Net Purchasing: Not Ready for Prime Time

An exclusive survey of Packaging World purchasing readers indicates enthusiasm for buying via the Internet but little actual experience in packaging purchases thus far.

If W. W. Grainger ever expands into selling packaging materials, it could become a significant supplier in an instant, say Packaging World readers with purchasing responsibilities. That’s because survey respondents at companies that are purchasing on the Internet most often are buying general office or plant supplies from the Grainger Web site (www.grainger.com).

By contrast, relatively few purchasing readers surveyed for Net Sourcing say their companies have ventured into Internet buying for packaging products. In fact, a sizable number of these buyers report their departments have limited or no access to the Internet, and many also report that their suppliers are not ready to take Web-originated orders.

Enthusiastic to buy

Still, the majority of these buyers are enthusiastic or at least interested in exploring the concept of buying via the Internet.

These conclusions come from a telephone survey conducted in January of PW readers who have purchasing responsibilities. Some 50 in-depth interviews with packaging people around the country were conducted by Milford, NH-based Frambach & Co. Qualitative rather than statistical in nature, this research explored readers’ opinions and personal experience with Internet buying, both for personal and professional use.

To be sure, some manufacturers are beginning to understand how the Internet can be used to buy packaging. Others, like Owens Corning (see p. 6) are much further along.

The national purchasing manager for a major food company indicates that certain people within his company’s purchasing organization have been authorized to use the Web. Some of his company’s people can use the Web to research a company and its products, he said, and within certain financial limits, these people can make purchases using a company credit card. “Some of our preferred suppliers [allow us] to place orders on the Web. . .and we are able to look at [their] inventories,” he reported.

Despite this experience, he expected his company to move slowly. “It’s still in the beginning stages for both suppliers and buyers. You have to approach it cautiously because it’s hard to know exactly [how it’s going to work].”

A buyer for a Western manufacturer of processed foods says that only a few of her vendors are equipped to operate on the Internet. But her past experience makes her an enthusiastic proponent. “At the last company I worked at, we used EDI (electronic data interchange), and it was great. I saved time and work because it eliminates phone calls and I can do it during off-time hours. Plus, order confirmations are quicker, too.”

Based on her experience, she cited better speed and the lack of paperwork as major benefits to Web-based buying. Those advantages, she said, add up to “streamlining administrative costs. Still, she predicted that her company would go slow in moving toward Internet purchasing. “We’re doing less than 5% on the Web now, and I don’t see that changing in the next year or so because we haven’t budgeted for it.”

Caution prevails

The purchasing manager for a major national distillery said her company is not discouraging the use of the Internet, but that it will be an uphill battle to change corporate purchasing practices. “I look at it more as another tool for gathering information,” she said, “and I don’t anticipate any changes [in practices] in the next year or two.”

The purchasing manager added that she’s anxious about losing face-to-face contact with vendors, a point echoed by others in this survey. “Face-to-face contact with vendors is better for dealing with problems as they arise,” she said. “Sometimes, I need vendors in here twice a week. I don’t see us getting that level of service with ordering on the Internet.”

Others said they felt it might have a place in buying certain types of products. “There are some areas [where] it would work, like office supplies, computers and maybe spare parts, but not so much for packaging materials,” reported the senior vice president of purchasing at a national bakery. “It’s difficult to put business on the Web that requires complex specifications like printed bags and film.”

However, even this executive can see some advantages to Web-based buying. “You can get a lot more suppliers to look at a piece of business and expand the base of quotes you receive,” he admitted.

A buyer for a Midwest-based beverage producer says he sees advantages in Internet purchasing, but that packaging suppliers are moving slowly. “Packaging companies do not seem to be approaching it from an e-commerce perspective,” noting that his company only uses the Web for office supplies. “That’s the only thing that’s made sense thus far.”

He sees the need to take a systems approach to Web buying. “It’s more complex than just sending a PO electronically. You want to be able to streamline your process internally. That’s where the value will be. But we have not seen that being available in packaging,” he laments. He lists better communications along with reduced administrative costs as the major benefits to Internet buying.

In fact, this buyer reported that Y2K investments have postponed more investment in Web purchasing. “We still have to get through the Y2K ‘hangover.’ Some companies made major software upgrades to get through Y2K, and we’re still working through that issue.” Later, perhaps, his company will look at what he calls “nice to have” software purchases that will facilitate more Web activity.

Benefits not yet enjoyed

The purchasing manager for a Midwest plant of a national candy company says its Internet involvement will be determined at the corporate level. On a personal basis, though, he views Web purchasing as “a tool to expedite the whole process, [making it] faster and easier,” he says.

A buyer for a meat packer in Minnesota says that even though his company’s computers don’t currently have Internet access, he believes that Web-based purchasing will permit buyers “to have access to a broader range of products.” Also enthusiastic is the purchasing manager for a Midwest pharmaceutical company. He sees its value as a research tool but admits that his small company has not made Web purchasing a priority.

A purchasing agent for a South Dakota meat processor is even more frustrated. She says her company is encouraging Web purchasing, and that last year it installed a new system that permits it. However, system implementation has been stalled. “I’d like to be doing it [soon]. Based on what I’ve seen, we’d have so much more information available to make our decision, and that will all be current,” she says.

Progress, she says, won’t wait. “If we don’t get going soon, the software we just put in will become obsolete and we’ll have to start over.”

A purchasing manager for one plant of a national brewing company revealed that his company has an e-commerce project in place with a major consultant. “I think it’s the way of the future. Business-to-business purchasing will all be electronic,” he says. “Speeding up the order-placement process and the elimination of paper handling will be more economical.”

Security an issue

While most of the survey participants see major benefits to Web purchasing, some are concerned about its drawbacks. One issue, mentioned by some of those individuals whose companies had not given them Internet access, was that there was concern about whether the purchasing people might use the access for personal rather than business reasons.

The purchasing manager for a major fruit processor on the West Coast worries about reliability of communicating orders. “If the order gets lost in some black hole, there’s no way to verify [a supplier] received the order,” she worries. And a number of purchasing executives are concerned about the Web’s security. The purchasing manager for a national brewery also wonders about reliability. A drawback could be “people having a confidence level that their transactions went through, and learning to rely on new technology.”

Another buyer for a meat packer suggests that “fraud” could be an issue. Yet she adds that it probably won’t be a problem because “safeguards will probably be in place.” The purchasing manager for another Midwest food processor echoes the concern. “All of the sites need to be secure, so there are no concerns about information going to the wrong place,” he notes.

The purchasing department manager for a major national beverage company is also concerned. “Our IS [information services] people worry about security,” she states. “For example, [we’re concerned] about unauthorized purchases billed to our accounts.”

A purchasing specialist for a beverage company believes security will be difficult to guarantee. “You can’t be confident that any information on the Web is secure or confidential. The Web is designed to spread information, not restrict it,” she said.

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