Hansen’s Models are a Great Addition to the Pool of Analyst Offerings …

… but they still don’t solve your solution selection problem end to end. As per my successful vendor selection, Assisted Solution Selection is a Seven Stair Methodology, and many of those steps aren’t covered.

Backing up, Hansen just launched his new Hansen Procurement site where he centralizes his three new offerings around Organizational Maturity, Vendor Fit Measurement, and Strategy — all of which are sorely needed in our space as the consultancies and analyst firms don’t really address this (or at least don’t address these aspects to the level they need to be addressed to flip the script and turn the 80%+ chance of failure with every new technology project into an 80%+ chance of success).

The best way to see this is to outline the steps of a solution selection project, define what they are, and indicate where various analyst and consultancy offerings come into play.

Step Goal Offerings
Organization Maturity Determine if the Organization is Ready for Process Change that will Involve New Tech Hansen Phase 0 Readiness Assessment
Actual Need Identification Expert review of current processes and problems to identify real process and automation needs, not parroted buzzword descriptions from non-expert executives. Any Niche Consultancy or Expert Advisory Firm Engagement
Holistic Solution Assessment Translation of the need to actual process improvements, platform and automation needs, and service requirements. Any Niche Consultancy or Expert Advisory Firm Engagement
Vendor Pool Selection Starting vendor pool where the vendors meet the minimum platform, automation, and service requirements specified. Spend Matters Tech (only) Match &
Hansen Fit Score Vendor Assessment (Actual Performance)
Vendor Assessment Process RFX cycle management, response and demo analysis, and overall vendor suitability for the client to find the best match. Any Niche Consultancy or Expert Advisory Firm Engagement
Project Assurance Guidance on implementation plan creation, project monitoring, and vendor and partner management with a focus on client success, not the vendor or implementation partner! Engagement with select niche consultants and experts who understand both modern platforms and process requirements of Procurement and Supply Chain.
Strategic Post-Implementation Training, Monitoring, and Advisory A successful implementation does not guarantee success -— that requires adoption, continued utilization, and results. Engagement with select niche consultants and experts who understand both modern platforms and process requirements of Procurement and Supply Chain and why adoption is critical.

As you can see, with the Hansen Models, you finally have a way to judge your organizational maturity and readiness for a new tech-based solution before you start done a path you aren’t ready for (as that always ends in failure), and you finally have a way to determine a potential vendor’s ability to support you in achieving your goals in addition to whether or not the technical core is up to the challenge (which you didn’t have until Spend Matters introduced Solution Map, which powers their Tech Match).

These are key additions because without them,

  1. it’s almost impossible to judge organizational readiness
    you can’t bring an expert in, do a few interviews, and reach a conclusion because you have nothing to compare against (and, moreover, you need scale … at least 30 to 50 related, relevant, projects for any level of confidence in your assessment)
  2. it’s hard to zero in on the best vendors for a selection
    as the best tech fits from both a capability AND a vendor support perspective

The Strategy offering from niche professionals who understand where the organization actually is from a maturity perspective is a nice touch, as they can create more appropriate plans for you more efficiently, but other niche firms could also offer you the same level of strategic advice if they ran the models from Hansen and Spend Matters — although it might take them longer and cost you more depending on their change management and transformation chops vs. Hansen’s chops.

But, as we said above, it’s not end to end, and you’ll still have to do a lot of manual work to get from beginning to end, and possibly need a lot of guidance. But it’s getting you a step (or two) closer to a good assisted solution selection methodology in practice.

Today is the One Day Procurement Doesn’t Have to Worry About Purchasing Software and Services …

… because vendors try to make a fool of them every day of the year.

As per our recent 3-part series on Now is NOT a Good Time To Buy (1, 2, and 3), vendors across the board are trying to overcharge you on a daily basis, by as much as 900% of the software’s actual value.

Services vendors are constantly trying to push you towards the most expensive offerings (that give them the greatest kickbacks, sorry, partner commissions), upsell you on as many modules (that you don’t need) as possible, drag out the implementation (which they know will be easy because they know you’re not organizationally ready to support an implementation because they didn’t prepare you because you didn’t ask), insist on extraneous integrations using custom connectors, and then up-sell you on training for an overly complex system you weren’t ready for.

