Procurement life cycle and the procure to pay process. Aren’t they the same thing?

April 22nd, 2010

This author believes that is precisely the problem. There are too many naming conventions and too many acronyms for a process that has been largely the same for years.

 According to Wikipedia Spend Management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business. These costs typically show up as “operating costs” or SG&A (Selling, General and Administrative) costs, but can also be found in other areas and in other members of the supply chain.

If we understand that spend management is as defined by Wikipedia, then how does it differ from procurement lifecycle management? There are generally several steps to PLM that include information gathering, supplier communication, background review, negotiation, fulfillment, consumption and resupply. So it seems as though procure to pay represents the tools used to carry out spend management

The tools that support this process generally fall into the following categories. E-procurement or e-negotiation tools such as reverse auctions or RFI’s, spend management tools such as adhoc reporting tools , predictive modeling tools, contract management tools, invoice and payment tools and order and fulfillment tools.

Unfortunately many of the available tools come from a  diverse base of providers utilizing a variety of technologies. In mid tier market, many retailers some still cling to home grown tools that have evolved over years. The first tool of importantance should be tool sets that assist in easy integration of disparate technologies. There are major companies such as Oracle and SAP that provide sophisticated ERP suites that provide a centralized location for buyers to log on and handle all their payments, requisitions, exceptions and agreements at once. In general these solutions are too expensive for lower level tier one and mid tier retail companies and also lack adequate data to operate as an integrated sourcing system such as supplier databases and product template libraries or integrated purchase order and contract management systems . These typically show up as wrap around service bundles that require significant research of existing data points and often significantly raise the price of the system after initial purchase.

None of the tools or services listed above are very intuitive easy to use or low cost.

So now we’ve come full circle, how can technology solve these problems so that all retailers regardless of size can take advantage of these types of systems? That’s part II.

We look forward to and appreacite your comments.

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