Today, in great majority, advanced purchasing organizations use solutions that allow for electronic contacts with suppliers. Electronic communication offers completely new possibilities and significantly enhances purchasing processes. However, before we describe its potential, it is worthwhile to explain the term itself meaning “the exchange of information in the manner allowing for its automated processing in information technology systems”.
How did it start?
The history of electronic communication between contractors dates from the 1970s. Interestingly, electronic communication with suppliers had been used across industries long before the age of the Internet. At that time, the communication was carried out through modem connections over telephone lines, Value Added Network, Bulleting Board Systems or even physical transfer of diskettes carrying data. As a result of standardization, soon the most important standards were established known as EDI (Electronic Data Interchange). The EDI standards (including UN/EDIFACT and ANSI X12) defined the information scope and format of data for basic set of business documents, with particular consideration of logistics needs. EDI was commonly used in industries that required the exchange of large number of documents such as the pharmaceutical, motor or FMCG industry. In the 1990s, the extent of the EDI application as well as the number of ready-made information technology solutions available on the market resulted in EDI becoming a core standard of electronic communication. It had not been threatened until such technologies as Internet and XML were launched.
Some technology companies, driven by the Internet bubble of the end of the 20th century, found their niche in the computerization of the sourcing element of supply. Companies operating in the market at that time took the advantage of certain favourable factors – the development of Internet technologies, accessibility of funds for Internet start-ups and the demand for innovative technologies. In a short time, the companies launched some breakthrough ideas and products in the area of electronic communication with suppliers. One example of a critical product that has become a standard is an electronic auction. This tool was promptly and widely adapted by big and agile purchasing organizations, and allowed for achieving good results in a very short time, with relatively limited investment. Largely, the success of electronic auctions stems from the development of a friendly business model. There were many companies offering auctions as a service, and additionally, at the beginning, success fee payments decreased the risk of taking the innovative approach.
It took much more time for another breakthrough idea – an electronic market – to become popular. In short, the idea is to organize a common place and tools available over the Internet to allow for linking the supply with the demand, i.e. electronic transactions. The main advantage of such a solution for buyers was to be the possibility to easily reach a wide group of potential suppliers. Looking back, it seems that the major challenge in implementing the idea was to find a critical mass for the undertaking – the number of contractors large enough to make the cumulative offer attractive for new participants.
Electronic contact with suppliers is a standard
Today, solutions that enable electronic contact with suppliers are standard tools in advanced purchasing organisations. This trend is particularly visible among big international companies. In majority, they have corporate systems in place for making electronic orders or organising electronic auctions. In addition, electronic means of contact with suppliers is usually required under applicable procedures or other regulations. This means that people responsible for corporate purchasing strategies are convinced about the effectiveness of such tools and their possible advantages that are available for the organization.
Some tools offered in the market today have been developed to expand their scope of application. Marketplanet, as an operator of the electronic market for companies – Marketplanet OnePlace – offers not only electronic communication between suppliers and buyers, but also a single place for completing the entire purchasing process, including searching for sources of supply, negotiations and electronic on-line payments. The comprehensive tool facilitates business activities, but also improves their effectiveness.