An Inside Look At Corporate Purchasing

To appreciate the efforts in developing cXML, it''s important to understand the environment and unique problems that corporate buyers face. Let''s take a look inside typical large corporate procurement processing:

The employees at the Albatross Corporation complain steadily because the supply room is always empty of critical supplies: ballpoint pens, paper clips, and business envelopes. The purchasing department is obligated to control procurement of these essential supplies, so they have managed to strike a deal with their suppliers, committing to an entire year''s supply of goods at a hefty volume discount. This business model, while appearing straightforward to an outsider, introduces several problems that involve internal procedures, controls, and technology.

• Who does the ordering? Obviously, the purchasing department doesn''t want a thousand employees placing thousands of different purchase orders. How does a company control the purchasing of supplies via the Internet?
• Once a purchasing department has struck volume discount deals, how do they guarantee that their commitments will be honored? How can they know that the individuals making the purchases will go to their preferred suppliers and nowhere else? If an unwitting employee buys from an "off-contract" supplier, companies might end up paying higher prices and risk weakening their established supplier relationships.
• Who stores the catalog and buyer information? Corporate users need information from suppliers for line-item reporting. Unfortunately, not all suppliers provide the same information in the same way. Data may be incomplete. Without additional manual processes, buyers will have incomplete purchasing logs and insufficient audit trails. Not only does this cause inconsistency in data, but reconciliation requires much more time. In addition, do you want your suppliers maintaining information about your employees on their systems? Doing so only seems to beg for trouble.
• How can purchasing departments know that the right products are purchased at the right price by the right people at the right times? Abuse of authority is certain to run rampant without adequate controls in place to prevent it.
• How will companies integrate business-to-business electronic commerce processing into their back-office systems that meet the requirements for themselves and all their suppliers?
• How will the new business models fit into existing accounting procedures and systems?