Now, if you’ve been listening to the thought leaders, like The Mpower Group, you’d know that good sourcing requires category management because one size does not fit all from a sourcing perspective, and, even if you didn’t know why, you’ve seen it during the auction craze (which seems to resurface every decade or so) where you auction everything you can that hasn’t been sourced before and get good savings, try it on categories sourced every 3 years, get none, and then try again on the first set of categories in 3 years, and see prices rise (because you can only take supplier margin out once, and then you have inflation), during a marketplace craze (where you just order from distributors who suddenly can’t supply when their primary suppliers or supply lines go down), and during overly drawn out strategic sourcing events (where, by the time you’re done, scarce supply has been locked up).

However, category management alone is not enough. Up until 2020, it was since global trade flowed freely, inflation was low, disruptive events were typically limited to natural disasters, logistics slowdowns (due to strikes that shut down ports) could be predicted by anyone following the contract expiry dates and current negotiation states, and black swans were rarely seen. In this environment, you simply needed to devise a good category strategy for sourcing, procurement, and supplier management and all was well (and ended well).

The time of smooth sailing in global supply chains is long gone! You now need multiple sourcing, procurement, and supplier management strategies for overall supply assurance that take into account the various risks, disruptions, and shortages you could face on a semi-regular basis. And you need to identify which of these strategies you need to employ on every regularly scheduled event (sourcing exercise, PO/reorder point, logistics (re)contract, and supplier review/development meeting) and unexpected real world event that could/will impact your supply chain to some degree (from delay to complete closure). This requires category intelligence, sometimes near real-time.

Category intelligence is the one thing pretty much every Source-to-Pay/Source-to-Settle (S2P/S2S) is missing. A few support elementary category management, but even that doesn’t go beyond product groupings and default sourcing workflows and RFX templates, contracts, and re-order schedules. There are a number of best-of-breed risk monitoring applications, but at most they are tied to the supplier and you have little to no idea of the potential impact since most applications only tie suppliers to currently supplied products, and you don’t fully understand what bill of materials (BoMs) they appear in, product lines they impact, customers who rely on them (and whom you are contractually obligated to serve), overall revenue stream, and profit margins. In other words, you get supplier insight, but not category intelligence. And category intelligence is what you need to make all of your Procurement decisions on.

This is the beauty of Busch-Lamoureux Exact Purchasing. When you separate out the three critical factors of complexity, risk, and impact, you understand not only that each of the eight category types needs to be managed differently (since complexity limits supply base, risk limits supply assurance, and impact determines criticality of ensuring supply and maintaining a sufficiently large and risk mitigating supply base), but that each category type requires differing intelligence to properly manage, that the intelligence required across the categories differs in types and depth, and that some of the intelligence has to be near real-time (with updates/alerts required hourly). The days of the annual spend analysis exercise to (re)classify categories and sequence sourcing and supplier development events are long gone. If a mine collapses, a fire destroys a production plant, a port shuts down, or a carrier goes out of business, you need to know that day and start executing mitigation plans on those complex and high-impact categories immediately, because by the time the (advance) shipment (notice) doesn’t arrive, it’s too late.