An ERP is not suitable for the procurement function

• Portfolio

An ongoing ERP system does not support the entire BSM domain. Key differentiators in the areas of sourcing and contract management are often virtually impossible to manage in an ERP. As a result, the benefits of a proper and fully integrated digital procurement process can never be fully realized. A best-of-breed solution is needed to secure the risk & compliance, realize cost savings in sourcing, and place orders on the established contract terms and conditions.

• Golden record

Many of our customers, through acquisitions or otherwise, have multiple ERP systems in use and sometimes deliberately maintain this diversity. Accounting consolidations are established to enable group level reporting. However, processes are more difficult to centralize and streamline due to the variety of ERP systems. There is a lack of understanding of commitments, expenditures and agreements made with suppliers and within purchasing categories across all group companies. As a result, opportunities and cost savings are missed due to failing to negotiate purchasing contracts at the central level to achieve economies of scale. In addition, it results in increased supplier risks because the company does business with parties that have not been assessed or monitored.

An ERP system is excellent for combining key business information. However, it is limited to these static data. This data is often not up-to-date. This makes real time analysis challenging. External information cannot be enriched and is not taken into account in the process. With a golden record, supplier data is centralized. The data is enriched with market information such as fraud susceptibility, credit ratings and sustainability. Additionally, transactions in the process can be checked against these scores on a daily basis, alerting users when something has changed or automatically requesting additional approval.

• Collaboration within an eco-system

With global supply chain disruptions, such as material shortages, tight labor markets, production delays and inflation, collaboration in the chain is becoming increasingly important. BSM technology embraces collaboration with the entire community, enabling higher business impact by ensuring more transparent and timely performance and risk. In this way, an eco-system is created around the entire Source-to-Pay process. This eco-system ultimately consists of B2B online shops, marketplaces, credit rating agencies and integrations for sustainability ratings, among other things. In contrast, an ERP system is not designed for open access collaboration with multiple parties within the procurement process.

Strategically choosing BSM

An ERP system is an indispensable part of business life and has proven itself over the last 40 years as an important link for processing transactions in various business processes and storing data. However, practice shows that ERP systems are less suitable for the automation and centralization of the entire procurement function. With a Business Spend Management (BSM) platform, the entire procurement process with associated tasks, applications and data is centralized and optimized in a single ecosystem. This provides insights, allows for minimizing risks and standardization and automation of processes.

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