Procurement: Spend Influencer, Not Total Spend Manager

Over on Trade Financing Matters, my colleague David Gustin makes a rather astute observation when he notes in his post titled "It's a Fallacy that Procurement Manages ALL Spend," that “in very few organizations does procurement have total control of spend.” David gets his procurement mojo on – especially for a trade finance guy – when he further observes that:

“[W]ho is best to understand the compliance issues around a complex bill of materials?…Take this one step further and how do you manage the connected commerce world for direct spend? We know EDI and EDI integrators have been doing it for decades – shout out to companies like GXS/OpenText, Sterling, etc. But as my colleague Pierre Mitchell knows much more deeply than myself, direct spend enablement is a different beast. It requires deep knowledge and skills to set up and orchestrate a global supply network comprised of various partners who collaborate in complex high-stakes processes.”

One of the fundamental challenges here is that procurement is often being sold a false bill of goods by tech vendors and consultants alike when it comes to what they can actually influence, let alone control. I personally have a lot of respect for the Coupa philosophy of simply capturing spend as a first step within a common transactional system that can serve as a front-end across all categories (not that most companies are using it that way just yet, however!).

Following this approach, even if procurement is not ultimately in charge of influencing how the majority of spend (e.g., direct materials, services, etc.) actually happens and inputs to it, at least it can capture snippets of the data trail on the transactional side if it embraces this philosophy. But part of the broader challenge, especially regarding the financial supply chain in which vendors are ultimately paid, is that when it comes to direct spend, few technology vendors focus on this area and deliver automation like they do on the indirect side, as David suggests in his article.

Should trade financing be the Trojan horse for procurement (alone with A/P and finance) to take control of broader spending areas outside of a central focus on indirect procurement? What do you think?

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