Myth-busting 2025 2015 Procurement Predictions and Trends! Part 10

Introduction

In our first instalment, we noted that the ambitious started pumping out 2025 prediction and trend articles in late November / early December, wanting to be ahead of the pack, even though there is rarely much value in these articles. First of all, and we say this with 25 years of experience in this space, the more they proclaim things will change … Secondly, the predictions all revolve around the same topics we’ve been talking about for almost two decades. In fact, if you dug up a Procurement predictions article for 2015, there’s a good chance 9 of the top 10 topic areas would be the same. (And see the links in our first article for two “future” series with about 3 dozen trends that are more or less as relevant now as they were then.)

In our last instalment, we continued our review of the 10 core predictions (and variants) that came out of our initial review of 71 “predictions” and “trends” across the first eight articles we found, in an effort to demonstrate that most of these aren’t ground-shattering, new, or, if they actually are, not going to happen because the more they proclaim things will change …

In this instalment, we’re again continuing to work our way up the list from the bottom to the top and continuing with “Category Management”.

Category Management

There were 2 predictions across the eight articles which basically revolved around a shift from generic sourcing to “category management”. As with almost every “prediction” and “trend” in this series, this is yet another prediction that makes headlines every year, no more important this year than the last, and still as unlikely to actually happen because, despite all the lip service around the value achievable from a category focus, at the end of the day, unless the C-Suite is convinced it will save more money (since it’s only savings they are ultimately concerned about), it doesn’t happen. Before we discuss further, here were the two predictions:

  • Category Management Takes Center Stage
  • We’ll See More Emphasis on Category Management Innovation

Category Management is yet another topic that a small contingent of thought leaders, Gurus, and consultants bring up year after year. And it’s yet another topic that never really sees the light of day. Especially when you consider that, at any given time, less than (half-a) dozen vendors take a category-centric approach to sourcing, and only a handful of consultancies push the approach.

We wholeheartedly agree that category centric Procurement is the key to value creation in certain enterprises where some categories are more strategic than others, have unique characteristics that can be exploited at the category level, and where experts can identify unique avenues of pursuit that will allow for strategic differentiation that can allow the company to charge more for the finished products, thus creating the value management that the experts say Procurement should be focussed on. However, as this is a value-centric activity that is, initially, far removed from the cost-cutting focus that CFOs and CEOs ultimately hand down to the head of Procurement, it will continue to live on the periphery of Procurement and only come into play in select organizations for select strategic categories.

What Should Happen? (But Won’t!)

What should happen is stupid simple. Analyze all the categories you buy and determine which categories, if any, should be sourced and procured using a category-centric approach. Then, category strategies and processes should be implemented for those categories and the remaining products and services should be sourced as they typically are. That’s it.

Nine down. Just one (big one) to go!

Myth-busting 2025 2015 Procurement Predictions and Trends! Part 9

Introduction

In our first instalment, we noted that the ambitious started pumping out 2025 prediction and trend articles in late November / early December, wanting to be ahead of the pack, even though there is rarely much value in these articles. First of all, and we say this with 25 years of experience in this space, the more they proclaim things will change … Secondly, the predictions all revolve around the same topics we’ve been talking about for almost two decades. In fact, if you dug up a Procurement predictions article for 2015, there’s a good chance 9 of the top 10 topic areas would be the same. (And see the links in our first article for two “future” series with about 3 dozen trends that are more or less as relevant now as they were then.)

In our last instalment, we continued our review of the 10 core predictions (and variants) that came out of our initial review of 71 “predictions” and “trends” across the first eight articles we found, in an effort to demonstrate that most of these aren’t ground-shattering, new, or, if they actually are, not going to happen because the more they proclaim things will change …

In this instalment, we’re again continuing to work our way up the list from the bottom to the top and continuing with “Cost vs. Value”.

Cost Vs. Value

There were 3 predictions across the eight articles which basically revolved around a shift from “cost cutting and management” to “value creation”. As with almost every “prediction” and “trend” in this series, this is yet another prediction that makes headlines every year, no more important this year than the last, and still as unlikely to actually happen because, despite all the lip service around value, at the end of the day, all the CFO and CEO ultimately care about is increased profit from cost-cutting to make the Board happy. Before we discuss further, here were the three predictions:

  • Cost Management and Value Creation
  • Cost Management vs. Value Creation
  • Shift from Cost Cutting to Value Creation

Every year is the year Procurement is going to switch en-masse from cost cutting and cost management to value creation, and every year it doesn’t happen. We’re constantly being told that Procurement is not a cost center, it’s a value center, and proper Procurement adds value to the business, as a foundation for the “visionaries” to preach the power, and future, of Procurement.

