Category Archives: Market Intelligence

Proof You Don’t Need AI For Procurement

And that you don’t need modern procurement technology. (No SaaS. No fluffy magic cloud.)

Or classical technology. (No Microsoft Back Office. No ERP.)

All you need is pencil, paper, and a good old fashion fax machine based on the classic 1966 Telecopier (that compacted the Xerox LDX).

Last year, Asahi proved it when they were hacked by the Ransomware group Qlin. The hack took all of their factories offline, and when they managed to get them back online, their computer systems were still down. Most of their global competitors would have remained completely shut down until the computer systems came back online, but instead Asahi rolled up their sleeves, powered up the fax, took out a pad of paper and a pen, and got to work. They placed orders, took orders, shipped out what they were able to produce to their largest distributors, and kept going. While it was a slow start at first (with some customers only receiving about 20% of their usual orders), at least they were able to start up again right away and maintain part of their revenue stream.

Could your organization do the same? Likely not!

It’s shameful because we’re one of the world’s oldest professions, possibly the second oldest, and early professionals were doing their jobs with reed pens and papyrus just fine!

The fact of the matter is that if you can’t do your job without technology, you can’t do your job with technology. True Procurement is human judgement. Judgement requires the expertise necessary to do the job — the entire job. Technology is just the execution that automates the tactical drudgery which allows us to focus on what’s truly important and spend most of our time on strategic activities. Nothing more.

Exact Purchasing Helps You Assess Your Reality

In our last post we explained that the Busch-Lamoureux Exact Purchasing Model not only puts you on the path to Category Intelligence (which it requires, and which you need to get to, even though you likely haven’t even adopted Category Management), but it helps you define what you need in your technology platforms so that you can go to market knowing what you need and not get sucked into vendor BS.

But it goes beyond just laying out the path to category intelligence and platform selection, it helps you understand the real Procurement reality that faces your organization, which is not only different by category, but vastly different by product and supplier once you dig into your high complexity, high risk, and high impact categories.

Let’s start with the low complexity, low risk, high impact continual transaction monitoring category where energy, RAM, and custom FPGAs will live for engineering firms and where fertilizer, tractor parts, and greenhouse panels will live for agricultural operations. Most of the time, this category is quickly and easily sourced since you bid out the contract in a deregulated energy market and the energy keeps flowing, DRAM is DRAM is DRAM, a number of suppliers exist that make customized FPGAs, greenhouse panels are pretty interchangeable, you don’t care who supplies your fertilizer (as long as it doesn’t sale on the Saskatchewan River, and tractor parts are made in bulk and almost always in the local shop.

But, sometimes, an energy production plant fails and then your energy provider files chapter 11, the once-a-decade plant fire happens and takes one of the few large RAM production factories offline (causing major RAM shortages), or your factory gets cut off by a border or port closure and then you need a replacement – fast. Similarly, global supply chain disruptions can cause tractor part shortages (as the major US manufacturers offshored production of some parts to China and Mexico — COVID proved this), you need your greenhouse panel replacements to be the right size and thickness (among other things), and you need that fertilizer (which all of a sudden becomes scarce, if not unavailable, if the shipping lane that sees up to half of the global supply of key chemical components cut off.

As you explore this category in detail you note that, most of the time, you can just send out an RFQ, get the bids, award the lowest bidder, and keep on truckin’ without a second thought. It’s only when an event happens that will lead to cut off supply from your current source do you need to do anything. But since there is usually other supply from other sources, even if more expensive, you realize that you don’t need to think about every possible risk or disruption — you just need to detect when one has occurred and go back to market right away.

All you need to do is monitor the transactions and make sure they occur on the required schedule, at the expected unit count, and at the expected price. Should a transaction not occur when expected, and for something with a lead time of more than 7 days, should a ASN not appear when expected, then alternate supply needs to be secured. The program should automatically place an order to the backup supplier (or the #2 supplier on the last event) and alert a buyer to investigate what happened. Should the buyer investigate and determine the delay is just due to a carrier f*ck up, you take solace in the fact an extra replacement order is on the way, and comfort in the fact that everything should be fine starting with the next order. Should the buyer determine it’s because of a border/port closing that could go on a while, she orders a new RFP (and uses Force Majeure to cancel any remaining commitment to the current supplier), invokes the (agentic) automation, and goes back to work. And should the buyer determine it’s because of a plant fire or plant damage from a natural supplier that’s going to go a while AND create a global supply shortage, she buys up all the supply she can as fast as she can before supply becomes very scarce and prices go through the roof. And then, knowing the only extra costs are inventory, she goes back to work knowing that the annoyance her organization is feeling due to a temporary sharp rise in inventory costs and a rapid reduction in cash flow, is nothing compared to the pain the organization would feel if all of a sudden there was no supply, they couldn’t produce their products in their biggest product lines, and defaulted on contracts and had to pay an extended legal team to defend lawsuits on Force Majeure claims while the organization sees a substantial drop in revenue.

