Category Archives: Procurement Innovation

Strategic Procurement for Strategic M&A

A recent article over on Fierce Healthcare on how strategic procurement can maximize M&A benefits noted that consolidating procurement can slash costs by standardizing purchasing processes and taking advantage of volume discounts for supplies because a smart business buying strategy involves using one technology platform for purchasing a wide variety of products from multiple sources.

The healthcare sector has also been ripe with M&A over the past few years, with $13 Billion in revenue now required to be a top 20 healthcare system, as many systems have grown significantly as a result of inorganic M&A growth over the past few years. According to the article, the recent M&A activity has been characterized by cross-geography deals designed to create value by scaling investments in platform capabilities across digital, analytics, shared services and workforce management.

But Procurement can find more value beyond shared products, shared supply base, and shared systems.

As hinted in the article, Procurement can also:

  • identify opportunities for shared services across the merged companies:
    this can allow for service provider contract consolidation and renegotiation for better rates
  • better workforce management:
    Procurement can help analyze the workforce needs across the proposed combined organization to better reallocate workforce needs (and possibly reduce the need for outsourced services)

But it doesn’t have to stop there.

An organization spends money across:

  • employees
  • contractors
  • facilities
  • utilities
  • products
  • systems

Procurement can help identify opportunities across each of these.

In other words, don’t overlook:

  • facilities:
    maybe you can reduce the number of locations through relocation of some personnel, and even reduce the overall cost through better facility identification
  • utilities:
    some states have energy deregulation, and there is significant opportunity in telco (like SaaS)
  • software: well beyond the S2P tools

Anywhere money is spent, Procurement can help provide an objective, fact-based view — not just on product-based spend.

Are the Seven Suites Sailing the Seven Seas Sans a Sextant?

Post Edit: The summary on LinkedIn has been removed. Note that this is an opinion piece and read why it was removed from LInkedIn in the Social Media Policy.  [Also note that this is about [marketing] direction, not about the actual platform, which we have covered, or advised the coverage on, here or on Spend Matters (in the past)!  (See the end of this article for links.) We have recommended all of these suites and will continue to recommend them from a product and platform perspective where they are a great fit (even if we lament the [marketing] direction).]

You knew this was coming. It was foreshadowed in our top 10 ways to be labelled as a (Procure)Tech Noise / TroubleMaker article. (Where satisfaction was guaranteed if you followed the advice.)

Basically, in this new age where hype trumps straight-shooting, fake Gen-AI* trumps HI (Human Intelligence), intake and orchestration trumps the ability to actually do Proper Prudent Procurement, and carbon calculation trumps the ability to actually do anything about carbon reduction, the question becomes are the senior stalwart suites, who have an install base, good recurring revenue, and the ability to weather storms, staying the charted course or straying off towards the rocks and the siren’s call?

More specifically, are the seven suites that have ruled the enterprise Source-to-Pay Solution Maps since those maps were introduced still staying the course and slow and steady moving towards the next generation of real Source-to-Pay solutions that will solve real customer problems, or getting lured in by the siren’s call and sailing towards the rocks (and inevitably delaying the next great version of their platform)?

After noting we have links to previous in-depth coverage at the end of this article (so you can get the full picture), let’s take them one-by-one:

(SAP) Ariba

As far as we are concerned, SAP has been sailing without a direction since they acquired Fieldglass and Concur in 2014 (after acquiring Ariba in 2012) and formed the Intelligent Spend Group in 2015 (which has since seen numerous changes in leadership, direction, and even interpretation). They started off with a great idea (like Jaggaer who came up with “One” in 2018 after acquiring Pool4Tool and BravoSolution in 2017), but never really did anything significant with those acquisitions. (We can’t say why, but numerous leadership changes suggest disagreement on direction and priorities.)  They are still, more or less, three solutions, on three stacks, which aren’t deeply integrated … unless, of course, you buy their new brand-spanking new Spend Control Tower which will integrate all your Procurement, CWM, and T&E spend, as well as your HR/payroll spend and other un-captured spend if you have other SAP modules or modules that integrate with SAP.  (Or augment it with an orchestration interface that was built for SAP.)

