Is Your Company’s Spending Like My Daughters’ – Out of Control?

I consider myself a reasonable person, despite the fact that I have two teenage daughters.  In these formable years I try to instill life lessons whenever possible, such as pick-up after yourself and save some money so you have something to fall back on.  But this “mall” thing may be a challenge that’s just too big for me.

The day my daughters get their allowance they immediately head out to the mall.  They don’t have a plan for what they are going to buy; they just feel the need to shop and head out with glazed eyes.  The expedition usually results in them purchasing items they don’t need, and the process in which they go about their purchasing is certainly not efficient.

Occasionally my daughters need a ride to the mall so I use this opportunity to ask them what they plan to buy and why.  My questions are usually met with the expected eye roll.  Often, under the pretext that I need something from the mall, I go into the mall to observe them, just so I can try to figure out what’s going on in the teenage mind.  For my daughters, a trip to the mall is not a rational experience, where you go and get what you need and get out of there; for them it’s an emotional adventure.

Every trip I have witnessed starts out at Hollister, proceeds to Forever 21, then Abercrombie, and so on… (you get the idea).  By the time the adventure is over, they’ve spent all of their money, and if I am around, some of mine too.  During this adventure, they have gotten excited about an outfit, talked themselves out of another, decided on one and discussed all the places they will go outfit and have rationalized the purchase.

My questions, to myself of course, as I don’t want their eyes to roll out of their heads, are…Did they get what they needed, wanted, liked? Did they get it at the best price? And how is the quality?

What if…

  • they had a view into what clothes they have and got a recommendation on what they really need, if anything?
  • they knew where they spent most of their money and could leverage that spend to receive better deals?
  • they could compare not only price but other important factors like quality and service?
  • they could streamline their trips and get done in minutes not hours?

When I think about these issues, I think about the distributors I work with and the sourcing and procurement issues they face.  I realize distributors have a lot of the same challenges, just on a much larger scale.

You spent how much?

My daughters spend most of their money on clothes. But do they know what store they are spending MOST of their money?  If they knew how much and where, could they get a preferred customer discount?

Distributors I work with are looking to effectively rationalize their supplier base to generate visible savings and limit the introduction of risk while meeting the needs of their stakeholders. As executives prepare for growth in a recovering economy, their top initiatives include reducing spend, increasing cost savings, and managing supplier risk. To accomplish this, procurement teams must be able to tie spend information to supplier risk alerts, trade costs, and supply plans yet make allowances for discretionary spending.

The SAP BusinessObjects Spend Performance Management application provides full visibility into direct and indirect spend, helping you to proactively identify cost-savings opportunities and supplier risk. As a result, you are better positioned to reduce cost and ensure supply continuity, thereby increasing spend under management.

You spent how much… where?

Just like my daughters have to decide who to buy from, distributors need to decide who their best trading partner should be.  To remain competitive, you must take innovative steps to position your company as a cost leader. Sourcing is one of those steps. Effective sourcing can help reduce costs and improve margins.  With SAP solutions for sourcing you can source, store, deliver, and sell your products as well as forecast and analyze your business. The solutions provide purchasing teams every function needed to maintain a closed-loop supply chain.

The SAP solutions also enable you to forecast what kind of product is needed, determine how much is needed and when, create sales and purchase orders at one time, comply with import and export laws and regulations, store goods at your warehouse or deliver them to the customer back-to-back, and analyze the entire process after the fact.

But I had a buy one get one free coupon on my phone

Finally, as I see them flit from store to store I notice they continue to check their phones.  Yes they are texting, but they are also being driven by store coupons on their phones.

Distributors have become more mobile. They need access to critical information while on the go.   Any dashboard or query you use at your desk can be rendered on any mobile device.  SAP also has mobile applications to help run your business faster and better.  Applications ranging from purchase order approval, to customer order tracking, to proof of order delivery, payment collection, including invoice adjustment.  SAP is truly putting the power of information into the hands of many distributors.

Now that I’m  on the way to solving my daughters’ spending issues,  if I could only figure out a way to keep their rooms clean I may actually be on to something.  Maybe by the next time we talk I’ll have it figured out.

Mike Wise is the  industry principal for Wholesale Distribution at SAP America.  He is a wholesale distribution technology and operations leader with over twenty  years of comprehensive experience in distribution and manufacturing environments, executing operational improvement strategies through technology. He focuses on enabling efficient distributor operations with SAP for Wholesale Distribution solutions.