The Final Round: Spend Management vs. Supply Management

In the spirit of spending time writing blogs that educate rather than just entertain, Tim and I agreed to a truce following his last post in the Spend Management vs. Supply Management debate. But after a week considering Tim's comments -- and some flaws in his logic -- I thought it prudent to respond with a few final few jabs of my own. You can decide for yourself whether you think that this volley is a knock-out blow or a sucker punch. Regardless, this is my last attack.

To begin my reply, for most rhetoricians, the phrase "management" would imply the same meaning wherever used, but Tim takes a different approach in his logic. For in his argument, Tim has unilaterally decided that “Spend Management has a "myopic focus on reducing spend not only overlooks the vital importance (i.e., cost and value) of supplier performance, but it can also expose enterprises to undo risks." And he goes on from there to further miss define Spend Management. The critical sentence that best exposes the flaw in his logic is when he says “reducing spend is like reducing inventory. It seems like a good idea until you don't have the materials or resources you need to serve the end customer." The problem with Tim's logic is that Spend Management is not just about spend reduction. Just as the art of balancing inventory reduction with avoiding out of stocks is called "Inventory Management", the art of optimizing spend -- reducing it while maintaining or improving quality, service and other goals -- is called “Spend Management".

In my view, Tim's entire argument is based on a mischaracterization of what Spend Management is all about. By following Tim's logic, "management" magically means only "reduction" when it is followed by the word "spend", but it is more holistic when it follows the word "supply" If you follow this logic, then human resources management should mean the "myopic reduction of labor costs" and customer relationship management mean "giving the product away for free to make customers happy."

But most important, in thinking about Tim's argument supporting the phrase "supply management", I came to the conclusion that his view is simply limiting. It is too materials centric and sourcing oriented in perspective (which is exactly why I was so in favor of the term when I was at FreeMarkets -- that was our focus). To wit, "supply" is not exactly a term that anyone in the A/P or treasury function would latch onto, or anyone sourcing non-materials, for that matter. For example, supply management does not make sense for services procurement, which is critical for companies across industries. And if you were to say the term "supply management" to a bank, software company, or university, you would get a glazed expression. Spend Management, in contrast, is about managing all of the touch points within an organization with regard to purchased goods and services. Unlike Supply Management, Spend Management holds across functions and different categories of spend, transcending materials sourcing and risk management.

Enough from me … I will give Tim the final word if he would like to respond. Regardless, I think that we would both agree that we have far more important topics to tackle on our respective blogs!

Jason Busch

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