Oh, That Explains It: Lookalike Terms in Procurement

It's that time of year again. That's right, Look Alike Day is finally here. Established by a Pittsburgh television reporter in the 1980s, everyone's favorite unofficial holiday celebrates doppelgangers, doubles, and duplicates everywhere.

For Procurement professionals, it can sometimes look like every day is Look Alike Day. The department's huge catalog of relevant terms and phrases includes a number of words that look and sound almost identical. To make matters more complicated, the majority of these lookalike Procurement terms mean completely different things. Need some help getting your definitions straight? You're in luck. Source One's terminology team can help you make sense of Procurement's dictionary.

1. Digitization vs. Digitalization

Digitization: This term refers to the process of transitioning from analog to digital technology. Think of the ongoing move from CDs and DVDs to MP3s and MP4s. For Procurement, this could mean shifting from physical contracts to digital files in a contract repository or abandoning paper purchase orders in favor their electronic counterparts.

Digitalization: This is ultimately the more meaningful term for Procurement and Strategic Sourcing professionals. It describes the use of digital technologies to change business models and create new opportunities. A Procurement team looking to digitalize itself might look into spend analytics platforms, eProcurement tools, or other solutions for streamlining and optimizing the sourcing process.

2. Managed Spend vs. Spend Under Management 

Managed Spend: Procurement professionals often mistake managed spend for true spend under management. To qualify as managed, spend only needs to be tracked and made available for analysis. Just because your Procurement team has entered historical spend into a spend analysis or opportunity assessment platform does not mean they've brought it under management. They've certainly put down a nice foundation, but they've still got quite a bit of work ahead of them.

Spend Under Management: For manged spend to qualify as spend under management, Procurement needs to make sure that all of their spend is effectively categorized, strategic purchases are made across all categories, and that all purchasing decisions are inspired and reinforced by a dependable platform. Procurement can't reach its full potential until it gets the entirety of their managed spend under the management of an expert team and cutting-edge platform.

3. BPO vs. GPO

BPO: Business Process Outsourcing providers offer Procurement teams support for all or some of their operations. The best of these organizations offer flexible, fit to purpose support for Procurement organizations at any maturity level. Many, however offer little but boilerplate support and inexperienced consultants. Source One cautions any organization from selecting its Procurement BPO based on price alone. The seemingly cost effective choice is often anything but.

GPO: A  Group Purchasing Organization leverages the buying power of multiple businesses to negotiate discounts with vendors. In theory, this collaboration makes it easier to obtain favorable prices, terms, and conditions. Industries ranging from health care to industrial manufacturing favor this system to optimize their purchases. You might think small businesses are more likely to take part in a GPO, but research from Spend Matters suggests that 15-20% of Fortune 1000 companies take part in purchasing groups as well.

Still feeling confused? Contact the Procurement team at Source One today. We'll leverage our years of experience and wealth of resources to fill in any gaps in your understanding and prepare your team to produce long-term value.