Category Archives: rants

If You Still Don’t Believe That Gen-AI is Bad for Procurement …

Then maybe you should do the math.

It’s very expensive for what it doesn’t do. You can pay 10K a month or more just for a conversational interface to search your data or push data into your applications. For 10K a month, you can get a decent core P2P application or source-to-contract application that, well, actually does something.

It’s even more expensive to train these systems on your policies, connect them to your applications, test that basic requests generate reasonable responses, train it to guide your users to get to an eventual answer, and so on. This could easily be more than a year or three of license fees.

But the true costs are in the utilization. Every time a user asks a question, or responds to a question posed by the Gen-AI to try and elicit the users intent, it takes compute time. LOTS of compute time. At least 10X the compute time of a standard search engine or keyword based retrieval system. In some cases, 30X. (The wattage required is easily 10 to 30 times traditional Google search.) So if you’re a mid-sized organization with more than 1,000 employees, a portion of your cloud computing costs, which average between 2.4 Million and 6 Million a year (according to CloudZero), is going to increase 10X to 30X. Let’s say 5% of that was basic search and inquiry, 120K to 300K. Almost inconsequential. But multiply it by 10 to 30, and you’ve just added another 1 Million to 9 Million to your bill. Think about that.

That “low-cost” Gen-AI “chatbot” that makes enterprise search and application interface “easy” (but not as easy as a well designed workflow, FYI), that you think costs 10K a month after implementation, training, and most importantly, cloud computing costs could actually be costing you 100K a month (or even 500K). For what? A fancier Google?

As Procurement professionals, you can, and should, do the math. So even if you don’t believe the doctor when he says Gen-AI is a fallacy, then believe the math.

The math says Gen-AI is just NOT worth it.

Cost Savings is NOT Cost Cutting …

… and we need more articles that hammer this point home!

A recent article over on the Supply Chain Management Review (SCMR) focussed on how strategic cost savings differ from cutting costs, highlighted a recent survey from Boston Consulting Group (BCG) that found that while 65% of executives are prioritizing supply chain and manufacturing costs as the biggest levels for organizations to pull for cost savings, 52% [are still focussed on] labour and non-labour overhead costs. OUCH!

Most Supply Chain / Procurement Departments are understaffed and/or under platformed due to lack of talent and lack of available budget. They’re also a very small part of the organizational headcount, which in many organizations is now a small part of total spend. As a result, labour is not the problem. External spend is.

And kudos to the SCMR and Laura Juliano from the Boston Consulting Group for pointing out that strategic cost control is the right approach.

If you’re spending 100M on a category, you should be doing a lot more than just a 3-bids-and-a-buy RFX, cutting a PO, and paying an invoice. A lot more. And looking at more than just the unit cost — at the very least the total cost of ownership from initial acquisition through warranty/repair and eventual disposal, if not full total value management which also looks at brand value, bundled services, etc. Even well managed direct categories usually have 3% or more savings opportunities, and those that were not well managed can have two to three times that (in the 6% to 9% range). In other words, giving one person the time to properly source one category, even if it takes 3 months of man effort, can save 3M. Even if the fully burdened resource costs your organization 240K a year, that’s an ROI of 50X on the proper use of that one resource’s time.

This one example surfaces the key point of strategic cost control. It requires strategy and strategy requires PEOPLE with real HUMAN INTELLIGENCE (HI!). (Not hallucinatory Gen-AI like “chat, j’ai pété”). People who can analyze the situation, the available data, case studies from similar (historical) market situations, suppliers, products, and make the overall best decision(s) for the organization. And, preferably, people who can also consider the sustainability of their decision (and the implications with respect to any regulations in laws in countries they source from and sell to). (Senior Procurement leaders can’t ignore any sustainability requirements they are subject to [40% are], they definitely can’t be unaware of legislation that could affect them [37% are], and they definitely can’t be making awards to suppliers and/or for products that might just disappear in a year or three.)

In other words, you can’t reduce headcount. (You may need to replace people if you initially hired people who thought strategic procurement was catalog comparison or invoice verification, of which 95% to 99% can be fully automated, but never, ever reduce the number of people in Procurement.)

