Special issue editorial: purchasing and e-Procurement

The emphasis throughout this special issue will be on the business aspects of information and communication technology (ICT) concerning purchasing management. The vast progress of ICT is discussed only in association with its influence on the business views, bearing in mind that ICT systems are worthless unless they lead to better information or better ways of doing business. As happens in any management subject, purchasing management literature comes from many different author groups representing a variety of scientific and professional communities, like purchasing managers, IT professionals, OR scientists and production/logistics academics and experts, all of them adopting a somewhat different approach to the subject. The importance of purchasing arises from the fact that in the average organization, over 50% of the total product or service cost is spent on materials, supplies, fuel and services from outside sources. The purchasing or buying responsibility in any organization is usually defined as buying materials of the right quality and quantity, at the right time, from the right supplier, at the right price. The problem of course is to find a formal and operational definition of the vague concept ‘right’ in particular situations. The essential role of purchasing is to provide a service to other departments of the organization, particularly production and/or operations. The prime objective of purchasing is to maintain continuity of supply so as to eliminate or minimize disruptions to production/operations resulting from lack of materials, equipment or supplies. This should be achieved with the minimum investment in stocks necessary as well as with the minimum of procurement costs. A further objective often given to the purchasing function is to maintain the organization’s competitive position in its industry and conserve its profit in so far as material costs are concerned. Obviously the implications of poor purchasing decisions are immediate and can be quite costly to an organization’s operations. Purchasing falls into two rough categories: direct materials that go into end-products, and indirect materials that are called maintenance, repair and operating (MRO) supplies. Most corporations spend a far higher percentage of their total revenues on operating resources like computers, office supplies and support services, than they do on the raw material and components that are actually used in the production of goods or services. Some estimates suggest that about 60% of global purchasing expenditures are spent on high-volume, low-money MRO purchases. All too often, the purchasing transaction costs more than the items bought. MROs typically account for 20% of an organization’s purchases but 80% of its orders. This is the area where e-Procurement may offer a dramatic decrease in transaction costs of placing orders. Large organizations (corporations, government agencies, municipalities, hospitals, universities etc.) concerning purchasing are typically characterized by large buying departments full of bored clerical staff. Traditional purchasing is notoriously inefficient and costly. Buying departments have long been one of corporate life’s dead ends, full of people chasing up invoices and trying to work out how many things the organization bought last year. However, nowdays the situation has changed and those who manage purchasing are the driving force of the B2B (business-to-business) enterprise. Direct materials that go into end-products are handled differently, usually through MRP (material requirements planning) software programs that track the materials and