Category Archives: Market Intelligence

Four Broken Procurement Processes You Wouldn’t Have With Exact Purchasing

Gaurav Sharma recently penned a truly great post on LinkedIn on 5 dated procurement processes/setups you can get rid of without AI or any tool whatsoever. This is the type of post we need more of because AI isn’t always the answer (and in fact, it’s rarely the answer), and AI shouldn’t even be considered until the technological needs are identified (which, if the right process is followed, require AI a lot less than the hype machine would lead you to believe).

Not only should you not have the five processes he outlined if you are a best-practice Procurement department, but 4 of them wouldn’t exist in the first-place if you built your Procurement programs off of Busch-Lamoureux Exact Purchasing.

Let’s take them one-by-one.

Spend it or Lose it at the end of the year.

Proper Procurement, and the proper business operations it would dictate, would never have this because budgeting based on historical spend is bad budgeting, as is pricing based on historical price points. The era of global stability is over, natural disasters are on the rise, critical resources are becoming scarcer by the day, and logistics becoming uncertain and unpredictable due to the fallouts of sanctions, wars, disasters, strikes, and uprisings. As a result, what you will pay this year, and what you will have to charge to maintain a fair profit margin, will not necessarily have any correlation to what you paid last year, especially in categories where more than half of supply comes from a single country (such as rare Earths from China) or flows through a single chokepoint (like oil, fertilizer, etc. through the Strait of Hormuz).

Budgets need to be based on expected costs using the most up to date data at the time, and revisited every time a category comes up for (re)sourcing. And, most importantly, be based on forecasted demand, which needs to be up-to-date when budgets are created and updated regularly based upon category velocity and actual sales/utilization over a typical, statistically significant, time window (which will be different for every category). This is the key: budgets should be based on expected, and approved, demand and cost ranges — not fixed spend buckets.

And you need to make three critical changes to budget management to be successful.

  1. If the purchases are needed (i.e. buying less will shutdown a production line, result in a costly stockout, etc.), the expected spend can be exceeded (as long as all efforts are made to keep it as low as possible) and the organization will react by either increasing pricing or cutting elsewhere if they can’t.
  2. If the forecasted demand has been reached, it cannot be increased without approval (or approved forecast updates for input components), even if the expected spend hasn’t been reached.
  3. For discretionary categories, if the organization was able to delay demand (by finding a way to get one more year out of that cell phone or laptop, delaying hiring through better automation and occasional overtime, or simply pushing off MRO restock until the next major project started), expected baseline demand is NOT reduced for the next year. In fact, if a valid argument exists, unused demand may even be carried over. Organizations that can reduce or defer demand need to be rewarded. In the long term, you’ll save money if you encourage delay of spend until absolutely necessary.

And if you use Busch-Lamoureux Exact Purchasing, you’ll have an infrastructure where you are able to re-compute forecasts as needed, query current pricing as needed, monitor for events in high risk or highly volatile categories, get alerted when you may need to accelerate an event, and have an infrastructure to take the right action at the right time where you aren’t sourcing based on a fantasy budget but a real, up-to-date, demand with real, up-to-date, market pricing.

Approval Chains

If you’re using Busch-Lamoureux Exact Purchasing, you have regularly updated, agreed upon, forecasts and expected demand. You have pre-vetted suppliers. You have market pricing, contracts, purchase orders, and m-way match. Once the demand, suppliers, and contracts / bids have been accepted and approved, if everything matches, there is no need for a human in the loop. You configure the (A)RPA and let it issue the okay-to-pay to the payment system and let the payment happen. Unnecessary approvals add unnecessary time, create unnecessary work, and potentially cost you not only the opportunity for early payment discounts, but even fines if you don’t make the payment windows mandated by the UK, EU, and other countries for paying small suppliers.

PowerPoint Category Strategies

A PowerPoint dies as soon as it is presented. No one ever goes back to it. With Busch-Lamoureux Exact Purchasing, for any high complexity, high risk, or high impact category (which are 7 of the 8 categories), you setup the necessary price, risk, quality, delivery, etc. monitoring systems from day one. You have alerts whenever a significant event occurs that could significantly impact your pricing, quality, or supply. And, for any category that is high impact, you have mitigation or response strategies already defined in your procurement systems that you can action.

KPIs that incentivize activity

In Busch-Lamoureux Exact Purchasing, you define KPIs based upon success factors, NOT activity factors. You’re concerned with savings against market (i.e. cost avoidance), not historical budgets. If market prices went up 15%, you’re not saving over last year in any managed category. But if market prices went down 10%, you shouldn’t count any decrease in spend against last year’s spend of less than 10% as savings, because if you didn’t reduce spend by 10%, you’re doing a lousy job. It’s not resolved issues, it’s straight through processing. And so on. With Busch-Lamoureux Exact Purchasing, you don’t have worthless KPIs in the first place.

