For a corporation with a multi-billion-dollar supply chain, increasing operating efficiencies via the Internet will have a significant impact on the bottom line.
At Chevron Corp., a global oil and gas company with over $40 billion in annual sales, the costs of everything from paper clips to oil rigs can stack up quickly. With its cost of operations currently sitting at about $10 billion a year, Chevron spends money to make money. Until the Internet began to pick up steam, Chevron managed its supply chain largely on paper, through good old-fashioned purchase orders.
But as we learned from Dave Clementz, president of Chevron Information Technology Co., that's changing.
"We had primarily paper-based purchase ordering in place around the time the Internet took off, five years ago," says Clementz. "But we saw the phenomenal growth going on out beyond our corporate firewall." Chevron did do some electronic procurement at the time, primarily through EDI systems accessing existing electronic catalogs, but on a relatively small scale. And various employees were using all kinds of different catalogs - most of them on paper, though a few were electronic.
"A couple of years ago, we stepped up our efforts in the product procurement area with an eye on centralizing on electronic catalogs and the Internet," Clementz says. Chevron partnered with a company called Requisite Technology, which uses a technology called e-Merge to turn paper product catalogs into Internet-based electronic catalogs quickly.
"Suppliers were eager to participate and give us lower unit prices for high-volume products bought electronically," Clementz adds. "In the early going, we concentrated on bringing in the suppliers we spend the most money with."