Canadian Imperial Bank of Commerce expects to save millions of dollars with an electronic procurement program it is rolling out.
The eSource system, developed internally with help from Andersen Consulting, is projected to shave 10% from the $1.3 billion the Toronto- based bank spends annually on office supplies.
The system lets users at the $182.5 billion-asset bank gain access to catalogues posted on the Internet by suppliers. Approval processes are automatic, letting orders be filled in days rather than weeks and helping management monitor what is bought.
"We had a vision to simplify the sourcing and purchasing of products and to provide a tool to manage the expense base," said John P. Miles, senior vice president and chief purchasing officer.
Large banks typically spend $1.5 billion to $3 billion annually on so- called operating resources-goods such as office supplies that are not directly related to core production or services, said Colin Davies, a partner in Andersen's financial services practice who is working on eSource.
Banks are being forced by technology and competition "to better manage their spending," Mr. Davies said. "For the first time, the technology is there to allow them to do so."
Aggregate revenues from sales of operating resource procurement software are expected to nearly double this year, according to the research firm Dataquest. The 12 largest vendors of such software took in less than $40 million in 1998, Dataquest said.
CIBC, which makes 57% of its purchases from the top 100 of the 14,000 vendors it deals with, has begun to see results from its partial rollout of eSource. It has eliminated 6,000 invoices a year and reduced the number of printing companies it works with from 60 to six.
The reengineering also has caused a behavioral shift among users, Mr. Miles said. "We've tried to dramatically change our vocabulary. It is not a request for proposal any more but a prospectus. It is not compliance in deals but participation."
Savings opportunities arise "on the product-buying side in invoice reduction and on the information side in better managing expenses," Mr. Miles said.
CIBC started an eSource pilot test with 30 users and five suppliers last October. The second phase, involving 200 users and 15 suppliers in Toronto, went live last month. A national rollout is to begin in August and probably include 1,000 buyers and 20 suppliers.
CIBC is deploying customized software from Ariba Inc. of Sunnyvale, Calif. The software lets it play host to and manage content from suppliers on its Web site, and it is integrated with enterprise resource planning software from PeopleSoft.
This model is known as buyer-centric and is intended to give a buying organization more control than in the alternative "supplier-managed model," in which suppliers manage Web site information. However, higher costs are possible in the buyer-centric approach, from having to manage and integrate content from many suppliers.
"There are 3,000 parts to a catalogue, and having users go through the catalogue is one of the struggles," said Kevin Patterson, vice president of integrated financial systems at CIBC.
The bank may eventually move to a supplier-managed model. "Our organization is so large that to manage content will become cost- prohibitive," Mr. Patterson said. "We're looking to other models to scale."
Ninety-five people are working on the eSource project, half from Andersen Consulting, two each from Ariba and PeopleSoft, and the rest from CIBC. About half are focused on managing the integration of suppliers, and half are working on technical implementation, Mr. Patterson said.
Another Ariba financial services client is Visa U.S.A.
Features of eSource include a compensation system that rewards employees responsible for managing a portfolio of suppliers if they achieve favorable results.