Direct Materials Procurement Technology: Help Wanted (Excel Need not Apply!)

- February 3, 2014 10:08 AM
Categories: Procurement Commentary, Procurement Research, Technology | Tags: ,

Directworks, a software provider specializing in direct materials sourcing and related solutions, recently release a survey based on an analysis of over 200 discrete manufacturing organizations (you can read the highlights on the Directworks blog). In our view, the results show just how far procurement organizations need to go in a manufacturing organization to use specialized tools and capabilities to mirror the level of results they’ve gotten from indirect and services procurement investments. Indeed, non “people and process investments” in direct spend represent the last frontier of new procurement investments in specialized technology.

In their study, Directworks found that “not a single existing capability garnered a satisfaction score of 70% or higher. And the capabilities with the two biggest gaps between satisfaction and importance should scream for the attention of every supply chain and sourcing executive. Only 47% of manufacturers surveyed are satisfied with their insight into their suppliers’ true capacity.”

Directworks suggests, in a somewhat self-serving manner but one we completely agree with, that what’s driving the satisfaction gap can “be tied to manual, disjointed processes, and under-performing technology. Indeed, the manufacturers who reported that utilizing spreadsheets, ERP modules, or indirect procurement tools are struggling the most with these capabilities.” No surprise there.

But the findings do suggest a reversal of other areas, including supplier rationalization programs of the past. To wit, “only about 1/3 of manufacturers are planning on reducing the number of suppliers they have in the upcoming year. Many risk mitigation strategies are calling for dual or split sourcing, as well having groups of contingency suppliers that manufacturers can turn to in times of need.”

A number of the findings are congruous with some of the deeper questions and analysis about the future of direct procurement in my colleague Pierre Mitchell’s study: Re-inventing Direct Procurement.

We’ll continue to explore some of the highlights from the Directworks study in a follow-up post on the topic.

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