Now let’s consider the high complexity, low risk, low impact spend governance category where you’d likely see BPO, facility management, and installation projects. Here you’re spending a lot of time on your vendor identification, vendor qualification, RFP, vendor selection, contracting with obligations, milestones, and risk management, and spend schedules and when you’re done, you think you’re done. But when you understand the sheer complexity, you know you’re just getting started. First of all, the vendor doesn’t know your processes or expectations as well as you think. Secondly, their improvements are theirs and theirs alone (and they’ll lock you in for life) unless you ensure, and capture, knowledge transfer. Third, once you become dependent you become damned if you continue and damned if you don’t. They’ll know the precise moment you can’t live without them and then prices will skyrocket on the next renewal. And even worse will be if they get into financial trouble and can no longer support you to the degree you expect.

This means that you not only need to capture as much knowledge as possible on the improved processes they deliver, but also the technologies they use and the providers who provide them. And then you have to, before each renewal, determine who the other providers are who could also deliver an equivalent solution based on your current process and technology requirements, and ensure you could contact them quickly if needed. The switching costs will be high, so unless you don’t have a choice, it’s not a trigger you’ll want to pull, but if you aren’t ready when you need to, you’ll be in deep trouble.

You realize you not only need to go through a very involved selection project when you need the BPO, regular engineering, or facility management service, but due all the market research to kick off another one on a (bi) annual basis to ensure that you are not caught in a very bad situation on the once-a-decade black swan event when the provider all of a sudden becomes unavailable or (possibly as a result of a merge or acquisition) raises prices so high you can’t afford to continue, even though you desperately need the service.

Finally, when you dive into each of the other six categories you realize that your reality is a lot more fragmented and diverse than you would otherwise expect in a Procurement organization and until you accept that, and start dealing with the different fragments differently, success will always be just beyond your reach.

We Don’t Need State of Procurement Reports. We need Procurement Problem Prescriptions!

And we need Hackett Spend Matters to give them to us!

There’s a reason we picked on Hackett this week in our follow up to our 35 part series on why you really DO NOT need to read another State of Procurement report for Five Years, and that’s because we need Hackett to give us solutions to procurement problems.

We need them to tell us not just how to

  • prioritize our concerns
  • extract the core issues
  • identify the most relevant barriers
  • rank the most likely risks

but tell us

  • why some concerns take priority, based on organizational impact
  • how to identify the core issues, so you can learn to do so yourself
  • where you will encounter the barriers, and the techniques for busting through them
  • what the key risks are, with the mitigations and responses you need to put in place

The reality is that

  • you know what your concerns are, but you don’t know which are the most critical to your success when you are overworked, underfunded, and the world is literally burning around you
  • you likely weren’t trained in root cause analysis, and if you’re not a process expert, you will likely have difficulty getting to the root cause (especially if it’s deep in another part of the organization or the partner ecosystem)
  • you don’t know which barriers are equivalent to reinforced concrete and truly blocking your success and which are essentially made of paper mâché and easily conquered
  • how to deal with the most significant risks, especially when you can’t predict them all or influence their likelihood at all

This is the help you need … and Hackett, with the acquisition of Spend Matters, is the only analyst firm with the bench strength left in Procurement to do it!

The reality is that the original analysts in our space (first at AMR Research, which was acquired by Gartner; and then Aberdeen, acquired by Harte Hanks; and finally Forrester) all departed years ago. The number of analysts who have been in, and continually analyzing, Procurement Tech for 20 years is now countable on your fingers (and since Mickey North Rizza, at IDC, and Magnus Bergfors, at Gartner, both did a long stint in the vendor ecosystem and Jason Busch recently departed the analyst space for the vendor ecosystem, I can only confirm [besides myself] Jon Hansen of Procurement Insights, Andrew Bartolini and Christopher Dwyer of Ardent Partners, and Chris Sawchuk and the legendary Pierre Mitchell at Hackett [who goes all the way back to AMR]) as vets who have been consistently analyzing the Procurement space for at least the last two decades (back to when SI started 20 years ago in 2006). If you look at the handful of organizations with a senior Procurement analyst with two decades of experience, only Hackett, who also has Xavier Olivera and Bertrand Maltaverne, have a real Procurement Analyst team with deep bench strength where you have four senior analysts who each have 25+ years of deep Procurement expertise!

