Executive Summary

  • It is amazing to read the information that is provided online about the effectiveness of the purchasing module in ERP functionality. 
  • We dissect information from population websites on the topic. 

Introduction

A number of websites provide misleading information about the procurement functionality in ERP systems. This provides an insight into the false information provided in private by ERP vendors and consulting firms to their clients and customers.  

Analysis of Articles on the Purchasing Module in ERP

These quotes are from GeniusERP. 

Issue #1: Covering Up the History of the Purchasing Module in ERP Functionality

How using an ERP could lead to more efficient purchasing

Keeping on top of purchasing requests, managing inventory levels, and trying to negotiate with vendors can make even the best purchasing manager feel like they live in a constant state of chaos. Custom manufacturing involves a lot of moving parts (literally)—and the purchasing department is responsible for ensuring all these parts are in the right place at the right time.

GeniusERP makes an ERP system, so naturally, they present how great ERP systems are for purchasing. However, it is a completely one-sided type of presentation. Furthermore, the companies that we consult with do not normally find their purchasing process particularly enhanced after purchasing and implementing an ERP system. This is because the purchasing module in ERP functionality is normally very elementary.

This is part of a long-term pattern of ERP vendors exaggerating the functionality they have in their systems, something which all of the ERP consulting firms are also part of helping provide this misimpression to their clients. This is something I cover in detail in the article The Myth of ERP Systems as Out of the Box: Why Functionality Gaps are a Common Problem on ERP Projects.

Issue #2: Highly Simplified Explanation of the Purchasing Module in ERP Functionality

GeniusERP continues.

Sometimes it’s easy to forget that among all of the features your ERP has to offer, an ERP can also help streamline the purchasing process, by ensuring you always have the right level of stock on hand, and help you handle the intricacies of low-mix, high-variable manufacturing. An ERP will ease supplier management by making the procurement process smoother, giving you more time to focus on other areas, and a more efficient business.

That is the promise frequently made by ERP vendors and consulting firms, but it is rarely true. Again, the stock or inventory management functionality in ERP systems is generic. For example, for running inventory and production procedures like MRP or DRP, the functionality offered within ERP systems is dramatically inferior to running the same procedures in a specialized system, which I explain in the article How to Best Understand The Limitations of MRP Based ERP Systems.

There is also no evidence that ERP systems have improved stock management over the inventory systems that ERP systems replaced. 

Issue #3: The Validity of the Claim That Purchase Orders Are Better Managed?

GeniusERP continues.

Think about the hours and effort that go into purchasing: creating tracking numbers, filing orders, checking inventory, making a purchase history, coordinating with suppliers, and so on. An ERP makes purchasing easier by automating these tasks, and providing you with accurate real-time data. Because an ERP is always managing your inventory levels in the background of everything you do, you will know what stock you have on hand, and what needs to be ordered to complete a job. You will also be able to create a PO with one click—saving you time and streamlining the purchasing process.

Purchasing systems not related to or not incorporated as part of ERP systems do this as well, and in nearly all cases that I have reviewed do it considerably better. Some of the claims by ERP systems seem to compare them against paper-based systems.

When ERP cheerleaders say “ERP makes XYZ easier” the question should always be “easier than what.” In all of these quotes thus far there has been no comparison to any other system or even acknowledgment in any of the articles I read that any other category of software does what the purchasing module in ERP functionality does. This is misleading, because software buyers have many competing systems they can buy, in addition to custom development they can perform. Something else of note is that in none of the the purchasing module in ERP coverage could I find any reference to custom development. However, custom development is very common in ERP systems because the functionality is so generic that many of the business requirements are not met with the standard functionality. 

Issue #4: False Claim About Supplier Management

GeniusERP continues.

Managing your relationships with suppliers is one of the biggest tasks a purchasing department is required to do. Using an ERP can help you create better relationships and enhance and streamline communications with suppliers.

An ERP system will allow you to create a robust supplier database—essential to all manufacturers that order multiple parts from multiple suppliers. From names and addresses to parts and materials offered and tax identification data, your ERP collects and organizes all the supplier information you’ll need. You will always be confident that you have the right information about your suppliers, making it easier to submit requests and orders.

This is true of any supplier database in any system that is kept up to date. 

GeniusERP continues.

