Defining and digitizing direct procurement — Introduction and framework

The term “direct procurement,” like the term “procurement” itself, means different things to different organizations. Some view “direct” only as direct materials while others include any supply chain-related spending (e.g., energy, tooling and any allocable spend that will flow to cost of goods sold, or COGS) and services such as contract manufacturing or third-party logistics.

In terms of process, there are many “extended source-to-pay” processes that direct procurement organizations must handle related to raw material inventory management, supply chain risk, supply planning/commitment, and the inbound logistics required to coordinate fulfillment between PO issuance and a receipt.

Many source-to-pay systems (S2P) nibble at the edges, but they’re not supporting the deeper supply management use cases that enable direct spend management because their data models are incomplete related to the supply network, product structures and supply chain plans.

In this Spend Matters PRO series, we’ll help direct procurement technology buyers and solution providers by:

• Integrating the direct S2P process with broader supply chain process models and frameworks to help connect the dots process-wise between procurement and supply chain
• Presenting a four-part framework, with nearly 30 underlying requirement areas, including many with substantial gaps not supported well by current technology providers
• Identifying the three major areas where traditional S2P technology provider systems/platforms fall short in terms of data models, integrations and partnerships
• Providing selected direct procurement insights from our SolutionMap benchmark database
• Highlighting proven providers that DO support these extended supply management scenarios