Operationalizing the Pocket Cube for Exact Purchasing Part III

A few weeks ago, we not only told you that Exact Purchasing is a Pocket Cube, but we broke it down and defined each octant for you, as well as indicating which categories of goods and services were most likely to fall in each octant (with the disclaimer that there is variation between industry and sometimes even companies in the same industry based on size and focus).

This was a great start, but once you understand the breakdown, the next step is understanding how you go about sourcing and procuring the categories in each octant. Today we continue our deep dive into the core technologies you will use with the Risk (Monitoring) focussed-octants.

Low Complexity, High Risk, Low Impact: Continuous Market Monitoring

If it wasn’t for the high risk, this would be a transaction category. As a result, this is one of the categories that is heavily automated. In fact, the only human intervention that is needed is human review and approval of suppliers and products (and organizational requirements). Once these are defined, autonomous systems can be set up to completely manage the (re) sourcing process.

The main difference between this category and the transaction category is the extent of signals that need to be monitored to detect, and respond, to risk (related) events in (near) real time and ensure the supply chains keep supplying on time. The monitoring has to cross Procurement, Inventory, ERP, and External (News and Event and Financial) (Data Feed) systems and keep tabs on all relevant signals so that any relevant signal is captured and automatically responded to.

  • (Strategic) Sourcing: Autonomous Dual (Region) Sourcing with Near-Equal Splits
  • Supplier Management: AVLs with strong Compliance and Risk Management
  • Catalog Management: APLs
  • Contract Management: Auto-Creation and Auto-Sign
  • Procurement (Channel)*: Goods PO (Item Master), Framework PO (Fixed Delivery Schedule), Non-PO Invoice (Emergency Replacement), PCard (Seasonal Purchase)
  • Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Sanction Monitoring, News and Event Monitoring;

Low Complexity, High Risk, High Impact: Market Risk Management

This category isn’t just high risk, but high impact. As a result, while this is one of the categories that you want to heavily automate due to low complexity, it’s a balance between automation and human intervention. Unlike our last category, additional intervention is required before award and upon every significant alert, to see if a relationship, market, mitigation, or re-sourcing/re-purchasing action is needed.

The main difference between this category and our previous continuous market monitoring category is that the high impact nature of this category means that simply re-sourcing is not enough of a risk management strategy and mitigation options need to be pre-defined so they can be quickly executed if a risk is detected.

  • (Strategic) Sourcing: Semi-Autonomous Dual (Region) Sourcing with Near-Equal Splits, Human Award Analysis and Review
  • Supplier Management: APLs and Performance Monitoring
  • Catalog Management: AVLs and regular review and approval of new product options and regular automatic identification of potential products for review
  • Contract Management: Auto-Creation, Human Review of Obligation and Risk Mitigation Clauses, Auto-Sign
  • Procurement (Channel)*: Goods PO (Catalog), Framework PO (Fixed Delivery Schedule), Non-PO Invoice (Emergency Replacement), Consignment PO (VMI)
  • Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Financial Status, Litigation Monitoring, Sanction Monitoring, News, Event, and Sentiment Monitoring;

* Unless the Channel-Master Joël Collin-Demers says otherwise.