Good supplier relationships require a level of transparency. A fully integrated ERP software system will balance your sales demands, buying processes, and inventory controls with the capabilities and capacities of your suppliers. This makes for more transparent dealings, and encourages a better understanding of both parties’ business needs, helping you to create better and more open relationships with your suppliers.

After having seen many ERP implementations, I have never seen any ERP implementation where these things ended up being true. ERP systems have a table where suppliers are stored. When a PO is created, there is a relation between the product and a series of suppliers, which are then shown to the procurement specialist. That is the extent of most ERP supplier management functionality. 

What About Mentioning Supplier Management Software?

There is even a separate category of software called supplier management software or vendor management software. Software buyers interested in doing what is described in this quote, should probably investigate this software category rather than try to get these things from an ERP system. 

SAP: Another Software Vendor Claiming To Provide Extraordinary the Purchasing Module in ERP Coverage

All of the ERP vendors that I reviewed for this article appeared to be saying the same thing, that their procurement functionality is fantastic and that ERP systems are how one improves procurement management. However, we have evaluated the procurement functionality in these ERP systems (in this case SAP S/4HANA) that make these claims, and they are not fantastic. 

Accenture Tips Its Financial Bias

If you visit the website of a large ERP consulting company, you will find a strong financial bias in favor of the most expensive to install and maintain ERP systems. This makes them essentially parrot the exact same information provided by ERP vendors when it comes to the purchasing module in ERP functionality. 

This is Accenture’s comment on systems. 

Accenture’s Procurement function is transforming to deliver value above and beyond what is expected of traditional procurement. We’ve shifted our focus past the traditional role of managing transactional compliance to also becoming a partner to our business functions, enabling Accenture’s bottom line. It’s the reason we changed our name to Procurement Plus several years ago.

Our systems landscape is SAP® Ariba® On Demand and a single global instance of SAP S/4HANA®. Our journey involves standardizing, simplifying and automating the elements of traditional procurement by digitizing processes, moving to a frictionless buying experience and developing analytics to enable intelligent procurement supported by data-driven decisions. – Accenture

For all clients? Accenture has an extensive SAP practice where they make large amounts of money, so they don’t have any objectivity on the subject and they will likely try to push SAP S/4HANA on their clients for the only reason that it makes more money for Accenture. Furthermore, looking at SAP Ariba, it is far better for indirect procurement (buying small things for consumption and not generating revenue) than indirect procurement. However, Accenture clients will not learn about any of this. 

This means that Accenture’s supply chain consulting comes with a high financial bias where Accenture will want to push SAP systems on companies that reach out to them. 

Our Conclusion

We could have provided many more examples of faulty information about the purchasing module in ERP functionality but wanted to keep the article to a reasonable length. We reviewed other material than we showed in this article, and our observation is that there is a lot of inaccurate information published by ERP vendors, IT media, and ERP consulting firms about the purchasing module in ERP functionality and the benefits of using this functionality.

Our Approach and Verification Capability

We have a great deal of experience in the purchasing module in ERP functionality, so we can both analyze ERP vendor and ERP consulting company claims on this topic. 

Our Independence

  • One of the most important questions that you should have is regarding our independence from the influence of software vendors. And here, we rate exceptionally well. We have no relationships with any vendors or any other third parties.
  • Unlike virtually all consulting firms like Deloitte, Accenture, or Infosys, or IT research entities like Gartner, Forrester, or IDC, Brightwork takes no money from any vendor.
  • As an unbiased entity (for instance, that is not both selling consulting projects while also offering Consulting services) we can offer entirely unbiased advice.
  • The problems with the lack of independence in the IT research space are covered in our article The Brightwork Research & Analysis Rating of IT Analysts Like Gartner, Forrester, and More.

Background on Our Primary Analyst

Our primary analyst is Shaun Snapp. However, we also bring in other experts that fit the needs of the support. However, Shaun Snapp writes the analysis, incorporating the specialists of this type if they are necessary.

  • Shaun Snapp performs research for Brightwork Research & Analysis. Brightwork Research & Analysis covers many IT topics ranging from databases to open-source software.
  • After many years as an implementation consultant, Shaun Snapp migrated to being a researcher. He usually works in project advisement and performing analysis for things like IT acquisitions and project planning.
  • Brightwork Research & Analysis is known for publishing information around the enterprise software space that is not covered elsewhere.

Go to top

Contact

To contact us for our assistance in analyzing the purchasing module in ERP claims, type your message into the chat bubble in the lower right-hand corner of this website.