Direct Materials Procurement – Does Europe Have A Market That North America Doesn’t?

Procurement industry expert and Spend Matters founder, Jason Busch, has been putting the deepest reaches of the ‘procurement tech market’ segment of his brain to work on unravelling a direct procurement question. Not the time-travelled question of what is the difference between direct and indirect procurement, or whether one is more dependent on the other from a business need perspective, or even whether they should live in the same procurement lifecycle process, but whether a separate market for it actually exists in North America as it does in Europe.

He identifies a market to which specialist providers can pitch, rather than to an individual buyer. Firms like Pool4Tool (now Jaggaer Direct), Allocation Network, SynerTrade, SupplyOn and a range of other solution providers, including Ivalua, Sap Ariba and GEP, and specialists like SourceDay, Supply Dynamics and LiveSource, he deduces ‘have succeeded in creating a distinctive European direct materials procurement solutions market that exists outside the generic source-to-pay realm.’

He questions whether in North America there is clear market segment which recognises a need for a specialised solution set -- a solution set that works for direct materials procurement and caters for the singular challenges of meeting regulations, specifications, quality standards, differing supplier management and so on.

So he lays out the technology capability areas that would encompass a direct materials procurement solution. Then thinks about whether these are truly established market segments in North America, and how you can tell.

To answer this conundrum he has devised (his own) simple but clever ‘test’ for the procurement, finance and supply chain solutions sector – a series of questions to ascertain whether an independent market segment exists. By answering yes or no to this list of questions, you allocate points that add up to a score, which in turn offers the likelihood of a market’s existence.

This is the first in a series of posts on this subject, and he will be discussing what the answers to these questions might mean for providers targeting a market that may, or may not, exist - yet.

So do read “Is Direct Materials Procurement a Separate Technology Market in North America? (Part 1: Introducing a Decision Framework)” and feel free to leave feedback.

 

Voices (3)

  1. Dan:

    Isn’t the direct/indirect split a bit pointless from a procurement point of view? Its only useful from a finance perspective, and even then only in manufacturing.

    1. Jason Busch:

      There’s SO many sides to direct procurement of interest to procurement, not just finance — total cost modeling, bill of material sourcing, multi-tier sourcing/rebate programs. You name it. That’s just a start. Yes, it matters for manufacturers, but it even matters in areas where “direct” does not look like classic direct widgets or materials — healthcare, hospitality, construction, etc.
      / Jason

      1. Tom Kieley:

        Great article. The pain and costs of direct procurement, specifically supply chain performance against demand, is strategic to finance in a manufacturing organization’s ability to better manage cash and revenue recognition with more accurate scheduling and planning.

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