Their top of page message about “automating spending processes and actively manage more spend for better control, greater value, and more savings” and “managing all sources of spend for increased control and business resilience” is pretty good, and one might think they are staying the course … still a decade behind the times in some ways (as Control Towers were so early 2010s), but staying the course. Unless, of course, you were paying attention to their most recent announcement pushing “SAP Business AI built into your procurement processes“. Even though they first announced an AI Co-pilot in 2018, it received pretty low fanfare, and was kept in the backroom, until this year, where it is now “super-charging” its AI Co-pilot with Gen-AI and other new capabilities!

While a bit behind the times (which makes sense for them as their enterprise customers don’t want to be suffering hit-and-miss innovation on the bleeding edge), everything was looking pretty good in our books until they started diving all in on the (Gen-)AI Co-pilot.

We’re especially saddened by the new, deep, focus on the (Gen)-AI Co-pilot because, and while this is as much on the SAP side as the Ariba side, they seemed to have been making some very good progress on the improvement and modernization of the direct side — catching up to the big specialists (namely Ivalua and Jaggaer) that were, through their DirectWorks and Pool4Tool acquisitions, respectively, working hard to build a better direct mousetrap and take SAP customers away).

Coupa

Well, you know our opinion here … the way things are going, this could be Coupa’s Third and Final Act. They replaced BSM with MMM, which they say stands for Make Margins Multiply, but what does that mean?

Even worse, they’ve apparently now gone all-in on AI, recently releasing 100+ AI powered innovations in their spend management platform and redoing their tagline to “optimizing your spend with the #1 AI total spend management platform“. Which is sad for us. It’s acquisition of Trade Extensions made it the #1 sourcing optimization platform and its acquisition of Llamasoft gave it the ability to optimize supply chain networks as well. It could literally optimize your spend across Souce-to-Pay and Supply Chain better than any other source to pay platform out there and yet it too has gone all in on AI, which does NOT optimize!

Ivalua

Ivalua, which, like Coupa, has been tracked by SI since the early days, was one of the platforms we felt was on the right track. Especially since it was one of the few platforms that was built up on one native, integrated, code base that allowed for true, integrated, end-to-end S2P processes that felt fragmented on other suites that built up their functionality by acquiring modular vendors and loosely integrating them.

At first glance, it seems like they are still on the right path. Off the top its “SIMPLIFY PROCUREMENT with a Unified Source-to-Pay platform” messaging is on course. Moving on to “complete transparency, seamless automation, and enhanced collaboration” elicits a hear, hear. “It will make you #LoveProcurement“. Doubtful in our books (unless you love it already because, if you love procurement, you love the process and not the tech). But you certainly won’t hate it with a good platform. “Make your spend matter with a complete, future-proof platform to manage all spend.” Not quite all spend, but certainly enough to make a big difference!

… and use “IVA to supercharge procurement with Gen-AI“. NOPE! It was a great start when they tried to be the first S2P vendor to create a true cross-platform search capability through a single search bar. Their early chat-bot interface which allowed for the execution of platform functions through simple statements, which could be learned and remembered, as they would be interpreted the exact same way every single time, was good for people who didn’t want to jump around through menus and modules and quickly access reports, documents, and simple system functions.

But when you introduce Gen-AI, you have unpredictability, the need to answer six or seven questions to explain, and get, what you hopefully want, and the opportunity for inappropriate (and if you hook it up to the web, even bad) data to be retrieved, which means bad decisions and bad results. In our view, they were so close, but now … we’re hoping they reverse course just a little bit.

Jaggaer

As we noted above, after the acquisition of Pool4Tool and BravoSolution in 2017, Jaggaer announced “ONE” in 2018, but under Accel KKR, they never achieved “ONE”, and, in fact, they didn’t even come close to true cross-platform data integration (level 1 on a 5 level hierarchy of integration) in our deep assessments (which included SolutionMap evaluations at the time), largely due to all the layoffs and operational cost reductions. It wasn’t until Cinven (who flipped them to Vista Equity earlier this year) acquired Jaggaer in 2019 that they started serious integration efforts (and, in the early 2020s, made very good progress).

Since then, they have continued to focus on:

1. “Harnessing the power of ONE intelligent S2P platform to turn procurement into a value-adding force with Jaggaer’s AI-powered, S2P solutions and supplier collaboration platform“, which is great.