The only process/setup it doesn’t eliminate is tolerating underperformance. That’s entirely a people issue, and if you have people that tolerate underperformance, they need to go. No process can fix that. Only your willingness to take action can.

* as a certain Western society does everything it can to pretend climate change doesn’t exist while its greatest ally does everything it can to bomb us to the next great flood as it unleashes over 2 million metric tons of carbon dioxide (tCO₂e) a month with the bombs it uses in a single conflict — a measurable level of emission equal to 0.05% of total monthly (tCO₂e) global emissions

Roll Up The Space To … Lose!

Over the past decade, a number of the big PE firms in our space decided that a “roll up the space to win” strategy was the right approach and bought a large number, and in some cases dozens, of assets in the Procurement space globally. Vista, Main, KKR, Accel-KKR, and Thoma Bravo all followed this strategy in the hopes that with enough assets, they’d control enough of the space that controls the transactions to give them a long term home inside a significant number of major corporations.

It was a great plan, and a great play at the time (as it worked out well for them), but one that may backfire for anyone who is late to the party as the Age of AI, coupled with the realization that bit pushing applications don’t cost very much anymore, means that these nine and ten figure plays are not going to maintain their market dominance, or their income stream that depends on seven figure annual subscriptions, for much longer.

As per THE PROPHET‘s recent piece on An LP, an AI Builder, and a PE Advisor Walk into a Bar, the time for the traditional players is coming to an end — especially the mega-suites that thought they could charge 7-figure license fees until the end of time. Whether or not Agentic AI can fully replace them (they can’t, by the way), the price compression is changing the game. (Especially when you’ve been warned that Now is NOT a Great Time to Buy … a Mega-Suite.)

If you don’t have time to read the piece, THE PROPHET believes that Agentic AI is going to effectively boil the ocean and cook all of the traditional plays, charging high six and seven figures a year for relatively simple tasks that can be mostly automated by these Agentic AI solutions for a tenth of the cost (until compute costs skyrocket, but still, that’s significant downward price pressure now) in the process. If you don’t trust AI, even better, since applications that were built on modern stacks in the last 5 years with the ability to wrap discrete tasks in micro-services and orchestrate them into dynamically configurable workflows that exactly match your needs, cost about a fifth of what these big plays do and do more for you. Either way, as has been indicated many times on this blog over the past, unless your Source to Pay needs are in the top 10%, you probably don’t need to be paying more than 250K for your Source to Pay.

Now, no one can see the future with clarity, everything is in flux, and we could both be wrong, but all software (like hardware) depreciates with time, tech always advances faster than we would like to think, organizations in unregulated market places under severe cost pressure are always looking for ways to cut costs, and those providers who are running on old stacks that are hard to adapt and support aren’t going to be able to keep up or keep costs low enough. There’s going to be a massive shift, and any major players not in the public sector (where contracts tend to extend beyond our professional lifetimes due to the slow pace of change in government organizations) are on the verge of shifting out of business.

So, like THE PROPHET, when it comes to the continued dominance of traditional SaaS in a big PE portfolio, I’m not buying it either.

Maybe If Procurement Had Embraced Magic and Logic Decades Ago …

… it would not be in such dire straits today.

The Procurement Ledger recently ran an article on Agility with Purpose which ran an interview with Jeanette Hübsch, a Global Procurement Leader and Senior Consultant with Proxima, who said that in Marketing Procurement, agility isn’t just a buzzword—it’s a necessity because the landscape shifts constantly with evolving consumer trends, digital innovation, and now AI-driven content creation. Procurement must move beyond being a cost controller; it needs to be a business enabler, a partner, and a source of innovation. And she’s right.

But she goes on to say that in indirect procurement, disruptions don’t always look like delayed shipments—they might be sudden campaign pivots, regulatory changes, or shifting budgets. Agility means being able to respond without slowing the business down and to accomplish this her focus is on building an adaptable supplier ecosystem—trusted partners with modular contracts, alternative sourcing strategies, and the ability to flex with us. Strong relationships, clarity, and scenario planning make a big difference.

In other words, it seems that marketing has understood what Procurement needs, and has needed, for at least the last two decades, but yet it’s still the sacred cow in most organizations that Procurement is not allowed to touch (when Procurement should be designed around good strategies that come from good Marketing Provider Management) and be allowed to shoot any scared cow ready for pasture.

