Plan by Vendor with flexible, detailed expenses for each

Description

Planning by vendor in Corporate Performance Management (CPM) Software refers to the capability of managing and projecting costs related to each service provider or supplier. This functionality provides organizations the ability to add, track, and forecast specific vendor expenses, ensuring a more precise and detailed budgeting and forecasting process. It may also allow modeling cost comparisons for multiple vendors based on volume discount rules.

Example Use Case

Scenario: A manufacturing company uses CPM software to manage its budgeting and forecasting. They rely on numerous vendors for different stages of their production process - raw material providers, logistics companies, machine maintenance services, etc.

Solution: By utilizing the 'plan by vendor' feature, the company can assign specific expense categories to each of these vendors and track actual expenses loaded in from their general ledger. This allows the company to forecast the costs associated with each vendor and develop what-if scenarios, comparing each vendor's cost to other vendors, assisting in purchasing decisions.

Considerations

We hear this requirement often and have seen a multitude of approaches. The most common is to list vendors, time, and what was spent with the vendor. This approach allows summarized analytics showing what was spent in a certain month with a certain vendor which could be useful assuming the company is only purchasing one thing from the vendor. However, if the vendor provides a multitude of distinct products or services, this summarized information quickly becomes useless.

That approach does nothing to help model purchasing decisions, which require line-item detail at the vendor level. For this requirement to receive a positive score, the product must allow line-item detail to be entered at a detail level. This is like entering in capital expenditures in a CapEx module, or individual employees in a Workforce module. Ideally, the system has the capability to configure certain bulk discount levels for a vendor, allowing the modeler to see a complete view of the forecasted spend with the vendor.

Questions to Ask a Vendor

• Detail Levels: How detailed can we get while planning by vendor? Can we assign specific expense categories to individual vendors?
• Integration capabilities: How well does your system integrate with existing procurement and accounts payable systems? If it does not, where do your customers automatically source vendor information?
• Dimensions: Is vendor treated as a dimension, allowing us to slice and dice? Or is it a separate, custom function?
• Vendor Modeling: Are we able to include rules for vendors, such as discounts based on volume or other pricing planning mechanisms?