The Procurement Space is Filled with Hogwash! It’s Time We Start Calling It Out!

Not that long ago, Jon THE REVELATOR noted that nothing matters more than getting your messaging right in an article over on LinkedIn. Quoting a piece from 2010 where, in the colliding worlds of traditional and social media, the line of distinction is not as clear. Even though there are no real technological boundaries to limit the number of blogs, websites, and news sites, it is only a matter of time before the over-abundance of writers will manifest itself in the form of Aldous Huxley’s greatest fear and lament that truth would somehow “be drowned in a sea of irrelevance.” If not irrelevance, then one of information overload.

His lament echos that of Sarah Scudder who notes to ProcureTech brands that when we look at your website, we have NO idea what you do. You confuse us and say the same thing as the other 23+ brands in your space. Your platform is AI enabled/AI backed/AI enhanced/AI driven but what problem are you going to solve for me?! That the majority of marketing is the exact same messaging with no actual meaning.

As a result of this, and THE REVELATOR‘s comments, the doctor was forced to note that he’s getting fed up with the use of the word “content“. The Oxford dictionary defines content as “information made available by a website or other electronic medium”.

The Oxford diction then defines information as “facts provided or learned”.

There are NO facts in most of the hogwash these marketers are pushing onto the market. Therefore it is NOT content. Let’s start calling it what it is: HOGWASH! (And refer to our recent piece where we demystify the marketing madness for you for some of the more common, and more egregious, examples of this Hogwash!)

Content must be informative (precisely what you sell, precisely what it does, precisely how it helps the customer, and precisely what results the customer will get). Otherwise, it’s just HOGWASH!

As the doctor has said before, there’s a reason SI hasn’t returned to sponsorships [yet] (and that the doctor hasn’t authored any public papers/books for anyone in quite a while) — and it’s because almost none of these companies truly care about their customers anymore, once they take the (Investor/Angel/VC/PE/Wall Street) money, it’s only “sell, sell, sell“).

(If these companies did care, they’d be lining up asking us for the EDUCATION the doctor and THE REVELATOR used to provide, that, in the doctor‘s case, helped every single sponsor get the exit they weren’t even necessarily looking for at the time … because, even if it sounds plain vanilla, there’s nothing [potential] customers value more than the education and insights they need to do their jobs that their employer, who cut the training budget years ago and used the bonus money for a defective “chat, j’ai pété”-bot, won’t provide).

So, dwelling on this, it leaves the doctor with a question. Should we start calling out ALL the HOGWASH as we see it? Could we even keep up? Or should we stick to the HOGWASH of the week?

Is Procurement Complexity at an All-Time High?

A couple of months ago, CIPS and RS released the 2024 Indirect Procurement Report ‘Maintaining Focus’ that focussed on the state of the sector for those responsible for supplies supporting maintenance, repair, & operations (MRO). The survey, which drew a record number of responses, including a large number of younger individuals contributing compared to prior years, like many other, provided a lot of data points and statistics, but unlike other surveys, was pretty surprising.

Why?

Usually, when a report asks about business pressures, challenges, top areas of focus, etc., there are typically 2 or 3 responses that the majority of respondents agree on. But in this survey, the top business pressure received 32% agreement, the top challenge 37% agreement, the top day-to-day challenge 33%, and top activity to drive efficiency 27%, the top strategy 26%, the largest challenge to delivery ESG 39%, the biggest driver of downtime 19%, the top indicator for supplier performance management 44% (which is as close as we get to 50%), the top reason to adopt new tech 32%, the top benefits of a digital procurement service 29%, etc. It would have been really useful if CIPS did a study as to why (especially when we are so used to Deloitte, McKinsey, and Accenture studies with so much agreement), but they didn’t. So we have to hypothesize.

And the hypothesis that the doctor is coming to is that complexity is at an all time high and, because of this, most procurement professionals, especially newer professionals, just don’t know where to focus. There are too many challenges, too many demands, too many conflicting goals and pressures within the organization, and too many possibilities to address them, and with all the meaningless marketing mayhem and Gen-AI garbage, there’s no real guidance out there.

