Summary
Software for purchasing departments has tended to confine itself to automation and communication. While a few Business Intelligence applications primarily aimed at extended supply chain management and/or reverse auctions exist, they almost always require high volumes, power users and substantial financial and change management commitments. What’s brand new on the scene is operationally embedded business intelligence applications for purchasing that are lightweight, easily implemented and deliver major benefits.
Introduction
During the last decade, almost all the sophisticated software attention garnered by purchasing departments has been focused on the extended supply chain. Collaborative Supply Chain Management (SCM) tools and reverse auction applications are transforming the way high-spend, high volume corporations are doing the business of purchasing. In these tier one multinationals, Business Intelligence (BI) applications have started to make inroads, moving out from corporate strategy and statistics to start to power operational and tactical decisions in both SCM and SRM (Supplier Relationship Management). But for those purchasing departments handling hundreds, not thousands, of suppliers, and with spend in six and seven figures, not nine or ten, most of the implemented applications have tended to simply automate the way purchasing departments have always done their jobs. And, for these purchasing departments, business intelligence applications still seem anything but near term.
While the vanguard has grabbed the headlines, the majority of purchasing departments are struggling to keep pace with an ever more exacting marketplace. Current estimates are that only 50-60% of US companies use even slightly advanced SCM/SRM techniques, fewer than 1 in 10 are positioned to fully exploit the concept of strategic procurement, and less than 1 in 100 has actually fully implemented it. But, all purchasing departments are subject to the same market forces, which recently has meant a rapid increase in materials costs. Global sourcing helps to address rising costs, but often contributes to greater deviations in lead times. Increasing the supplier base also tends to increase supplier instability, as less proven partners enter into the database. The need for advanced capabilities certainly exists, but most mid-size companies are put off by high cost and the significant change management commitment required by many of the new solutions.
Purchasing Software
Purchasing departments historically existed in the backwater of the back office. Until recently, their services were critical, but certainly not sexy. They originally came into being as a separate organizational function to channel dollars through a single department dedicated to cost savings. Purchasing agents soon developed paperwork systems and forms to speed work and ensure that all transactions were legal, ethical, and properly recorded.
During the last 30 years, technology has increasingly and systematically simplified much of this work. A quick scan of the software available for purchasing shows that the great majority of applications actually implemented in purchasing departments aimed at automating existing processes, not fundamentally altering them. Software now facilitates everything from requisition to payment, including streamlining RFQs, creating POs, PO management, order acknowledgement, order processing, blanket orders, automated approvals, and creating supplier report cards.
More advanced technology aids in communication, both internally, with global demand aggregation, integrated accounting, and inventory management, and externally, via internet based procurement.
|
