The Impact of Internet-Based Technologies on the Procurement Strategy

The big company may spend millions of dollars of expenditure on indirect goods and services. However, much of them may be carried out locally or divisionally, bypassing central guidelines. From a corporate perspective the fragmented procurement resulted in slow and expensive processes and excessive product costs due to poor leverage of buying power. The greater information processing capability achieved through the use of technology, especially Internet-based procurement systems, will enable significant cost improvements and leverage to be obtained through a more strategic approach to management of the typically routine and repetitive tasks with a low unit value, high variety of goods and services, but relatively high frequency. According to the researches, a 10 percent reduction in purchase costs can easily lead to a 50 percent rise in profit margin. This paper addresses the issue of how the Internet-based technologies will impact on the procurement strategy. I believe that the radical change in the Internet will give rise to new marketspaces, which may have the largest impact on procurement. The benefits to aware impacts come not only through direct cost savings but also through the improved efficiency of companies rethinking how they operate.