Then there are GPOs who are claiming they can save you dollars you can’t save on your own, and that you should hand over a whole host of categories to them for an annual six figure access fee and a slice of every transaction, even though you could do just as good on your own managing the larger categories they want to hand over (by the time you factor in the transaction fee and the amortized GPO access fee) and handing the rest over to low cost Amazon Business.

Then there are the marketplaces you need to use for your tail spend that try to convince you to pay preferred access fees, priority order processing fees, expedited shipping fees (for carriers they control), etc. All extra costs for non-priority goods and MRO.

And, of course, when the sales person at the supplier thinks that you don’t have any other immediate options, they come up with fees you never heard of in order to guarantee that order.

In other words, every vendor and supplier is trying to make a fool out of you every day. There’s nothing else they can try to pull on April Fools day that they haven’t already. Multiple times.

In other words, we’re the one profession that doesn’t have to worry about being an April fool, as we deal with tricksters, cons, and frauds every other day of the year.

The optimization era is finally beginning!

In a recent article, Koray Köse states that the EU just killed global supply chain optimization.

When, actually, they just ushered in the real optimization era.

If you are a true multi-national, as Koray has said, you have to pick 2 options out of the 3 options available since you can not simultaneously satisfy US CHIPS Act, EU IAA origin/low-carbon requirements, and Chinese local content rules. So you have to decide which 2 options are the most valuable to you (based on costs and revenue opportunity in the market). That’s an expected profit optimization based on predicted sale prices and the localized supply chain optimizations for cost computation.

So you have to run 3 different sets of scenarios against different assumptions and Pareto efficiencies — and as humans we just can’t do that, and today’s AI can’t do that either (despite the over-hyped claim to the contrary). You need optimization to pick/justify your options, and then ongoing optimization to keep costs, and revenue, in line with prediction as global events force you to reroute regionalized and localized supply chains, substitute materials due to shortages, etc.

What was killed was the simple concept of global optimization that was relatively easy to do without optimization (and what passed as optimization for the past 25 years). Up until now, the reality was that, if you had even a few constraints, and the ability to do simple math, you could quickly eliminate the most expensive suppliers and the suppliers that couldn’t meet your constraints, and then, using your constraints, cherry pick the lowest or second-lowest cost supplier/distributor, and come up with a solution that was within 1% to 2% of theoretical optimal, but that was actually more optimal in practice as it was more stable and easier to maintain.

Optimization is only needed when you need to make choices that can’t be made without considering multiple sub-cases, regionalizations, and localizations — and this is exactly what this messed up world has given us!

It becomes even more important if you are a true multi-national with business in, and government commitments in, the US, EU, and China. You have to adhere to all of the rules globally, but you can’t with any one product formulation, so you have to create at least 2 different products where you figure out what 2 of the three combinations are easiest AND cheapest to make, where to make them, and how to supply them to the countries you serve (with there will be one country each mix cannot be imported into). This requires a host of scenarios to be run before a selection to be made, and a host of models to be continually run during production and distribution to ensure everything aligns with changing market conditions.

So while the classic optimization vendors who can’t do anything more than minimally constrained global optimization are now dead, it’s finally opened up the era of real optimization. The question is, what vendors are going to step up to fill the void?

While Your Supply Chains Are Impacted by War, They are Not At War!

And just because autonomous AI has become a standard tool of the current conflicts, that doesn’t mean that autonomous AI should be a standard tool in your supply chains. AI, defined properly, most definitely should, but not autonomous AI. And even then, only with human oversight!

This rant is inspired by THE PROPHET who tells us that The War in Iran is an AI War. Your Procurement and Supply Chain War Should Be as Well. And, despite parts of it appearing in LinkedIn comments, it is being expanded and reposted now to emphasize our previous article (on Friday) that essentially stated YOU SHOULD NEVER TRUST YOUR AI.

First of all, procurement and supply chain management isn’t a war. It’s a tense conflict between buyer needs and supplier leverage, but not a war.

Secondly, the fact that “AI never stops for a coffee break or to complain about leave not being granted.” is not on its own a valid justification for using it.

