Coming Full Circle With Direct Procurement

Back in the early 1990s, my first experience with procurement was from a planning and scheduling standpoint. MRP runs generated batches of planned PO's to "firm up" and release (mostly by fax – but with some EDI). Unfortunately, the sheer volume of data combined with variability of all forms made it clear to me that a buyer/planner was going to be doomed to a life of expediting and firefighting.

Meanwhile, strategic sourcing was growing in strength as a corporate initiative to consolidate suppliers in low hanging fruit categories that moved from "easy" direct spend categories in forgings, stampings, components, corrugated, etc., over to the indirect spend categories. “Center-led” organizational models provided some linkage down to local site operations, but indirect spend, particularly regarding corporate spending in IT/telecom, marketing, print, travel and yes, office supplies/equipment, became a big focus for big firms.

Then the dot com boom led procurement strongly into reverse auctions (and eSourcing more broadly/appropriately) and “e-procurement.” But, the latter focused primarily on catalog buying for indirect spend, and then slowly expanded downstream into broader P2P and adjacently into services spend. But, P2P on the direct side has always been a bit of a black sheep: too variable and business/site specific to attack easily. It’s like the “wave 3” spend categories on a sourcing wave chart – not so easy to pick the high hanging fruit.

However, direct procurement is making a comeback not just on the sourcing and supplier management side, but in execution where it is "part and parcel" of the physical (and strategic) supply chain. Taking on this beast though requires a different approach than just trying to standardize on a single business application or integration provider. Rather, it means the ability to “mass customize” your information supply chain in the same way that you would mass customize your physical supply chain (e.g., flexible machine cells that can accommodate many products flowing through them).

By doing so, and coming full circle, the technology can actually help “orchestrate” (I know it’s a seemingly tired term, but it is apt) your supply chain and make it more resilient by not just modeling, monitoring, alerting and responding, but also predicting and learning. By doing so, it helps turn the buying process into a lights-out operation like e-invoicing/payments is moving toward – and freeing up staff to perform more strategic activities in cost management, supplier collaboration, customer-facing initiatives, innovation and other activities.

Coming full circle back to direct procurement is the focus for a discussion that Pete Loughlin and I will be having with Nipendo on a webcast. Pete is a real P2P guru, and Nipendo is doing some really cool stuff in this area. Join the webinar, titled Direct Spend P2P: Too Complex to Automate, which takes place Wednesday, Oct. 15 from 11 a.m. - 11:45 a.m. EDT. You can register for the event here.

Direct Spend P2P: Too Complex to Automate

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