Depending on the solution provider that you ask, you will get a variety of different answers.
This generally is dependant on their own offerings which can cover the entire procure to pay process? However at it’s most basic, we are talking about e-RFX offerings such as RFI’s, RFP’s and RFQ’s and other tools and services that support them. So, the answer to the above is really yes and no.
My typical response to retailers is that spend management is the management of your company’s spending across all of your operating expenses and SG&A through sophisticated tools that support RFI’s, RFP’s and RFQ’s at a minimum. Organizationally this process should report to a Chief Procurement Officer or the head of your supply chain with strong ties to the finance area. Success is typically measured by a reduction in cost of goods and services or COGS, improvement in quality or both. In retail, spend is represented in for resale products such as general merchandise, gift cards, frozen seafood, meat etc. Spend is also measured in the expense category or not for resale products and services such as supplies, services, technology, real estate etc.
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.
There are dozens of vendors that have a variety of tools and services that are available to assist companies in the analysis and management of their spend for the purpose of present and future decision making. These range from small boutique software houses to giant corporations. Spend management of which e-procurement tools are a part run the gamut from sophisticated contract management applications, reverse auction tools, purchase order management tools and supplier databases etc. In the most sophisticated implementations, these tools may be tightly integrated with retailers enterprise based support systems or data warehouses.
It is not a surprise that many retail companies are not really aware of what their total spend is, or how many suppliers they spend it with. In addition, many retail companies still do not use these tools today. Often times, product specifications are hard to find if documented at all and in some cases the same category might be purchased by different departments across the enterprise without aggregating the spend.
Today’s tools that supports spend management are largely available as internet based or hosted applications that re much lower cost than older in house legacy applications. As such they can be activated almost immediately. This means savings within your present accounting period is possible.
If you’d like to learn more about this process or these types of tools, please contact SafeSourcing.
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