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September 22, 2015

P is for Procurement… except when it isn’t.

The Finance team manages the finances of the enterprise. Marketing people market services and solutions to the purchaser (or customer). Human resources manages… well humans.

Given those examples, you would think that Procurement handled procurement. In an ironic twist, this is becoming less and less true—especially as technology evolves and blurs the line between Procurement as an entity and procurement as a process.

It used to be that every company had buyers; they were the people managing contracts and placing supply orders. Then strategic sourcing was introduced and dedicated buyers suddenly became a thing of the past, especially as eProcurement systems allowed supplies to be ordered by approved users through online catalogs. Being able to provide people in the organization with a convenient way to buy the right items from approved suppliers at contracted prices was a huge improvement. It also reinforced the notion that procurement could be managed more effectively through technology.

If more is more, then getting the entire procurement process into a closed loop must be the ideal. This led to a desire for solutions that could handle full end-to-end integration. This vision connected spend analysis to sourcing to contracts to eProcurement through to Accounts Payable and back to spend analysis again.

Now that P2P systems—meaning either purchase to pay or procure to pay—are more common, organizations are seeing a re-emergence of the buyer role. This person no longer sits in Procurement; they are distributed throughout the enterprise, enabled to make purchases based on contracts and prices already in place. If the P2P process starts with purchasing or procurement activity, where does that put sourcing?

While the terminology may vary, solutions that can handle sourcing as well as purchasing and payment are often called S2P, or source-to-pay. These solutions take contract, eProcurement, and payment functionality and add on RFx and supplier management capabilities. While Procurement may select and implement a P2P solution, they aren’t the ones making the most use of it. Under this model, S is for Procurement, unless you’re talking about procurement as a process, then it’s still P. Make sense?

To review: Procurement now encompasses the whole S2P process. Procurement folks are becoming more strategic, which creates an opportunity for Buyers to thrive elsewhere in the enterprise. Today Procurement is involved in everything from supplier sourcing decisions to negotiating the best rates and managing supplier relationships. P2P is a set of solutions Procurement can use to control spend in the organization, as far downstream as managing payment transactions. P2P encompasses the entire buying and payment process, but – empowered by technology – their actual focus can be in more strategic areas of effort.

It may not be straightforward, but it sure is interesting. Procurement is a field on the move—in name and in action.

* Knowing the terms is just the beginning, watch this webcast featuring Andrew Bartolini, Ardent Partners Managing Partner and Chief Research Officer, to learn more about the state of strategic sourcing in 2015.

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