Aug 28

Written by: RSouthard
8/28/2008 6:00 AM

Depending on the vendor you ask, you will get a variety of different answers. This generally is dependant on their own offerings. With that said, I must admit that there are days when my answer evolves based on current development and learning.

My typical response to retailers is that spend management is the management of your company’s spending across all product categories. Organizationally this normally reports to a Chief Procurement Officer or the head of your supply chain. Success is typically measured by a reduction in cost of goods and services or COGS, improvement in quality or both. In retail, spend is represented in for resale products such as general merchandise, gift cards, frozen seafood, meat etc. Spend is also measured in the expense category or not for resale products and services such as supplies, plastic sacks computer equipment, fuel etc.

According to Wikipedia, 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.

There are dozens of vendors that have a variety of tools and services that are available to assist companies in the analysis and management of their spend for the purpose of present and future decision making. These range from small boutique software houses to giant corporations. Spend management tools run the gamut from sophisticated contract management applications, e-procurement tools such as reverse auctions, purchase order management tools and supplier databases etc. In the most sophisticated implementations, these tools may be tightly integrated with retailers ERP systems.

It is not a surprise that many companies are not really aware of what their total spend is, or how many suppliers they spend it with. Often times, product specifications are hard to find if documented at all and the same category is being purchased by different departments across the enterprise without aggregating the spend. This results in lost savings which could mean the difference between success and failure in the retail segment. 

So, there you have a simple or maybe not so simple answer to a complex question.

I look forward to your comments

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