Making Software a Priority for Buyers

Feb. 25, 2015
Advocates say spend management software adds value to the supply channel, especially as OEMs and contract manufacturers seek to reduce costs and as outsourcing trends place greater emphasis on the purchasing department.

Information technology solutions remain a top priority for businesses in 2015, and the purchasing department is no exception. Finance, operations, and sales have long been the domain of efficiency-enhancing software tools and technologies, but purchasing is quickly becoming an area where such solutions can make a difference as well. Industry proponents argue that e-procurement tools that focus on how a company spends its money can go a long way toward increasing the value and raising the profile of the purchasing department, as well as streamlining processes and costs throughout the supply channel.

“There are a wide range of [purchasing] processes that all end up touching suppliers or enterprises,” explains Paul Noel, senior vice president of procurement solutions for spend management software provider Ivalua. “Seeing what you’re spending, where you’re spending it, and with whom; managing supplier information, ensuring you’re buying from reputable people; doing sourcing, capturing that information in a contract, and ensuring those prices are in the contract … All of those processes require [a strategic approach] to the spend management landscape.”

Indeed, in a 2014 survey of more than 750 executives at multinational companies—more than half of which were purchasing leaders—Ivalua found that eProcurement tools play an increasingly important role in the supply channel by centralizing a company’s supplier data and ensuring its reliability. This not only leads to better cost control, but to better decision-making, Noel argues. The use of such tools also helps raise the profile of the purchasing function, he says, and puts them on the road to becoming more of a partner in the overall business. This is especially helpful in organizations looking to outsource more of their manufacturing operations around the world.

“The hope … is that procurement is seen as much more of a value-driver in the organization—and, therefore, on a par with marketing, manufacturing, and sales because, as companies outsource more and we get into more of a ‘virtual economy,’ procurement becomes a key part of the process.”

Managing the coordination of materials and supplies to new and distant locations not only raises the complexity of the job, but also raises the stakes on issues such as quality and logistics.

“This … puts a lot of the onus on procurement to understand what’s going on all over the world,” Noel explains.

The advent of cloud computing has helped spur the development of eProcurement tools and spend management systems as well, Noel adds.

“The poor procurement professional hasn’t had much in software dedicated to their processes … and that’s partly because it’s a little bit harder [to do] because they deal with people outside of the enterprise,” he says. “Cloud-based solutions have helped … It’s taken some time to get there, but I think we’re there.”

Despite the rise in software tools dedicated to the purchasing function, many companies remain unaware of their benefits. Spreadsheets and other home-grown solutions, e-mail, and enterprise-wide programs remain common ways to manage the purchasing function, Noel and others agree. And even for those who have implemented spend-management programs—replacing an Excel spreadsheet with a sourcing tool for example—widespread adoption often leads to larger questions about how to integrate the solutions throughout the organization.

These are good problems for companies like Ivalua, who say they can answer those questions and provide solutions that help reduce costs and create greater visibility into a company’s supply channel. As business complexity rises, there’s no doubt companies of all sizes will continue to search for ways to simplify their processes as a route to better decision-making. And as the comfort level with accelerating technology improves, those companies are more likely to find a welcome reception to those tools at all levels of the organization.

Global Purchasing Editor Victoria Kickham covers electronics distribution and supply chain issues. She can be reached at [email protected].

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About the Author

Victoria Kickham | Distribution Editor

Victoria Kickham is the distribution editor for Electronic Design magazine, SourceESB and, where she covers issues related to the electronics supply chain. Victoria started out as a general assignment reporter for several Boston-area newspapers before joining Industrial Distribution magazine, where she spent 14 years covering industrial markets. She served as ID’s managing editor from 2000 to 2010. Victoria has a bachelor’s degree in English from the University of New Hampshire and a master’s degree in English from Northeastern University.