At any given moment, one billion paper messages are circulating around the NHS.

If that number - an estimate by the NHS Executive - looks suspiciously round it is because no one has ever counted.

We do, however, know two things for certain. First, most of this paper mountain consists of routine forms and invoices needed to order supplies, equipment and staff.

Second, it costs a lot of money. For every pound the NHS spends on pills, bandages and bedpans, 25p goes into the paperwork.

"Research shows that supply chain costs make up 25% of invoice value," says Sean Flanagan, chief executive of Medex Online, a new "e-health" company. He says that electronic messages could cut this cost in half.

Although the dot.com crash has taken most of the shine off electronic commerce in the consumer market, there is no doubt that, when large organisations do their shopping, e-commerce makes sense: car-makers and supermarkets have been ordering, invoicing and paying for their supplies electronically for years.

Healthcare, too, is getting into e-commerce - in the US at least. Research in the US shows that a 10% cut from supply chain costs adds 1% to an organisation's profits.

As most American hospitals operate on profit margins of only 2% or 3%, the US healthcare industry is taking it seriously.

Now it's the NHS's turn. The NHS Purchasing and Supply Agency, set up in April this year to help the NHS do its shopping more efficiently, is about to publish an e-commerce strategy for the health service.

The agency is also developing an e-commerce system, SupplyStream, that will allow trusts and other NHS organisations to order supplies electronically from private firms.

The scheme is part of a government-wide race to get into the e-commerce age. The Department of Health has already published an internal e-business strategy laying out its plans to hook its internal systems up to the NHS's network, NHSnet, as well as the wider internet.

Like other government departments, it is trying to meet the prime minister's deadline for all public services to be delivered electronically by 2005.

Under this timetable, 90% of routine government purchases are to be made electronically by next April.

Barring a miracle (or, more likely, some creative statistical juggling) this target will be missed.

Although the Office of Government Commerce, set up by the Treasury in April this year, says the government could save £1bn from its shopping bill by catching up with the rest of the world, e-business in the public sector is happening only in patches.

One example is a scheme to issue civil servants with government Visa cards, to cut the £300m the government spends a year on low-value, high-volume goods.

So far, however, only 14% of such purchases are handled by the government procurement card, according to its annual report published last week.

Predictably, the biggest use of the government procurement card was in buying stationery. Last year, civil servants used their flexible friends 37,756 times to buy paper clips, pads and other stationery worth £2.7m from supplier Guilbert.

Yet there is still hope. At Medex Online, Flanagan says the NHS' tardiness at getting into e-commerce could become an advantage. "Healthcare in Europe has a much bigger opportunity than the US."

Because the NHS and other European health systems have more primitive IT systems, they have the chance to skip the 1980s generation of custom-built electronic trading systems and leap straight into the internet age. Thanks to new web technologies, hospitals no longer need to replace their old systems.

Medex Online plans to announce its first NHS trust customer in January.

There are still technical and cultural barriers to e-procurement. Graham Newall, chief executive of Earthport, a company specialising in internet payment systems, says SupplyStream has to overcome substantial challenges to help the government reach its targets. Issues of security and usability are high on the list of priorities.

"We believe that the NHS e-procurement system will be a great success if it's easy to use, light on infrastructure, and scalable in order to cope with huge volumes of data and transactions. It also needs to be secure and able to authenticate the user and process real time cash and secure credit card payments."

And there's the human factor. Jill Turner, owner of The Health Store, a small firm which supplies bed aids to the NHS and the public via the web and traditional channels, says personal contact is important to NHS professionals. "I see no evidence that the NHS is interested in ordering online. They seem to prefer post and fax and purchase orders in triplicate."

• Michael Cross is news editor of www.kablenet.com