Buying power

There is strength in numbers. This is what over 100 procurement officers representing 21 Ayala companies and subsidiaries have learned – and are using to get the best deals in any marketplace, be it physical or virtual.

From a loose group back in the ’60s and the ’70s, the procurement officers of the different Ayala companies banded together recently to form the Ayala Procurement Network (APN), partly inspired by their success in purchasing over the BayanTrade electronic marketplace. Now that they are a formal group, the APN pioneers in accelerating acceptance of electronic procurement among Philippine corporations by showing how it can dramatically streamline operations and generate great savings.

One of the group’s first goals was to set up a common electronic catalogue of items that can be accessed by all member-companies through BayanTrade. APN officers identified and set standards for commonly procured items such as office supplies, office machines, tires and car batteries, cleaning agents, and personal computers and consumables.

Rafael Llave, vice president and head of Globe Telecom’s logistics and management services group, says they have gone through a long process of establishing and agreeing among themselves the processes, procedures and policies on how the common catalogue will be executed.

"That’s the difficult part. We are now going to the easy part, which is operationalizing what we talked about, which is coming up with the OneAyala catalogue," he adds.

Evangelizing e-procurement

Before the advent of e-procurement, Ayala procurement managers held informal forums where they exchanged notes on new prices and best buys for goods and services that their companies needed. Today, APN stands as a formal advocacy group that tries to convince people that e-procurement is the way to go.

"The APN sort of accelerated what could have taken a long time through natural evolution to happen. If not for the APN, probably not all the 21 companies would have embraced the Web and e-procurement," says Llave.

In the case of Integrated Microelectronics Inc. (IMI), the APN comes as a value-driver. Ronald Luis Goseco, senior vice president and chief financial officer of IMI, notes that through the APN, they were able to develop suppliers who they did not know when they started out.

"We’ve been able to share suppliers, particularly with the bigger companies in the group like Globe and Ayala Land, so that (the APN) by itself acted as a value-driver for IMI," says Goseco.

Rubber meets the road

The APN’s collective buying power is already gaining momentum using BayanTrade’s e-procurement platform. Among the APN’s first quick wins were for office supplies and when they came up with centralized negotiations for tires and batteries that were broadcast to all 21 companies and for which they eventually got a good price. This particular e-procurement transaction benefited the likes of Manila Water, which has hundreds of vehicles going around the city to do service repairs.

"It was our way of telling our suppliers, ‘Look, we’ll buy as Manila Water, but mind you we have 20 plus other companies with us, so if you give us a good price through this electronic procurement system, then you’re open to all. So if the price is all right and the quality is tops, then you’re open to Globe Telecom, Ayala Land, IMI and the rest,’" says Ramon de Leon, group director for human resources and corporate services of Manila Water Co. Inc.

Ma. Corazon Martin, purchasing director of Globe, points out that they can also further benefit from having a large group by bidding out the APN’s aggregate requirements. The APN is now moving toward e-bidding, starting with items like construction materials that Ayala Land or Manila Water, for example, require. De Leon says it helps that suppliers are also becoming comfortable to use the computer as a channel for bidding, encouraging a bigger volume of transactions and eventually higher savings for the APN.

Count your savings

The APN officers agree that saving money is just one of the many benefits of e-procurement. However, it’s probably the most important when the savings go by the millions of pesos.

Last year, Ayala Land Inc. (ALI) made P75 million in savings against its budget by doing e-bidding. This year – from Jan. 1 to May 24 – ALI already had savings of P117 million against budget and P56 million against the starting price for a volume of about P479 million value-pass through.

Value-pass through refers to the peso value of transactions between buyers and sellers conducted on BayanTrade.

"To us in Ayala Land, (e-procurement) has helped us a lot," says Juanito Rosales, assistant vice president for the materials management division. "We have several systems in place now with our suppliers and upon the negotiation of different APN product lines then we would be using the OneAyala price and that would be a bonus."

Rosales says e-procurement also promotes transparency with the way it defines the price for everybody in the group. For Llave, e-procurement’s foremost benefit is the way it improves the entire process and turnaround time.

"E-procurement really makes it faster because there are no more duplication of work, people are empowered and we can decentralize the act of choosing what they want because processes have already been put in place. If you have an e-procurement system, you don’t have to go to all the backroom activities," says Llave.

Dos and don’ts

Although the APN is a virtual group that doesn’t exist legally, it nevertheless has a set of policies and procedures in place signed by each of the member-companies.

"Ayala companies are very formal organizations. The APN, on the other hand and on the contrary, is a virtual one. Through some mutual agreements among ourselves, we have come up with a set of policies and procedures which we will follow not necessarily to the letter but as intended," explains Llave.

A basic yet important rule is never buy anything at a price higher than what is acceptable to the group. Llave says the APN, with the help of its product groups, regularly identifies a chosen supplier for a particular item at a particular price. They inform all members that such an item is the official catalogue item that the member-companies must buy.

"Don’t buy another item that is not in the catalogue. That’s in effect the essence of the APN’s policy," Llave says. But he notes that the APN is always ready to amend or change the catalogue if a member-company finds an item that is better, both in terms of price and quality, than what they have already identified.

Migration

Each of the Ayala companies is now in different stages of migrating their manual procurement processes to a virtual environment.

IMI at present is using e-procurement primarily for raw materials while it tries to have a fully integrated Supply Chain Management (SCM) to tie up its manufacturing plant operations to that of their suppliers and consumers’ requirements.

The Bank of Philippine Islands (BPI) has started dealing with BayanTrade in terms of e-bidding and online purchases, though still at a negligible amount in relation to how much the bank actually buys as a company.

"It’s negligible as we are still in the process of implementing our e-procurement software. We are really looking at the APN to act as a major source, particularly for office supplies," says Ma. Corazon Remo, BPI’s senior vice president for corporate banking.

Globe Telecom is also using e-procurement mostly for office supplies, which Martin says represents a very small piece of the cellular company’s total volume of purchases. "Most of our purchases are on major projects and strategic items like mobile phones and SIM cards and these are not coursed through e-procurement yet," she explains.

Ayala Land and Manila Water seem to be more bullish as they can already project how much they would buy electronically this year.

Rosales of ALI says they still have about P400 million that still go through the purchase orders (POs). But last year, he claims ALI already bought about P6 million worth of items through the e-catalogue, and would probably buy P10 million worth this year. "For e-bidding, we are targeting a P1-billion pass-through this year," he adds.

Manila Water, which has a P180-million budget this year for capital works, already saw P30 million of that going through the e-procurement process during the first five months of the year. But De Leon doesn’t expect everything to be spent via e-procurement, especially for their decentralized construction operations.

Although the APN members are in different stages of e-procurement, De Leon says it still proves that the Ayala companies can come together and work on common concerns. "I think this is the strength of the Ayala Group; we move as if we are one big happy family doing something, which in this case is e-procurement," he adds.