A recent two-month summer study by Grainger Consulting Services, a division of W.W. Grainger, Inc. (NYSE: GWW) confirms that e-commerce procurement is a significant benefit to both buyer and seller. The study shows that buyers who made investments to acquire and implement e-procurement methods averaged a return on their investment of between 245 and 400 percent, while sellers showed gains of 10 to 15 percent. Sellers did, however, receive the additional average benefit of a 300 percent increase in sales.
The study supports other dramatic business-to-business (B2B) projections for future e-commerce. Forrester Research indicates that 1998 B2B Internet trade was over $30 billion (US$). Additionally, the research company expects that number to exceed $800 billion by 2002 and grow past $1.3 trillion in 2003.
Procurement Leads the Rush to E-Commerce
“More and more buyers are investing in the Internet to gain the savings,” said Steve Bowen, General Manager of Grainger Consulting Services. In an interview with the E-Commerce Times, Bowen added that “Big manufacturers can achieve greater efficiency in procurement by buying from fewer suppliers over the Internet.”
Bowen also explained that sellers can achieve cost improvement around the ordering process. GE alone expects to spend $4 billion online over the next two years because it believes it can save up to $500 million by switching to e-commerce.
Move Online and Everyone Saves
According to Bowen, the savings that can be taken in e-commerce have inspired many companies to go online — including W.W. Grainger itself. “We saw the momentum behind the Forrester numbers and moved more and more of our business online,” Bowen said. W.W. Grainger, Inc. is the leading North American provider of maintenance, repair and operating supplies and services.
Bowen also sees big advantages for small and medium companies that take their distribution online. “They get some savings through e-commerce,” he said, “but they also gain a broader reach to potential customers when they go online.”
Bowen also feels that the rise of e-commerce poses no threat to traditional sales personnel. “If sales reps are just order-takers, then they are affected by e-commerce,” said Bowen. However, he pointed out that “Many sales departments are more involved with their customers, so the relationship exists offline while the orders are delivered online.”