However, as we stated in our discussion of “Strategic Value”, there’s a lot of talk about value creation, but at the end of the day, the majority of CFOs and CEOs define “Value” as “Cost Savings” and, unless Procurement cuts costs, they are not seen as “valuable”. And all of the proclaimed focus on “value creation” gets left on the cutting room floor (where Gen-AI should have been left with the rest of the discarded manuscripts).

However, once Procurement acquires the right technology, it will be super simple to make the right buy at the right price every time. (More specifically, optimization backed sourcing and procurement platforms that build baseline models, capture real-world constraints, import risk data, build minimally constrained risk-aware models, auto-solve them, make the optimal low-cost recommendation, and make what-if analysis easy if the buyer wants to see what would happen by substituting a preferred supplier. Not BS AI!) This means that Procurement will have all the time it needs to focus on strategic value vs. just finding the lowest cost (which takes up all its time now). So this is someplace Procurement should get to relatively soon — but considering we’ve had modern SSDO (Strategic Sourcing Decision Optimization) for almost 25 years, and that for the last decade it could solve large models in real-time with the computing power available, and that the vast majority of Sourcing and Procurement departments have not adopted it, our guess is that they won’t. And Procurement will thus continue to spend the majority of its time focussed on cost cutting.

What Should Happen? (But Won’t!)

If it doesn’t have it already, and it probably doesn’t, Procurement should immediately acquire SSDO (Strategic Sourcing Decision Optimization Technology) and use it for every sourcing event, even if to get a baseline to understand the cost baselines (and how much more they are going to pay regardless of inflation no matter how much they try to negotiate or buy). In addition, if they don’t have it already, they should acquire subscriptions to market cost data (commodity markets, public sector contracts, GPO data, etc.) to understand baseline commodity and product costs.

Then, when they understand the expected cost, use a combination of constraint-aware optimization and analytics to make the right decision as expediently as possible — and not waste time on futile spreadsheet analysis or negotiations that can’t go anywhere (because a price reduction from a supplier would mean the supplier’s bankruptcy).

Then, the focus should shift from minimizing costs, because that’s only going to get an organization so far, and finding value in every buy it makes, partnership it takes, and direction it breaks. It needs to, as per previous entries in this series, focus on maximizing the value of each supplier relationship through performance management and any collaboration required to make sure the expected value is realized for both parties. Focus has to be not just on the lowest cost, but quality and features that buyers will pay more for. Focus needs to be on identifying new products and services that are simultaneously more sustainable and more desirable to the market. And on curbing demand for MRO products and services to prevent spend in the first place. (Just make sure you have the Procurement Infrastructure to support you.)

That’s eight down, two to go.

Myth-busting 2025 2015 Procurement Predictions and Trends! Part 8

Introduction

In our first instalment, we noted that the ambitious started pumping out 2025 prediction and trend articles in late November / early December, wanting to be ahead of the pack, even though there is rarely much value in these articles. First of all, and we say this with 25 years of experience in this space, the more they proclaim things will change … Secondly, the predictions all revolve around the same topics we’ve been talking about for almost two decades. In fact, if you dug up a Procurement predictions article for 2015, there’s a good chance 9 of the top 10 topic areas would be the same. (And see the links in our first article for two “future” series with about 3 dozen trends that are more or less as relevant now as they were then.)

In our last instalment, we continued our review of the 10 core predictions (and variants) that came out of our initial review of 71 “predictions” and “trends” across the first eight articles we found, in an effort to demonstrate that most of these aren’t ground-shattering, new, or, if they actually are, not going to happen because the more they proclaim things will change …

In this instalment, we’re again continuing to work our way up the list from the bottom to the top and continuing with “Data”.

