Boston-based John Hancock Financial Services Inc. was an early adopter of e-procurement and e-sourcing technologies.In 1998, the company implemented an e-procurement solution from iPlanet, which was acquired in 2002 by Santa Clara, Calif.-based Sun Microsystems Inc. Then, in 2001, John Hancock deployed e-sourcing software from Frictionless Commerce Inc., Cambridge, Mass.

These initiatives, which originated with the insurer's need to cut costs prior to its IPO in January 2000, have decreased the company's price for goods and services by an estimated 5% to 20%, according to Aberdeen Group Inc., a Boston-based research and advisory firm.

John Hancock achieved these saving by centralizing purchasing within an Internet-based system, which increased the company's buying leverage, produced more competitive negotiations, and improved contract compliance. Suppliers also benefited, according to Aberdeen. Purchase orders were more accurate, with fewer returns and invoice problems, and faster payment.

As a result of its pioneering experience, John Hancock provides the following advice for other companies that wish to deploy procurement automation:

* Invest in your purchasing staff. Ineffective purchasing with the best tools is still bad.

* Map your organization. Data from human resources and e-mail systems is critical for defining hierarchy and workflow.

* These systems are not plug and play. You have to understand system limitations and create custom changes to fit your business.

* What works for one may not work for others. Consider your internal technology and overall procurement strategy when selecting a system-as well as evaluating the system's capabilities.

* Manual intervention is the root of all errors. Automate time-consuming, menial tasks to avoid data-entry errors.

* The key word in ROI is "return." Cost avoidance savings do not go to the bottom line.

Source: Aberdeen Group Inc., 2002

Editor's note: John Hancock was acquired by Toronto-based Manulife Financial Corp. in September, and could not be reached for comment.

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