2. “Unlocking the shared value in your procurement ecosystem to accelerate business outcomes, automate complexities, and manage spend with Jaggaer’s intelligent S2P and supplier collaboration platform“, which is greater.

3. “Accelerating your autonomous commerce journey to turn procurement into a value-adding force with Jaggaer’s AI-powered S2P solutions and supplier collaboration platform“, and there it is. Autonomous is okay when “autonomous” is just automating tactical tasks. But AI powered … especially when they are now going down the Gen-AI path, not good. Not good at all in our books. They have all the know how between old SciQuest (Indirect), Pool4Tool (Direct), and BravoSolution (Complex Services) to be one of the few suites that can handle any type of buy using best-in-class processes and capabilities. Continuing to bring that together, magnifying the opportunities, and continuing to introduce new capabilities and streamlined workflows and interfaces around that would not only be a huge differentiator, but one of the biggest in our book. Wasting talent on Gen-AI conversational interfaces which carry the risk of exacerbate as many complex events as they simplify, the exact opposite.  (As per our previous, grudging, admission, we believe Gen-AI has very few valid uses in Procurement, and believe that for most of those uses, Jaggaer already had better tech and approaches — and all that was needed was some streamlining and UX improvements.)

Edit: 2024-Nov-06: Jaggaer has reached out and indicated that while they believe in using Gen-AI wherever they think it has value, it is fully optional and they are more concerned with maintaining their focus on full platform integration and utilization of the right AI for automation where tactical processes can be automated.  Hopefully marketing can balance the messaging more going forward so people don’t make inferences to the contrary.

GEP

GEP used to be all about “SMART” Procurement. They named their suite, which was a complete re-write from scratch as a fine-tuned integrated suite, “SMART” back in 2013. They were playing a bit of catch-up, but it was a good, well oiled, integrated suite. Then they built NEXXE, so they could do supply chain, which, while not quite on the scale of a Big dedicated Supply Chain player (like Blue Yonder or Infor), given that they are also a full-service company, was more than good enough to support end-to-end S2P and Supply Chain for many of their G3000 clients.  (And if you knew who some of their clients were, you’d be amazed.  They support big names with very complex sourcing, procurement, and supply chain problems.)  By the end of the 2010s, the UX needed updating in both, but if you look at the Spend Matters Solution Map scores, it was more than enough to do the job. A few new advanced capabilities in a few areas and it was a great solution for their target market (G3000 who wanted end to end software and services across S2P and Supply Chain).

So where are they now? “GEP’s AI-First approach seamlessly integrates strategy, software and managed services, enabling enterprises to rapidly establish the infrastructure and capabilities necessary to build and run high-performance procurement and supply chain organizations.”

Why, why, why? First of all, in our experience, customers don’t buy GEP for AI-First, or even UX, they buy because they want the one-throat-to-choke solution-and-services model that works that GEP offers across source-to-pay and supply chain, which is something only SAP and Oracle can offer, and, more importantly, neither of them can offer it as a company that started as a S2P, and then Supply Chain, specialist (as SAP and Oracle both started as ERPs and also split focus across so many other areas — HR, CRM, etc.). Secondly, they want their their Procurement and Supply Chain managed, not run by a dumb bot who may or may not make random decisions on anything at any time. Thirdly they want predictable, repeatable results that they can bank on, as well as the ability to get to the root cause when something is screwed up. None of this says, or even implies, AI.  And definitely not Gen-AI!  Ugh.

Zycus

While much less visible in North America over the last few years, Zycus for a while was making a splash as the “affordable” solution that could be obtained in the six (and not seven) figures and do the majority of what most large mid-markets (LMM) and enterprises needed, especially in industries that didn’t require a lot of “direct”. It was a great solution for LMM multi-nationals on the rise to true global enterprises. And their messaging was straight to the point: the “Power of Procurement” through their Source-to-Pay Procurement Suite. It was clear what they did, what they offered, and why you wanted to use Zycus to go digital. Even the most novice of Procurement practitioners could understand it. Heck, they were one of the first to build a custom intake module (iRequest) for their entire platform a decade ago. (It should have been built in at the core, but not many suites would admit this oversight halfway through their journey and actively work to correct it.  Zycus deserves big props for this.)

