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NEW! A Direct Materials Guidebook – Six Key Principles for the Manufacturing Road Ahead

Any future evolution of direct procurement will undoubtedly build on the significant shifts we’ve seen in global manufacturing in the past two decades. In this next stage of growth, Spend Matters believes technology will catch up to current market requirements. In addition to focusing on the business skills and process change required to drive a new level of direct materials sourcing and supplier management success, this transition requires a new system of record for direct materials as well as a new way of thinking about how best to support business requirements. During this time, direct materials platforms will become as important as transactional procurement (P2P) and VMS (services procurement) systems in the coming years.

This rapid evolution has not changed the core differences of direct spend compared with other procurement areas (e.g., indirect, services). Fundamentally, unlike indirect procurement, direct purchasing is about buying quality and delivery capacity while managing against time and risk. Price, historically, has been a relatively secondary focus because in many cases, more advanced procurement teams put targeted price/cost models in place as they became more organizationally mature. Any future evolution of direct procurement will undoubtedly build on this past focus.
Spend Matters believes that direct materials platforms will become as important as transactional procurement (P2P) and VMS (services procurement) systems in the coming years. In addition to focusing on the business skills and process change required to drive a new level of direct materials sourcing and supplier management success, this transition requires a new system of record for direct materials.

This research brief offers a guidebook to this transition. We believe there are six themes that companies should include in their broader direct materials sourcing guidebook – focused on technology and beyond. These are:

1. Don’t be at the mercy of the global market
2. Remember all the time that your name (i.e., your company name) is on the box
3. Don’t take a generic approach to your industry-specific needs
4. When suppliers become your strategic partners to success, everyone wins
5. Break down the walls between engineering and sourcing at all costs
6. Build a bridge between your PLM and sourcing solution capabilities

This Spend Matters Perspective explores these six themes in detail as well as the broader direct materials sourcing environment today. It concludes with a snapshot of some of the direct materials platform requirements that companies will deploy in the decade to come.