Online Purchasing Increases in Q4 2001

A quarterly report by the Institute for Supply Management (ISM) and Forrester Research found that the number of large-volume-buying organizations that reported cost savings from using the Internet grew from 28 percent in the third quarter of 2001 to 45 percent for the fourth quarter.

The Institute for Supply Management was formerly known as the National Association of Purchasing Management.

Respondents reported purchasing 9.5 percent of their indirect materials and 6.2 percent of their direct materials over the Internet in the fourth quarter of 2001 — an increase from the third quarter’s levels of 7.1 percent and 5.3 percent, respectively.

“The Internet has become a necessity for large purchasers,” said Bruce Temkin, group director at Forrester. “The discussion has moved away from if the Internet should be used to where and how it can save money.”

The report also revealed that organizations have increased their participation in online marketplaces. More than one-quarter (26 percent) of organizations bought goods or services via online marketplaces, an increase from 23 percent in the third quarter of 2001. In addition, the report showed that organizations have also increased their use of online auctions to 23 percent in the fourth quarter to 17 percent in the third quarter. The increase was most dramatic for manufacturers, whose use of auctions increased from 21 percent in the third quarter of 2001 to 29 percent in the fourth quarter.

For the report, Forrester and the ISM received survey replies from supply management executives from both manufacturing and non-manufacturing organizations. The report analyzes three areas: the results of all organizations; the comparison of manufacturing and non-manufacturing organizations; and the comparison of organizations that procure more than $100 million on direct and indirect materials per year and those that purchase less than $100 million per year.