All-in-all, for all but the most die-hard seasoned professionals who remember the last time Procurement was this challenging (which was decades ago, since the 2000s and 2010s saw the constant introduction of newer, greater, technology; steady, stable, globalization; affordable (if not cheap) logistics; lots of sustainability talk, but no real regulations (beyond RoHS, WEEE, and their ilk); etc.), most Procurement professionals have never had so many challenges, demands, regulations, and technology options to deal with.

And if the doctor‘s right, then what is the solution? (He’ll tell you one thing — it’s not intake to orchestrate, but that’s a different rant [but see point 11 of the market madness].) It’s a very good question, and, right now, even the doctor doesn’t have the complete answer. But while technology will obviously be part of the answer, the full answer will require clarity and Human Intelligence (HI). So get ready to wake up and use your brain. There’s no big red easy button for the mess McKinsey and their ilk have (helped to) put us in (with excessive outsourcing and an utter lack of clarity on tech)!

Demystifying the Marketing Madness for you!

The marketing madness is returning, the incomprehensibility is increasing, and the terminology almost terrifying, so here’s the simplest easy-peasy guide the doctor can make to interpreting what the messaging is actually saying, if it’s saying anything at all!

AI-enabled/AI-backed/AI-enhanced/AI-driven: We don’t actually have any capabilities that you won’t find in one to three dozen of our peers, but since they’ve all jumped on the “AI” bandwagon, we will too and use the exact same meaningless messaging. (Remember, there are NO valid uses for Gen-AI in Procurement and most valid uses for “AI” are constrained to specific use cases, the rest of the time it’s just rules-based RPA/Automation.)

Autonomous Sourcing: If you configure enough rules, or, even worse, turn on our Gen-AI auto-negotiator, the platform, given a demand, will auto configure and run a sourcing event to the point it selects a supplier and sends out an award notification, with little to no guarantee it’s what you wanted (if you turned on Gen-AI).

Delightful Procurement: terribly sorry, but even the doctor can’t translate this one!

Intake-to-Procure: Takes a request in, but doesn’t do anything with it … unless you have a Procurement system it can automate or punch into. (As the doctor has said, intake on its own is Pay-Per-View on your data, and something that SHOULD be included in every proper Procurement solution because you should not have to pay another third party to see YOUR data!)

Margin Multiplier: Our ROI isn’t much better than other best-in-class solutions appropriately applied (the difference between the savings achievable from an average Strategic Procurement/Source-to-Pay and a Best-in-Class Strategic Procurement/Source-to-Pay platform appropriately applied is typically less than 2% [unless one platform includes appropriate SSDO and the other doesn’t] … i.e. you might get 12% savings instead of 10%), but since it’s best in class, you might be able to multiply your margin if all the math works out (3% to 6% instead of 3% to 5.8%), and Margin Multiplier just sounds so much cooler!

Orchestration: Cloud-based middleware that allows you to connect platforms using their APIs through a UX and build data-based workflows that pulls data from one platform and pushes it to another while controlling a multi-application process. Unless it supports integration beyond source-to-pay applications, likely not that useful as it just ADDS to solution sprawl when you can just direct connect the S2P applications yourself using the APIs and rules-based automation to push and pull data (as they all work on essentially the same data).

Smart Procurement: Procurement powered by rules-based workflows, but smart just sounds cool, eh?

Spend Orchestration: We don’t do anything different than all the other orchestration providers, but it sure sounds cool!

Sustainable Procurement: Generally speaking, this simply means you can see supplier / product sustainability (carbon, etc.) data when sourcing, but we don’t actually help you identify more sustainable suppliers or, more importantly, how to work with your supplier to decrease the carbon footprint, raw material utilization, fresh water footprint, etc.

Supplier Insights: An extensible, centralized supplier information/relationship management platform that can be augmented with ALL related supplier finance, product, location, compliance, risk, ESG, and other relevant data. A capability offered by a few dozen platforms, which means this platform isn’t that special.

In short, all of this new marketing gibberish is essentially complete bullcr@p and I have to echo the desire of Sarah Scudder and Dr. Elouise Epstein for Procurement solution providers to tell us what your solution actually does and, in the doctor‘s words, CUT THE CR@P!