Data

There were 4 predictions across the eight articles which basically revolved around “data-driven decision making” with some sideline focus on the need for “data governance”. As with almost every “prediction” and “trend” in this series, this is yet another prediction that makes headlines every year, no more important this year than the last as no Procurement tech works without good data (although some work even worse with bad data), and unlikely to get more attention now that a certain analyst firm has latched onto a new buzzword to hide the importance of good data. Before we discuss further, as is our custom, we will list the four predictions.

  • Data-Driven Decision Making
  • Data-Driven Decision Making
  • Data-Driven Decision Making Will Become More Critical
  • Data Governance and Data-Driven Decision Making

All strategic decisions should be, and more importantly, should have been, data driven for the last four decades in any organization (given that the first IBM PC hit the market in 1981, making computer-based data analysis affordable for any mid-sized or larger organization. And while it wasn’t possible to give every office worker a computer and internet access until about 25 years ago, limiting “data analysis” decision support to only the most important strategic decisions, once everyone had a computer and internet access, every strategic decision should have been supported by data to some extent).

And with the emergence of web-based data services, it’s never been easier to get data. Moreover, most organizations are swimming in data. In fact, some organizations have so much data that the problem is not the lack of data, but the lack of good, appropriate, data. In most organizations, there are drives bursting with data, where the quality ranges from reasonably good to completely wrong, and if you use that wrong data, you’ll have a wrong analysis and make wrong inferences. Also, not all data is appropriate for all types of analysis, so there’s no guarantee the feeds you have are the right ones. Moreover, most users in most organizations don’t know how to judge the quality of the data, or how to do a proper cleansing and correction if the data quality is poor.

Good decisions only come from a proper analysis on good data, so while there will continue to be pushes for data-driven decision making, because that’s the age we are in, there needs to be a continued push for good data! But that will only occur if an organization has good data governance, which is what the majority of these predictions and trends are missing.

The organization needs to ensure that, before any data is stored, there are processes in place to make sure that any data stored in an organization’s system is correct, complete, in a standardized format, and linked to any associated records using unique ids. That no record is stored unless these requirements are met. And that all records are verified on at least an annual basis to ensure they are still complete and correct. In particular, any time a record is updated, the data should be (automatically) verified again, and any time a record is touched for use, critical data should be verified. A lot of this can be automated if the organization has identified masters for all types of data and trusted external feeds for new data verifications and annual rechecks. And if it’s not, the organization can’t really do data-backed decision making because that relies on good data.

What Should Happen? (But Won’t!)

E-MDMA. The adoption of an Enterprise Master Data Management Administration strategy. Since data is so fundamental to good decisions across the organization, enterprises should not only be proactively managing their data but managing it in a manner that ensures it is actively maintained, highly accurate, and available to use by any system that needs it. This requires identifying, for each piece of data, a (master) system of record, verification rules, (third party) data sources for corroboration and verification, and access rules. All boring stuff … that has to be done enterprise wide … but absolutely necessary for data-based decision making. Especially if you want to use AI.

Now, we know it sounds very boring, but it’s critical. But we also know that no one will want to do it. So don’t call it Enterprise Master Data Management Administration … just call it E-MDMA and tell your employees its going to bring ecstasy to their job. Let them think its a new drug, and maybe they’ll buy in.

Seven down, three to go.

Myth-busting 2025 2015 Procurement Predictions and Trends! Part 7

Introduction

In our first instalment, we noted that the ambitious started pumping out 2025 prediction and trend articles in late November / early December, wanting to be ahead of the pack, even though there is rarely much value in these articles. First of all, and we say this with 25 years of experience in this space, the more they proclaim things will change … Secondly, the predictions all revolve around the same topics we’ve been talking about for almost two decades. In fact, if you dug up a Procurement predictions article for 2015, there’s a good chance 9 of the top 10 topic areas would be the same. (And see the links in our first article for two “future” series with about 3 dozen trends that are more or less as relevant now as they were then.)

In our last instalment, we continued our review of the 10 core predictions (and variants) that came out of our initial review of 71 “predictions” and “trends” across the first eight articles we found, in an effort to demonstrate that most of these aren’t ground-shattering, new, or, if they actually are, not going to happen because the more they proclaim things will change …

In this instalment, we’re again continuing to work our way up the list from the bottom to the top and continuing with “Risk & Compliance”.

