Logistics specialist doubts portal value

The joint chairman of New Zealand's Logistics Association finds it difficult to justify the business case for portal-aided electronic procurement.

The joint chairman of New Zealand’s Logistics Association finds it difficult to justify the business case for portal-aided electronic procurement.

Tim Munro’s comments come as government agencies weigh up the pluses and minuses of adopting government’s GoProcure e-procurement system (see Agencies shy of govt e-buying).

Munro (pictured right) is co-chair of a forum which takes in the logistics and procurement concerns of organisations in a variety of industries, including some public-sector entities.

Supposed savings through bulk buying power of agencies whose needs have been aggregated by a portal provider, and the advantage of preferential status to certain suppliers from a large number of buyers, are often illusory, he says.

“The market in these non-strategic goods [like stationery and furniture] is already so competitive that you don’t have to be a big buyer to get a reasonable price,” he says.

When buying through a portal, the portal operator “clips the ticket”, reducing any cost advantage. In a consolidated environment, he suggests, the opportunity to build a strong individual supplier/customer relationship is also decreased. At some time there has to be an individual relationship between customer and supplier, if only when the goods are delivered, Munro says. It is beneficial to cultivate such relationships.

Portals are claimed to aid analysis of buying patterns for supplier and customer, but it is not difficult for either to do that consolidation and analysis for themselves after a number of dealings with various parties, Munro suggests.

Bringing “rogue” spending under control, by permitting dealing through the portal only with approved suppliers is said to be another advantage of portal-based e-procurement. But again it is not hard for an individual buying organisation to restrict the behaviour of its staff in this way, Munro says, providing a simple web-based interface that communicates only with preferred suppliers. Because of government policy placing the authority of choice with the agency’s chief executive, the agency will often have to offer two or three choices of supplier for a certain line of goods anyway.

The only procurement portals he has seen work well because they are portals, he says, are the ones organised on an auction framework, like SouthFresh for fish and Woolnet for wool. Here the buyers have the ability to influence the price in real time, in competition with one another.

Munro works for Auckland City Council, but says his comments should not be read as indicating a council point of view.

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