Where are they now? “Make Procurement Intelligent: World’s first Generative AI powered S2P Platform that helps you achieve 10X speed and efficiency in procurement.” All-in on the Gen-AI hype train! (And given how many specialists launched on Gen-AI over the last couple of years, and how they are usually showing up after the party starts, following a best value approach, we will tell you that while they are one of the first, they are definitely NOT the world’s first.  However, in fairness, we will note that they were undeniably one of the first to investigate and deliver automated spend classification, and were so early in doing this they could have been the first full source-to-pay suite to have it, all depending on your definition of suite.)  Basically, more of our hopes and dreams that the big suites are resisting the Gen-AI hype are dashed.

Interlude

So where are we now? That’s six suites all in on AI, and, for the most part, Gen-AI, and, in our opinion, sailing the seas sans a sextant (at least with respect to their marketing direction)! (After all, despite the fact that it continues to perpetrate the Gen-AI hype, Gartner recently reported 85% failure rates in AI projects last year — and Bain is now reporting technology project failure rates of 88%, an all time tech failure high! This should be more than enough to turn away from Gen-AI, even without a discussion of all the problems Gen-AI comes with and all the risks Gen-AI entails. [Hallucinations, sleeper code, implanting false memories, etc. etc. etc.])

This is very sad in our view as these are six suites that grew and attained their status by attempting to, and then building, real solutions that solved real customer problems sufficiently enough to sign big customers, keep big customers, and grow big customer accounts. Since, with the possible exception of Ariba (that might have been added on by a SAP ERP customer), these aren’t ERP vendors with ERP lock in, you know they had to, and have to, be doing something right! Why risk that track record on unproven (and usually inappropriate) (Gen)-AI?

Now, as per our Coupa coverage, we hope we are dead wrong, that they all have a plan to continue building great solutions without Gen-AI (dominance), that they will continue to remain strong suites, and that we will be covering them for years to come (if they ever return our emails and messages and answer our demo requests).  We’ve invested almost two decades covering these solutions, and, more importantly, we have recommended and strongly recommended all of these solutions in the past and fully expect to keep doing so.  (Some clients need a suite, and we base our recommendations on current product capabilities, not how good the vendor is at marketing those capabilities.  That’s the advantage of having a deep understanding of technology!)

This just leaves us with:

Oracle

Specifically, their Fusion Cloud Procurement, which, to be honest, was the one suite we would almost never put on a shortlist for a company looking for a specialist S2P solution since they were usually less extensive and less feature-rich than the other suites that started as best-of-breed. (But definitely would for Oracle Shops that liked strong S2P integration with the ERP.)

However, when you go to their page, you see their messaging is all about asking if “your procurement suite can automate procure-to-pay, strategic sourcing and supplier management processes“? Then their messaging about how their “Fusion Cloud Procurement capabilities, built-in collaboration and analytic insights drive agility, manage risk and increase margins“. Moreover, “Oracle Fusion Cloud Procurement is an “integrated source-to-settle suite that automates business processes, enables strategic sourcing, improves supplier relationship management and simplifies buying resulting in lower risk, improved savings and greater profitability.” And, finally, it consists of modules for supplier management, sourcing, procurement contracts, purchasing, direct procurement, and procurement analytics.

Moreover, not a single mention of ANY AI on their main page. Just straight to the point messaging an average buyer and executive can understand. Moreover, searching for AI immediately takes you to Oracle AI for Fusion applications where you have a list of traditional AI for spend classification, predicted shipment and cycle times, dynamic discounting, supplier recommendations, demand sensing, anomaly detection, etc. No Gen-AI out of the box. If you dig deep, you find that you can have a Gen-AI based Procurement Tool with Natural Language Queries if you want it (and you are willing to custom build, configure, and train it), but they aren’t pushing it, you have to look for it, and ask for it. In other words, if you really want it, you can have it (because some customers will want it without researching it and they do give customers what they want), but they recognize you don’t need it for value, so they aren’t focussed on selling it (or even marketing it). (Just like they didn’t fall for The Cloud is a Crystal Ball hype, they ain’t falling for the Gen-AI Hype [yet].)

