Companies invested heavily in ERP systems in the early 1990s. They have proved their worth for direct, automated management of the whole supply chain, from raw materials to revenue. ERP has become a core system for tracking costs and financial results associated with production enterprise spend platform.
ERP software vendors have been eager to add indirect spending to their systems. They could recoup a little more from customers who have committed significant resources to their ERP systems, and reconfigure the systems to control the everyday spending on services and supplies for operating the business.
But after decades of working with ERP in some cases, companies across all industries never gained control of their indirect spending. They must recognize that spend management is a unique business process, and technology is available now that’s much better suited to the task than a customized ERP package.
#1. Spend management is not your ERP
Indirect spending is not specific to any industry, or even to any business or size of company, apart from a few specialized examples sourcing complex services. It’s simply purchasing necessary goods and services to run the business and do their jobs.
There’s little of the precise sequencing and scheduling required for direct spending on production, and it’s unlikely that much data is required that is specific to the company and products it manufactures. Indirect spending is a common process in every business, in the same way CRM, enterprise spend platform, human capital management (HCM) and order processing.
These business processes have spawned dedicated software solutions. These SaaS products offer a scalable, quick-to-deploy service managing the process from end to end, and continue to integrate with established ERPs. Spend management deserves its own version of this spend manager.
#2. Spend management must be simple to use
A customized ERP system covering all aspects of a manufacturing process is an asset to the business. Its users have highly specialized interactions with the system, use it every day and are specifically trained to do so.
But its complexity means ERP is highly unsuitable for use by anyone else in the company who just needs to purchase services and consumables to do their job. What often happens is people need to buy printer ink, avoid the complicated ERP purchasing system, and the company can’t track its spending properly. That reduces the value of the whole system.
ERP implementation projects are long, expensive undertakings with delicate, intense periods of addressing problems and stabilizing the system. Any custom components add complexity to that, and extend any upgrade cycle or leave the enterprise spend platform facing major decisions on whether or not to upgrade or buy a replacement off the shelf.
Meanwhile, consumer technology evolves faster than ever. Potential customers discover new mobile and automated ways of ordering products, then demand to be able to use them, or buy elsewhere. The market for recruiting specialist contractors is streamlining too: rather than calling the same agency, you can recruit from a number of marketplaces, and the most effective new practices quickly become the expected norm.
SaaS providers are as aware of this as anybody, and continue to roll out upgrades covering process and supplier innovations. The upgrades can be implemented with realistic levels of disruption and resources. The suppliers focus on improving the user experience so that everybody can use the systems, not just expert users. All these advantages are important to a successful spend management solution, and demonstrate why it belongs away from the stable core ERP system, interacting with it only where necessary.
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