E-procurement sees jump in Canada

The volume of online procurement in Canadian organizations has more than doubled in the past year, according to a survey of 1,000 CEOs.

The Purchasing Management Association of Canada (PMAC) Wednesday released the findings of a research study conducted on its behalf by the Conference Board of Canada. It said 58 per cent of Canadian organizations have developed an e-commerce strategy, 67 per cent of which involves some form of online procurement. This procurement is split between that which is conducted over the Internet (eight per cent), and to a lesser extent through traditional electronic data interchange systems (EDI). Though proprietary, EDI still accounts for about seven per cent of e-procurement, the study said.

Last year PMAC conducted a similar research initiative through St. Mary’s University, which saw online procurement rise from 3.2 per cent to 7.4 per cent over a seven-month period.

“It was surprisingly consistent with the results from previous research,” said Brian Guthrie, director of Innovation and Knowledge Management at the Conference Board. “It’s almost a straight line in terms of momentum or growth.”

Wednesday’s research marks the first of a six-part e-commerce study the group is conducting with Industry Canada. Components still to come include a detailed survey of procurement officers, focus groups with e-procurement firms in Toronto and New York, and case studies of best practices from around North America. Some parts of the research are still subject to funding, Gurthie said. IBM is another of the sponsors.

Though the rise in e-procurement strategy may be an encouraging sign, the research indicated many initiatives are still at the drawing-board stage. The report said 42 per cent of Canadian organizations have explicit measures, objectives,targets or actions to facilitate online procurement, but the other 58 per cent do not. Gurthie said in some cases this might be because suppliers aren’t ready for online procurement.

“Part of it is legacy systems, of course. They’ve been using these (EDI) systems for years and they don’t want to open it to the public,” he said, adding that 37 per cent of CEOs said their goods and services were not compatible with electronic procurement. “There will always be a place for non-electronic transactions.”

Many of the services, in particular, may not lend themselves to e-procurement. This would be especially true in hiring a consultant, for example. “With services, you can do parts of it over the wire, but you need face to face meetings,” Guthrie said.

Large companies were almost twice as likely to have an e-business strategy as companies with less than 500 people the report said, and a relatively larger percentage of big companies with an e-commerce strategy also have an e-procurement strategy — 75 per cent as compared to 48 per cent for small and medium enterprises.

“StatsCan suggested that for every new Web presences there were five that went under. It speaks to consolidation to some extent,” Guthrie said. “People who do it right are doing more of it. People who are not doing it are going under.”

PMAC and the Conference Board are using the Conference Board’s member list to get its sampling for the research. PMAC executives were unavailable for comment at press time.

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