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Traveling to the ISM Conference in the home city of the artist formerly known as Prince got me thinking about the term supply management.
About two years ago, the National Association of Purchasing Managers, North America’s premier association for procurement professionals, elected to rename itself as the Institute for Supply Management. The switch wasn’t just semantics. Nor was it a thinly-veiled gimmick to sell more music, or training courses, as the case may be.
The name change was driven by a simple fact: the association’s members had outgrown the purchasing moniker. The profession was no longer a tactical function focused only on internal operations and price negotiation. Instead, the profession had transformed into a strategic discipline focused on optimizing and continuously improving the total cost of ownership (TCO) and performance of external supply relationships.
The same dynamics are evident in the debate between spend management and supply management. When leaking the news of SupplyExcellence.com last week, Jason Busch, chief thinker and operator of Spend Matters (and an all-around great guy), threw down the gauntlet for a verbal jarring on the merits of each term.
Considering that Jason is currently attending the user conference of the vendor that created the spend management term and I am attending the leading industry event for supply management professionals, I couldn’t think of a better time to take up the challenge.
The below table illustrates the differences between spend and supply management. Yet, discrepencies between the two doctrines can be summed up as follows:
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Supply management is a strategic discipline focused on optimizing the TCO of external and global supply relationships. Spend management is a marketing campaign (albeit a brilliant one) focused on improving internal operations and reducing spend.
Supply management is endorsed by the leading professional association. Spend management is endorsed by a software provider and its partners.
Ascribing to a discipline directs your decisions around organizational structures and alignments, processes and skills development, and systems investments. This decision also impacts the overall value, type, and timing of returns from your improvement initiatives. Be careful to ensure that you choose the discipline that best and holistically serves your company’s current and future needs and objectives — and then aggressively execute toward that vision.
I’m certain this will be an ongoing and heated debate. I encourage you to chime in. But, please, no chair throwing.
3 responses so far ↓
1 » Round Three: When it Comes to Fans, Size Matters…- Supply Excellence // May 12, 2006 at 2:46 pm
[...] Just off the bus from the Spend Management Jamboree in Las Vegas, my sharp-witted commrade Jason Busch has already countered my initial diatribe on the subject in a new post on his blog, which is not coincidentally entitled Spend Matters. (Further evidence of his wit.) [...]
2 Charles Dominick, SPSM // May 12, 2006 at 2:51 pm
I agree with some of your points, Tim, and disagree with others.
Spend Management “feels” like it is geared towards a CFO who is concerned with expense/price reduction and has no concept of how quality, on-time delivery, or collaborative supplier relationships impact operations or the bottom line.
Supply management does imply a more strategic, all-encompassing, TCO-based view of the acquisition of goods, services, etc. and the management of those suppliers who provide such goods, services, etc.
However, I am concerned about two things:
1. Our profession has too many terms: purchasing, procurement, supply management, supply chain management, materials management, acquisition services, corporate sourcing, spend management, etc. Sure, one can identify subtle differences between them, but this proliferation of buzzwords only serves to confuse those who hear the terms and doesn’t create the type of united voice we need to really gain a higher level of respect for the profession.
2. I have a problem with any claim that “purchasing” implies outdated practices. The problem is in that the recognition of supply chain management, which encompasses outputs and production in addition to inputs, may lead senior managers to underestimate the value that core purchasing skills (e.g., negotiation, supplier relationship management, etc.) can bring to the organization. The organization that doesn’t abandon the recognition of the value of those skills will have a competitive advantage vs. those that do.
3 Tim // May 12, 2006 at 4:44 pm
Valid points. It is a shame that the purchasing term is attributed to the old buyer-planner role. As you aptly point out, purchasing managers have skills far beyond basic order processing and spot buying against hot lists.
Negotiation, costing, and relationship management skills have been core to the CPM curriculum for years. (And Chester Karass had built an industry on these advanced concepts.)
The reality is that the purchasing term — which implies the transactional — does not dob justice to the full attributes of the role. Hence the NAPM name change to ISM.
Who knows, maybe it is just semantics. (Dickens might say, “just call a post a post.”) But personally I think that the term could do with a little updating. Otherwise, I’m afraid it may always be put in the tactical box — whether it deserves it or not.
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