And that makes them the only suite that might not be sailing the seven seas sans a sextant (at least as far as their marketing direction is concerned). Now, we’re not saying they’re the best at using the sextant and charting a course, as they are typically behind most of the other suites in leading S2P functionality, but the simple fact they know that getting to your destination requires staying the course says something, and, in our book, that now makes them definite short-list material. Plus, like SAP, most of their customers are big enterprises that don’t want leading (and definitely don’t want bleeding) edge and instead want tested tried and true solutions.  And that’s why they’re going to be around for their 50th anniversary in 2027 and, if they so desire, might even be around in 2077.

In other words, they might be the tortoise, but we know in the end, if it stays the course, it eventually wins the race. (And this is something we never thought we’d write about Oracle in the early days. After all, Davie left Oracle to start the Coupa Factory in 2005 because he didn’t think they’d ever get where was needed in a timely fashion. How times have changed!)

Markets evolve, suites evolve, and messaging evolves.  Maybe when the Gen-AI hype dies down, we’ll see clearer messaging and be able to see the routes the suites are charting.  Only time will tell.

* Gen-AI stands for Generative Artificial Intelligence but should stand for Generative Artificial Idiocy as none of the generic Gen-AI LLM tools are intelligent and, moreover, can’t even do basic reasoning. Only the “generative” part is accurate, as generative literally means “make stuff up” and that’s what this hallucinatory technology does all the time!  (And that’s why SI is so scared when vendors start trying to rapidly incorporate it into their products.  As per previous coverage, their aren’t many valid uses cases with high reliability.)

Now, in full disclosure, SI hasn’t reviewed any of these solutions, except for two discrete modules in Coupa (Sourcing Optimization and Supply Chain Solutions), in the last 2 years, but this is not for lack of trying. SI has reached out (multiple times) to all but two of these companies, and, despite being one of the first sites to cover some these companies in the past (and do so in the early days when no one else would), has either been declined or completely ignored. (All the suites seem to care about now is Gartner and sometimes Spend Matters.)

First Coverage of:

  • Ariba: one of the few vendors that would not talk to SI in the early days, first covered by the doctor on Spend Matters in a 2-part piece in 2018 on Sourcing Decision Optimization Part 1 and Part 2#
  • Coupa was first covered in 2006 on the first Procurement Independence day
  • Ivalua was first covered in 2010 in a two-parter on end-to-end sourcing and procurement (Part 1 and Part 2)
  • Jaggaer is rebranded SciQuest, which was another vendor that wouldn’t talk to SI in the early days, even though the majority of its acquisitions, including AECSoft, Upside Software, Spend Radar, CombineNet, Pool4Tool, and BravoSolution, all did; the doctor did advise on Jaggaer coverage on Spend Matters as Lead Solution Map Analyst, but did not cover them directly;  he would advise checking out Spend Matter’s coverage if you have access: (S2C 1, S2C 2, and
    S2C 3 as well as P2P 1, P2P 2, and P2P 3)
  • GEP was not covered on SI, even though it acquired Enporion which was, as GEP was not highly relevant for SI’s market (focussed on companies who wanted insight into DIY platforms); the doctor did work with Xavier Olivera, Pierre Mitchell, and Jason Busch to do a deep dive in 2019 (Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7) which was the 6th most popular PRO article of the year! (Source)
  • Zycus, unfortunately, was not covered on SI as they never made our radar until the doctor started contributing to Spend Matters, where he advised on coverage, but did not do the vendor coverage (which included the 2018 Vendor Analysis, which we recommend: Part 1, Part 2, and Part 3)
  • Oracle, another of the original vendors that would not talk to SI, was never covered on SI, and while the doctor did consult on their platform capability during Solution Map capabilities, never contributed to a write-up (but would recommend anything Xavier Olivera or Jason Busch ever wrote about them, including Cloud Surprise, Part 1, Part 2, Part 3, and Update 1)

# Note that the Spend Matters site migration of June 2023, in addition to removing all articles pre-2013 and many more pre-2020, also dropped co-authors on many articles as well. Most of what the doctor wrote in the early days was always co-authored with Jason Busch who usually received lead credit (and, thus, was the author who survived the migration).