Risk and Compliance

There were 10 predictions across the eight articles which basically revolved around “risk management strategies” with some sideline focus on the need for “resilience”, “cybersecurity”, and “compliance”. As with almost every “prediction” and “trend” in this series, this is yet another prediction that makes headlines every year, no more important this year than the last, and no more likely to get any more attention until a major event happens that significantly disrupts the organization, a disruption that could have been prevented with better risk management systems and processes. Before we discuss further, as is our custom, we will list the ten predictions.

  • Blockchain
  • Cybersecurity and Data Privacy
  • Cybersecurity in Procurement
  • Compliance
  • Enhanced Risk Management Strategies
  • Expansion of Risk Management Strategies
  • Geopolitical Instability Shapes Risk Management
  • Resilient Supply Chains
  • Risk Management and Resilience will continue to be a Priority
  • Risk Management

Risk has been increasing year over year for over two decades. It should be front and center in every organization, especially given the facts that very few organizations that have been around for any length of time haven’t been impact to some degree by a disruption event and the chance of an organization of any size not experiencing a disruption in the next year is close to zero. And it does make the top of the charts in the board room, but, unfortunately, it’s still not making the top of the charts in the priorities when it comes to new solution acquisition and new process introduction. In most organizations, it’s just being pushed down to the tactical personnel who execute daily tasks. Personnel who may not have enough of a big picture understanding to manage risk properly in their decisions.

However, given the need for resilience in the age of constant supply chain uncertainty and disruption (due to epidemics and pandemics; border closings and sanctions; strikes and port shutdowns; reduced cargo capacity from perfectly good transport ships being junked during COVID, Houthis in the Red Sea, and Panamanian droughts, trade wars, reduced/cut-off rare-earth/raw material supply etc.), risk should be even more prominent and more actively addressed. Leading organizations will double down on resilience and supply assurance strategy and survive the disruptions relatively unscathed, and those who don’t double down on resilience and supply assurance won’t. It’s that simple.

Given that almost 3/4 organizations were hit with a cyberattack in 2023, which was an all time high and which was only projected to increase in 2024, cybersecurity concerns should also be at an all time high, but given that most organizations relegate that to IT, we know it’s not going to get much better in Procurement. It needs to, considering how much organizational finance flows through Procurement, but it won’t change much.

Finally, organizations know they need to comply with regulation, so compliance is always at the edge of the Procurement mindset, but beyond minimal requirements, it never gets much attention, regardless of how much a few analyst firms or vendors try to push it.

What Should Happen? (But Won’t!)

Organizations need to prioritize the acquisition of a Risk360 solution, or the closest thing it can find, implement it, and monitor it regularly to make sure they detect risks that can impact their supply chain or operation as soon as such a risk occurs. Not after the supply has been cut, not after the organization has been locked out of all their organizational systems, not after key customers have failed and orders evaporated, not after signing a contract with a sanctioned party, and so on. Today, every decision made has to be made risk aware. And without a centralized risk management system, that will not happen.

Six down, four to go!

Don’t Kill ALL the Lawyers …

… but certainly think about how (much) and when you use them in Procurement and your organization as a whole.

Earlier this month, THE PROPHET asked a very important question regarding Lawyers, Contracts, Procurement, and Tech in 6 parts, which essentially boils down to:

When will advanced tech, especially the tech we have today, replace lawyers for most in-house and even on-retainer Legal services?
To which the doctor replied: Why hasn’t it already?

Right now we have legal-tech so good that you should NEVER use a lawyer to:

Write a contract.
In fact, if you have any contract writing skills at all, even without ANY tech whatsoever, odds are high in your favour that you will write a better contract without a lawyer, especially in tech and supply chain when you know your business, the risks, and the key agreements and protections you need in place and, frankly, the lawyer doesn’t.I can’t count the number of times I’ve been told this is a great contract and there’s nothing wrong with it as we paid XK (where X, depending on the contract type, starts at 5, 10, or even 15), when the contract is in fact mediocre at best, full of holes, and sometimes even worse than the contract the firm was using. But sunk cost fallacy takes full effect, and a slipshod effort by the paralegal, quickly reviewed by the counsel to make sure there is nothing glaringly wrong, and put before you with a big price tag becomes the greatest contract ever written.

And yes, a lawyer will know to look for the presence of key standard clauses that should be in every business contract and contract from your business but, guess what, so will any contract creation / analytics product on the market.

