The Era Of The Postmodern ERP System

Procure-to-pay is no longer just about sourcing goods and paying suppliers. Indeed, in a modern global economy, procure-to-pay means mitigating supplier risk, managing cash flow and accessing spend data from cloud-based tools.

Rising expectations for procurement systems have created a new era for the industry, dubbed “Postmodern ERP” by Ivalua Senior Vice President of Procurement Solutions Paul Noel. These solutions offer value-added tools that augment existing ERP systems to add cloud-based functions — including procurement.

Having just announced a major deal in Latin America, Ivalua’s Noel spoke with PYMNTS to discuss how the postmodern ERP system came to be and why Latin American businesses can exemplify the contemporary shift.

High Expectations

“The majority of companies in the U.S. now have chief procurement officers, who were established to better manage corporate spend and deliver savings,” the executive explained. “However, their focus is now shifting to creating broader procurement value, in addition to managing spend and delivering savings.”

Globalization, outsourcing, third-party regulations, accelerated rates of change in business models and a shortage of procurement talent are just some of the factors behind that shift, Noel added.

“[CPOs] must get higher employee and supplier adoption to changing processes and technologies,” he continued. “In response to this, procurement technology is evolving towards truly broad, comprehensive and integrated suites for managing the source-to-pay process, dynamic discounting, supplier information, risk and performance management, spend analytics and data enrichment, indirect goods, services procurement, complex SOW spend, project spend, assets and tooling, bill of materials and expenses.”

That’s a long list of responsibilities for procurement executives. But, as Noel explained, such a burden often cannot be ignored by larger, multinational firms — especially in today’s market.

And it’s not just U.S. firms experiencing the weight of responsibility.

Ivalua recently struck a deal with procurement firm Exiros to expand across Latin America, another market faced with shifting demands for procurement, Noel explained.

“In general, the economic outlook for 2016 and 2017 is challenging,” he said. “A variety of political and microeconomic factors, including the decline in the price of crude oil, reduction of commodities exports to China and dollar valuation are directly influencing the economic growth for major Latin American economies.”

Corporations today now have to pay closer attention to how their contracts with suppliers are negotiated in an effort to secure better deals. Noel said Ivalua experiences other demands from Latin American clients, too.

“We have multiple clients in LATAM asking for our help in gaining better visibility into spend categories, using analytics, contextual search capabilities and highly interactive operational dashboards,” the SVP stated. “In the public sector, companies are also looking for a higher degree of compliance and transparency in supplier relationships.”

These needs appear quite similar to those in other markets, like the U.S. and Europe. It may be no coincidence, considering the geographic borders between companies are crumbling thanks to technology.

Boundaries Down, Risks Up

One of the top demands among corporations today when it comes to procurement is better risk management. The borders that crumble between companies mean greater room for expansion, but they can also mean working with unfamiliar suppliers — and heightened risk exposure for the enterprise.

“Supplier risk management is increasingly becoming important due to the trends of rapidly greater globalization, third-party outsourcing, ‘as-a-service’ solutions and regulatory requirements in key industries, such as financial services,” Noel said. “Companies need to gather and manage information about suppliers, regardless of where the suppliers are located and where the supplier data lives.”

So, as corporations in the “postmodern ERP” world augment their existing ERP solutions with cloud-based procurement tools, companies must also add features that protect their firms, Noel noted. These added solutions need to help procurement executives and their teams to manage spend, budgets, payments, cash and other strategic functions, but they also need to mitigate risk from suppliers and regulations, especially as business expands globally.

Supplier management, Noel argued, is critical, as businesses are faced with threats, like cyberattacks and data breaches, among others.

“Good supplier management is good risk management,” he stated. “Ignore it, and it can affect your brand reputation with poor product quality and recalls, supply disruptions or reduced production.”