Thought leaders have been promoting the embracement of good procurement by Marketing and marketing flexibility by Procurement for at least two decades now (and we first started talking about it in our two-part piece on Magic and Logic [Part I and Part II] two decades ago), especially since Decideware (founded in 1999 in Australia), one of the leaders in Marketing Procurement Technology, was just starting to break into the North American market at that time.

And even if they were a little slow on the uptake, then it should have been adopted when some thought leaders tried to make it vogue in the mid 2010s. A decade ago I penned a two-part piece on what to do if Marketing Mayhem Got You Down? Maybe it’s time to master the Marketing Way (Part 1 and Part 2) and ran a two-part series by Brian Seipel (of Source One, which was acquired by Corcentric) on why you should Ditch the Pepsi Blues, Already: Become a Marketing Procurement Asset (Part I and Part II). By then Decideware was taking marketing magic to a whole new level, but still marketing procurement (and the best practices it could bring) was still being largely ignored, even when marketing needed procurement more than ever. (In fact, Marketing recognition of Procurement wasn’t until mid 2019, and within a year COVID had shut everything down.)

While marketing suppliers (i.e. advertising agencies) are often very different from custom manufactured part suppliers (i.e. factories), and the categories need to be managed differently because of that, in a world where supply chains are being broken daily by geopolitics, unrest, and natural disasters, both require agility, creativity, multiple relationships and multi-sourcing, risk monitoring, mitigation, and management, and the ability to react as needed. The underlying best practices required by both sides are similar in theory and the lessons each side can teach the other can make both sides stronger.

So, if you want to be a better Procurement Pro, think like a Marketer, and if you truly want to be an effective Marketer, include some Procurement thinking. (And read the full interview with Jeanette Hübsch.) Remember that value has a cost side as well as a revenue side and both parties MUST manage both.

Sourcing Excellence IS Optimization!

Sourcing Excellence requires optimization. Not AI. Optimization. We have finally reached a point where nothing else will get you there.

And Sourcing Excellence requires Paul Martyn. You need someone who has built and led programs, evaluated and employed multiple tools, and has the decades of experience to bring the insights you need instantly to the table. With many of the sourcing optimization greats (who founded CombineNet, VerticalNet Tigris, Trade Extensions, etc.) retired or moved on, the number of people left who have over two decades of practical experience are countable on your fingers (just like the number of analysts who have been consistently covering this space for two decades). Paul Martyn is one of the few, true, optimization masters left. So if you want to save your supply chain, reach out to Paul.

If you want to understand why, as well as why sourcing excellence truly requires optimization (as it’s time has finally come), since I know you won’t listen to me, read Paul’s ongoing Sourcing Excellence series, which just saw Part 11 published.

  1. Part 1: (Optimization is Thinking)
  2. Part 2: (Optimization Frames Reality)
  3. Part 3: (Optimization is More than a Capability)
  4. Part 4: (Optimization Changed the Game)
  5. Part 5: (Optimization Must Always Be On)
  6. Part 6: (AI is NOT Yet Fly in Procurement)
  7. Part 7: (Innovation is Just an Input)
  8. Part 8: (Orchestration is the Key)
  9. Part 9: (Value is a Game)
  10. Part 10: (Constraints Dictate)
  11. Part 11: (Constraints Vary)

Another Reason To Avoid AI: NO ECONOMIC GROWTH COMES FROM AI!

A recent study by Goldman Sachs, summarized in Fortune, found no meaningful relationship between AI and productivity at the economy wide level/.

Think carefully about that. 450 Billion, which is more than the GDP of over 100 countries, was sunk (and I mean sunk) into AI last year — for the net result of ZERO economic growth. For 1/6 of that, every college in the US could be free — and you’d have 20 Million smarter adults with no student debt dragging them down, causing them stress, and zapping from their productivity. For 1/12 of that, you could eliminate all the hunger and food insufficiency in the US. For 1/50 of that, you could re-open Alcatraz and provide a King with his own special castle and his own moat.

In other words, there are so many better things that could have been done with that money — including training your people to be more productive, modernizing processes for efficiency, and building deterministic tech that actually works at 1/100 to 1/10000 of the compute power in a data center that’s already powered up.

The only company “winning” is Nvidia, who provides the chips, which means that most of the money is going to its factories in Taiwan and South Korea, and those are the only countries that are actually winning while Americans, who were laid off in droves last year, get poorer, colder and hotter, hungrier and thirstier (as AI sucks up all the energy, which is now not available for heating or air conditioning, and all the water for cooling, which is now not available for drinking or farming).

Think about that the next time you think an overpriced clod or chat, j’ai pété wrapper, even if hyped up as an AI Employee by the A.S.S.H.O.L.E., is going to solve all your problems. Especially since all the Age of AI has done for us is make us dumber, poorer, and less prepared for what is to come next than any age that has come before.