And yes, a lawyer can tell you the potential risks associated from veering away from a standard contract, standard terms & conditions, and standard mitigations, but, guess what, so will any contract creation / analytics product on the market.

There’s very little contract-related value a lawyer can offer that modern tech can’t do, especially in the hands of a tech-savvy contract manager who understands the purpose of a contract and writes the contract in plain English.

Locate the relevant statutes (laws), decisions, and regulations that affect your business.
There aren’t many valid uses for Gen-AI, but large document search and summarization is one valid use, and a use that usually works remarkably well (with a very low failure rate compared to other tasks wrongfully put to these LLMs). No need to pay thousands in hourly billables to dig up what these tools can dig up in minutes and you can review in hours.
Summarize your Financial and Legal (Reporting) Obligations with respect to all statutes and regulations that apply to you.
Again, this is one of the few valid uses for Gen-AI that works quite well as it’s just another type of document set summarization. So why pay a legal team dozens or hundreds of hours when you can get a highly accurate summary for next to nothing in comparison?
Summarize known incident response options, and known benefits/risks of each.
Again, this is one of the few valid uses for Gen-AI that works quite well as it’s just another form of document summarization. And while this won’t necessarily be 100% complete, or give you specific insight to your situation, it helps you get a handle on where you might start.

The reality is that you only need a lawyer to:

Do a final contract review.
To make sure you didn’t screw up a clause, miss a core enterprise requirement they have committed to memory, or address an upcoming risk or issue they happen to know about that you don’t. Considering this is all they really do anyway when you ask them to write a contract (as they are either sloughing it off to the paralegal or just pulling one from the file that is close to what they think you need and just making a few edits), just pay them for what they do that they are good at.
Review the list of statutes, regulations, and legal decisions you believe you are subject to.
Their in-depth knowledge of the law means that a good lawyer who practices in the relevant area will quickly be able to tell you whether or not each statute, regulation, and/or legal decision is relevant to you, key points you shouldn’t miss, and whether there are any statutes, regulations, and/or legal decisions they believe you should also be aware of because they are, or may be, relevant.
Review the financial and legal reporting you plan to do and advise you on completeness, correctness, and accuracy.
They know the law, and how to keep you in line with it.
Advise you on your incident response plan and best alternative options.
Again, these are legal experts who focus on mitigating risks and arguing for a living, unlike dumb algorithms which can just summarize which they are given. This is, or should be, the true value of your legal counsel and when you should really be paying the high hourly fees.

As to THE PROPHET‘s question as to:

When will it happen?
The answer is who knows?

Considering that good contract creation applications have been around for almost fifteen (15) years, where all you had to do was define clauses and variants by geography or category, standard templates by category, etc. and then rules for special situations, and it would assemble a custom template for you in minutes, the base technology should have been common a decade (10 years) ago. Now we have Gen-AI thrown into the mix which can analyze your contract repository, pre-populate your standard clauses and build starting templates, and then customize those based on the buy specifics, you can get a decent draft in minutes with very little manual effort.

We’ve had good semantic document summarization for well over a decade, and Gen-AI has taken that to a new level, most CLM vendors are integrating it, it’s easy to use, can be trained to be highly accurate for this task, and not expensive.

We’ve had good contract analytic solutions for about a decade, which can analyze all sorts of performance metrics, risk metrics, associated costs, and so on.

But yet these solutions have rarely been adopted, when they could save an organization a lot of money, help the organization get their risks under control, help the organization better manage their spend, and help the organization understand its supply chain.

This shouldn’t be surprising given that year after year, as per our recent myth-busting 2025 2015 trends, companies say they want strategic value but only focus on cost-cutting, but don’t even do that right. Only two technologies have been proven to support year-over-year cost reductions of 10% or more (adjusted for inflation), and those are

  1. (advanced) spend analysis
    (not the dinky projects some companies outsource to Big X who use second rate third party tools for poor results)
  2. (strategic sourcing decision) optimization

And how many companies have truly adopted these technologies AND use them in house? Our guess is less than 20% in the first case and we know it’s less than 10% in the second case. It’s like we said in our recent rant on You Don’t Need Gen-AI to Revolutionize Procurement and Supply Chain Management — Classic Analytics, Optimization, and Machine Learning that You Have Been Ignoring for Two Decades Will Do Just Fine!