Spend Management


By

C. Loganathan
MBA, Mphil, PGDCA
Lecturer
MBA Department
SSM College of Engineering
Komarapalayam-638 183, Namakkal District
 


Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business. These costs typically show up as "operating costs" or SG&A (Selling, General and Administrative) costs, but can also be found in other areas and in other members of the supply chain.

Whether it is the money spent on goods or services for direct inputs (raw goods and materials used in the manufacture of products), indirect material (office supplies and other expenses that do not go into a finished product), or services (temporary and contract labor, print services, etc.), a company needs a mechanism by which they are not only able to save money but control costs.

Spend Management is meant to represent a holistic view of the activities involved in the "source-to-settle" process. This process includes spend analysis, sourcing, procurement, receiving, payment settlement and management of accounts payable and general ledger accounts.

In an enterprise, spend management is managing how to spend money to best effect in order to build products and services. The term is intended to encompass such processes as outsourcing, procurement, e-procurement, and supply chain management. Since the "spend manager" could have a significant impact on a company's results, it has been advocated that this manager have a senior voice in running the company.

In an enterprise, spend management is managing how to spend money to best effect in order to build products and services. The term is intended to encompass such processes as outsourcing, procurement, e-procurement, and supply chain management. Since the "spend manager" could have a significant impact on a company's results,

Managing costs throughout the enterprise requires controls, but as with any initiative, these controls become more effective as they become adopted throughout an organization. Enter spend management, the discipline of squeezing the most out of each procurement dollar throughout the enterprise. Once a somewhat mysterious element in a financial department's bag of tricks, spend management has increasingly become integral to other areas in the enterprise, from operations to marketing and product development.

Spend management is how you maximize the return on investment (ROI) from every dollar a company spends. We think of spend management as a journey and every company is at a different stage in the voyage. Typically, companies start out trying to control their rate of spend looking for cost savings in procurement or making sure processes are in place for purchasing and then wind up using spend management as a major contributor to the overall corporate strategy. With the right strategy and solutions in place, companies can do more than just identify savings. They can make sure these savings make their way to the bottom line and improve profits, reduce supply risk, and gain competitive advantage.

Sharing the secrets of Success:

Not too long ago, a large Fortune 100 ranking globally diversified company, in its quest for achieving process excellence, pioneered the concept of Six-Sigma in Spend Management and came out with flying colors. Recently, another Fortune 100 ranking Chemical giant successfully adopted Six Sigma in Spend Management. With results evident, many more companies like yours are in the process of replicating the success of Six Sigma.

A Word of Caution? "End matters so do the means". Have you ever wondered what it takes to ensure a successful Six-Sigma adoption in Spend Management? Have you ever tried to check on the critical success factors of Spend Management?

Successful Six Sigma companies have encountered numerous problems in the journey of Six-Sigma adoption. One of the areas that has clearly emerged as the show-stopper is the lack of ability to track and measure the Spend Management process parameters.

The prime reason being:

    * Spend Invisibility due to poor quality spend data

    * Lack of Repeatable processes due to absence of automated Data cleansing tools

So what are YOU doing about it? The choice is yours. Either you turn a blind eye on the glaring problems and jeopardize the Six-Sigma initiative or you could learn some of the best kept secrets of Leading Fortune 100 organizations and confront the critical issues head-on.

Over the years, leading Fortune 100 ranking Organizations have leveraged Zycus Spend Data Management Software to ensure success in Six-Sigma adoption. Using Zycus' Spend Data Management software, these organizations have been able to built a sound Spend data foundation of clean, consistent, granular spend data and have realized 100s of million dollars of procurement savings through their six sigma endeavor. Since the software is completely automated and plugs in to the existing infrastructure (DW and BI), organizations are able to ensure repeatable process at minimum costs.

So are you still figuring out how to adopt Six-Sigma in Spend Management? Read the insightful white paper- "Six-Sigma in Spend Management -Secrets of Success" and learn how leading organizations have successfully implemented Six-Sigma in Purchasing.

References:

http://en.wikipedia.org/wiki/Spend_management

http://www.developers.net/sunebshowcase/view/2989

www.zycus.com/solution/secrets-of-success.html
 


C. Loganathan
MBA, Mphil, PGDCA
Lecturer
MBA Department
SSM College of Engineering
Komarapalayam-638 183, Namakkal District
 

Source: E-mail January 13, 2008

          

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