There are Many Key Elements of Sustainable Procurement Strategy — But Three Fundamental Elements that Must Be Present

A recent article over on Material Handling & Logistics on Key Elements of Sustainable Procurement Strategy outlined for key strategies for sustainable procurement that were on point:

  • A Holistic Approach
  • Data Integration
  • Pay it Forward
  • Stakeholder Engagement

But meaningless if you don’t have the basics in place:

  • trained talent
  • well defined processes
  • solution-oriented systems

Trained Talent

All of the above, and all of the other key elements of a strategic procurement strategy not listed, require talent to execute. Talent that is appropriately educated, experienced, and trained on all of the key elements appropriate to your organization. With respect to the above:

  • talent needs to define the right holistic approach
  • talent needs to identify the critical data, formats, and integration strategy — and make sure it is done effectively
  • only talent can handle delicate supplier relationships to make sure it is truly paid forward
  • shareholders need to be engaged effectively, and that requires real talent

Well Defined Processes

Statements, directions, and mandates don’t accomplish anything. Neither do people without an appropriately designed and detailed plan — which goes well beyond we’re going to engage supplier S or buy product P. Procurement success rates are high when there are well thought out and appropriately defined processes that can be followed by all those involved in a project or process, and generally low otherwise. Moreover, without well defined processes:

  • there is no holistic approach, it’s just a buzz phrase
  • data integration is just a one time pull into a system or push into a warehouse, and it gets outdated faster than fashion on Melmac
  • it takes more than smooth talk to pay it forward, it takes processes that ensure knowledge is transferred to, effort is minimized for, and real collaboration takes place with suppliers — it takes processes to make sure nothing critical is overlooked that could hamper the organization’s goals
  • while talent is the most critical to stakeholder engagement, good processes are critical to ensuring requirements and data is efficiently collected and retained (as a stakeholder should never have to make the same request or provide the same input twice) and no concern is overlooked

Solution Oriented Platforms

Sustainable Procurement ultimately relies on appropriately trained talent executing well designed processes with the help of platforms that help them do the jobs they need to do on a daily basis. Platforms that automate the tasks and solve the problems the organization has, not platforms that do nothing but act as fancy middleware or slap roll-the-bones AI-assisted conversational interfaces on top of software that never worked in the first place. Sustainable Procurement requires that the procurement department be able to get stuff done. That will rarely be AI, or spend orchestration, or the buzzword of the day.

  • orchestration may sound like it supports a holistic approach, but all those systems do is tie systems together that actually do the work through a common interface, which, in its attempt to homogenize everything, often weakens the solutions for the individuals that need to use them the most; a holistic approach is about getting things done with systems that get things done
  • you can’t integrate data without the right platforms that collect, process, and normalize the right data the right way
  • it’s a lot easier to pay it forward when you have the right platforms that support the processes and the people who need to pay it forward
  • it’s easier to manage stakeholder engagement on systems designed to support the stakeholders in question, in contrast to one-size-fits-all (but serves no one) “orchestration” systems

In other words, if you truly want sustainable procurement, start with making sure the foundations are in order. The rest will follow in a straight-forward manner once you have the basics right.

Does Logistics Management Understand Procurement Better than Most Procurement Publications?

A recent Logistics Management Article on The State of Procurement in 2024, starts off with Procurement is fundamental. It spans everything from day-to-day purchases to measuring sustainability to future-proofing operations for long-term growth. It’s a wide spectrum of mission-critical responsibilities, spanning all business functions.

As we noted in our recent article on The Future of Procurement is the Past, Procurement is at the heart of the business. It’s always been a core function and always will be. And once businesses realize that the key to sustained profitability going forward is getting back to basics, it will be again.

And while the article says “Procurement is transforming at lightning speed“, it’s only partially right … leading Procurement departments are transforming their technological baseline at lightning speed to become more efficient and effective, but they are not changing the core, strategic function they perform, they are just implementing processes and tools that allow them to perform those core, strategic functions more efficiently and effectively.

Why? According to the article, which quotes Gartner, its due to the intersection of accelerating changes in risk management, ESG, and technology and the complexity and challenges of keeping up. The internal challenges — such as system complexity, a wide range of vendors and products, and compliance requirements — and the external challenges — rising costs, unexpected economic changes and CSR mandates, and changing digital procurement needs — are increasing by the day.

As a result, many Procurement departments have been going through transformations, sometimes two or three at a times, but not all are turning out as planned. This is because, as the article notes, most of these projects focus on implementation, and not the reason for; relies too heavy on staff(‘s lack of) experience and implementer inexperience; buys into the vendor’s “one size fits all” approach; and leaves workflows incomplete. Digital is not an option, but how you approach it is. The article emphasizes simplicity, quoting Gartner’s statistic that organizations that employ design simplicity have a 42% increase in success, but that’s just part of the picture.