No other organization can give us the deep insights and playbooks we need to elevate our Procurement organizations, and do it without defaulting to the BS of “just implement the tech-du-jour of our sponsors and use our [associated] consulting arm to do it” — which we all know is not a solution (because, if it was, your problems would have been solved two decades ago)! But if they don’t do it soon, before Pierre and Chris retire, they won’t be able to — and, frankly, neither will anyone else! The time is now for them to stop wasting their analysts’ time on “state of” surveys and reports and instead explain what the findings of the last decade mean, what processes are needed to address the gaps, what organizational changes may be needed to implement those processes, and why we need to return to the classic

  1. PEOPLE-FIRST
  2. PROCESS-SECOND
  3. TECHNOLOGY-LAST

approach to solving problems and that, in the modern age, we have to actually modify this to:

  1. PEOPLE-FIRST
  2. PROCESS-SECOND
  3. DATA-THIRD
  4. TECHNOLOGY-LAST

because

  1. we are the ones who have to execute the business, all machines do is transmit and process data
  2. problems are solved by repeatable, predictable, dependable processes that can be executed by humans in a worst case scenario (even if intended to be automated to the majority of the time)
  3. no process can be executed without the right information
  4. technology only comes into play when we know it’s the right solution (and we can’t know it’s the right solution until we’ve addressed the people, process, and data elements)

and to do this, you need a lot of experience, domain expertise, knowledge about what data is available, and deep technology knowledge.

And this is another area where Hackett brings deep bench strength.

From the beginning, most of the analysts in our space were not technologists but operations research people, business finance, economists, accountants, and even historians. Few had computer science or engineering degrees and fewer still relevant experience building/installing relevant applications. At Hackett, Chris and Bertrand are engineers and Xavier and Pierre are computer scientists, who all have relevant real world experience with tech. They have a much better understanding of what tech can, and can’t do, then an average analyst (and are much less likely to have the wool pulled over their eyes by a new “AI-first” player that does nothing more than wrap a third party LLM to deliver a solution of questionable performance and reliability, for e.g.) and can do a much better job of not only recommending what type of tech to use, but who you should look at and why, versus just “who comes out in the upper right of of the magic map” based on blended subjective scores that, at the end of the day, mean nothing.

But the clock is ticking and time is running out. Let’s hope Hackett realizes sooner than later what types of research and reports we really need vs. just wasting their key analysts’ on surveys and summaries thereof.

HACKETT CONFIRMS THE STATE OF PROCUREMENT HAS NOT CHANGED … No Need to Read The Full Report!

Nothing makes my point better than slide 15 on Trends in Procurement priorities in the 2026 Procurement Agenda and Key Issues Study Results sponsored (at least) by Jaggaer, SAP and Unit4 (and likely others).

Basically, every year you have the concerns of

  • supply continuity
  • cost reduction against inflationary price increase
  • strategic business advisory
  • digital transformation and the tech-du-jour (analytics to AI)
  • operating model improvements

All of the risks fall into our eight ever present risk categories:

  • Talent: Access, Acquisition & Retention, Retiring Workforce Impact
  • Disasters: (Other) Supply Chain Disruptions
  • Cyberattack: CyberSecurity Risks
  • Spend Pressure: Economic Downturn, Changing Customer Expectations, Capital Access, Competitive Alternatives
  • Supply Shortage (and Trigger Events): Trade Wars, Geopolitical Tension
  • Regulatory Compliance: Regulatory Compliance, Ethics & Privacy, Product Liability
  • Corruption: IP Loss
  • Tech-Du-Jour: AI-enabled Tech, Tech Transformation Delays, Tech Obsolescence

It’s the same-old, same-old situation when it comes to initiatives, except the tech-du-jour (AI) is nearing the top of the list, and the ecosystem is essentially the same, only the names of the players have changed. And, of course, the conclusion is, surprise surprise, to employ the tech-du-jour which, lo-and-behold, Hackett stands by and stands ready to help you with (despite the 94%+ failure rates found by MIT and McKinsey).

In other words, it’s the report we expected, and the first of many to come. (As you can expect every other analyst firm and consultancy will soon be releasing theirs, if they haven’t already. But we won’t be reading them, and for the next five years at least, neither should you.)

And, with the exception of the key shifts in concerns, issues, risks, and barriers, which could be a two page summary, it’s not a report you need to read through as very little has changed in the last decade.