adoption. By automating and optimising their internal processes, organisations are then better able to integrate and automate external processes, such as purchasing.

One of Quadrem’s key successes has been to secure OTN as its Omani partner. OTN runs Oman’s largest document exchange, and counts Petroleum Development Oman (PDO) among its customers. Van Rensburg said that following Quadrem's work with OTN, he hoped to sign up a number of other regional partners in the near future.
“OTN is an excellent match for Quadrem's products and services. We're hoping they’ll be selling our offerings to their customers,” said Van Rensburg.

“We hope to repeat this pattern of a local partner in countries throughout the Middle East, although we are looking at regional partners as well.”

OTN's chief executive, Hosam Al-Jamali, is confident Quadrem offerings will enhance OTN's value to its customers. However, he emphasised that although PDO is by far OTN's biggest customer, it forms only part of the picture.

“Yes, PDO is a large part of our business. They account for around 30%-35% of the documents exchanged through our IX2 network. But around 85% of Oman companies are on the exchange now, so if someone asks who are our largest clients apart from PDO, I'd have to say almost all of them. Even companies which started just as suppliers are now using the exchange to source their own purchasing requirements.”||**||

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