As per our previous articles, it’s not just simplicity, it’s focus on what is needed, why, and vetting the platform and the vendor against both. It’s putting the real need first, not the technology, and selecting the right technology for the job. Sometimes it might be AI, but most of the time it will be classic tech that’s been on the market for 10, or 20, years that has been honed over the years by a vendor laser focused on solving a subset of Procurement problems in the best way possible for companies in the industries, market size, and geography the vendor is focussed on. As the article notes, there’s no AI roadmap and, as such, significant care should be taken with any AI initiative.

It’s more critical as the article notes, to focus on better data analysis, efficiency, and system (and data stream) interconnection. The more insight you get, the better decisions you can make on system selection.

In other words, the current state is a challenging one, but that’s no different than what Procurement has been going through since the first commercial telephone interchange began operations in 1878. Procurement has always had to deal with change, the only difference now is that it’s coming harder and faster than it ever has. But it’s not like Procurement hasn’t always had to deal with or adapt to change, and it’s not like the best Procurement departments haven’t always done so, it’s just that the challenge has reached a new height. But as long as Procurement employs the same best practices they’ve always employed and does the right due diligence on any solutions they are considering, they will do just fine.

The Future of Procurement is the Past … With Just a Dab More Modern Technology

A recent article in the SCMR asked what is the future of procurement after reviewing a benchmarking report (or at least a press release) from McKinsey & Company on “Where Procurement is Going Next”.

The article quoted a statistic that companies excelling in procurement had a digital capabilities maturity score 40% higher in strategy, digital and data analytics compared to average performers. They also noted that this tracks with the first Procurement benchmarking survey McKinsey launched two decades ago which uncovered a clear link between procurement maturity and higher business performance. (Today, top quartile procurement maturity companies have EBITDA margins at least 5% higher than less mature peers.)

According to SCMR, McKinsey found that the priorities for the next 6 to 12 months is end-to-end margin management; next generation technology, data, and analytics; and talent and resiliency. Translation: focus on sustained profitable growth, make sure you have the right technology to support it, and don’t forget that talent is key to resiliency (or at least not until the budget gets tight and the first thing to be cut is the training budget and the next the compensation budget).

First of all, isn’t that what Procurement’s always been about? Supporting the business in a manner that allows it to be sustainable and profitable, using the tools at its disposal (good negotiators and couriers, then phones and catalogs, then faxes, then emails, etc. etc. etc.), and the right people for the job.

Secondly, now that the time of global expansion and growth is over, inflation is back with a vengeance that was unseen for two decades, global trade is disrupted on a daily basis, capacity is low (thanks to ships scrapped during COVID) and lower thanks to Panamanian droughts and the conflict in the Red Sea (and the renewed need to make the long, and sometimes dangerous, voyage around the capes), sustainability is critical in many jurisdictions, and the marketing mad men can only take your company so far, companies are realizing that they need to get back to basics.

And those basics are good operations centered on what is most important. If we go back to Business 101 (which, unfortunately, many of today’s founders and CEOs didn’t take or forget), businesses survive on profit and profit equals revenue minus expenses. Revenue is not infinite, which means the key to growth is NOT just revenue growth, but expense management. And expense management is good old fashioned Procurement.

Which means the future is the past. The future is that Procurement will regain its importance in any organization that not only wants to survive the increasingly turbulent and troubled times ahead, but thrive.

Procurement is at least the world’s third oldest profession, depending on whether astronomy came first or third, and, as we’ve been repeatedly saying, the core, and importance, has never changed. Not since the first known modern manual was published in 1887. Not since The Royal Mint was founded in what is now the UK in 886. Not since someone was first hired in an ancient metropolis by a businessman to buy goods on his behalf thousands and thousands of years ago. Buy usable, quality, goods and services the business needs at a fair price so that the business can sustain its operation profitably. And that’s where Procurement’s focus, and importance, will return. That’s the future. And it’s the past. Brush up on your history. The “tools” may change but the job remains the same.

We just have to survive Everything Louder than Everything Else.