Because, by the same token, it also doesn’t care if a strike accidentally hits a school and murders hundreds of innocent children. (Al Jazeera, BBC, and Haaretz)

Nor does it care if multiple civilians get killed in a drone strike just to relieve a human soldier of a guilty conscience as they didn’t order the killing of the target and make the decision that resulted in civilian deaths. (NPR, The Guardian, The Times of Israel)

Given that AI has no ethics and no real intelligence to evaluate a situation beyond data it is provided and the question it is asked, is it really good enough to plan an operation on its own? I’d say it is not. (And also that it was applied without a full understanding of its weak points and how to use it properly.) (And if you want a great post about how critical human command decisions are, check out Michael Salehi‘s post and how the right decision always requires judgement, experience, and accountability — which an AI does not have.)

This is why Anthropic wants some safeguards, why you should too, and why you should be just as careful about where and how you use it in your supply chain. There are two realities with AI:

Properly applied augmented intelligence is a gift from heaven.

If you take the augmented intelligence approach, it can process all the data, give you recommendations, give you a synopsis of the reasoning, and allow you to dig into that reasoning, ask questions about risk and indirect ramifications, and explore the broader picture when you need to.

AI is not human, not ethical, not flawless, and not responsible.

You still need to review the synopsis, dig in when something appears to be off (and even if it’s just an uneasy feeling — your “intuition” can often be just as valid as the AI output), and verify the decision. And often these tools will allow what would take weeks to be done in minutes. But sometimes you’ll find there isn’t enough data, and you won’t be able to act confidently right away.

Now, THE PROPHET didn’t like my response, and countered with a number of questions, which I gladly answered and will repeat here because two of those questions missed the point, and including them helps illustrate what the real questions are.

“Would you take action?”: Yes!
(I don’t care if you agree or disagree with my viewpoint, or THE PROPHET‘s viewpoint, as this is not the point.)

“Would you use all tools available?”: YES!
(Again, I don’t care if you agree or disagree with my viewpoint, or THE PROPHET‘s viewpoint, as this not the point either.)

“Would you trust the tools blindly?“: No!

“Would you rush them into deployment without proper field testing and safeguards?”: NO!

That’s the point. All the hype and promises are resulting in an implicit trust of AI when it should be “Trust … But Verify!“. It’s usually the omission of just one extra step, which is usually just a few minutes of extra human review, that is the difference between success and accuracy vs. failure and widespread destruction. And this is true both in war and in business decisions that impact your supply chain.

This is why I continue to so strongly caution against the use of “autonomous AI” when it is largely built on systems that are flawed at the core, where hallucinations are part of the core function, and one subtle change in a prompt or query can result in a completely different output.

The reality is that, while you need modern tech platforms, constant intelligence monitoring, and pre-defined mitigation strategies just to survive, you usually don’t need AI. (Or at least not the “AI” they are selling … which, as you guessed, isn’t “AI” at all.)

What you do need to do is prepare for AI. If you do that, which involves:

  • getting your data under control
  • building an infrastructure for connectivity, process, and data integration
  • updating your processes for modern environments
  • training your talent accordingly

You will find that you have

  • put data at the core of not just category strategy, but overall operations
  • expanded your definition of risk to include price, partners, and related information flows
  • identified where automation fits; where optimization, analytics, and machine learning fits; and where “AI” doesn’t actually add any additional value
  • figured out that Employees backed by Augmented Intelligence and agents with escalating, but still restricted in critical situations, automation privileges as they learn from those human are best
  • developed a much better understanding of multi-tier exposure
  • begun the process of transitioning to a new, alert, organizational state where you are continually monitoring, optimizing, and re-planning your supply chain in response to emerging disruptive threats … and, as Koray Köse (who we may have to start calling The Oracle due to the insightful nature of his posts) points out, this is where you need to be

… and this is everything THE PROPHET says you need. Most importantly, all of this just might be accomplished without any modern AI (and definitely no BS AI Employees) at all!

The Office Of Procurement

In a dark office basement
Stale air all around
Dank smell of old HVAC
Rising up from the ground
Up the stairs in the distance
I see a shimmering light
My eyes grow heavy and my sight grows dim
I have to stop for the night

Then she stands in the doorway
I hear the mission bell
And I am thinking to myself
This could be heaven or this could be hell
Then she lights up a candle
And she shows me the way
There are voices in the sub-basement
I think I hear them say

Welcome to the Office of Procurement
Such a lovely place (such a lovely place)
Where we fall from grace
Plenty of room in the Office of Procurement
Any time of year (any time of year)
You can find me here

My mind is cost-savings-twisted
Can’t buy the Mercedes-Benz, uh
Sales got a lot of pretty, pretty toys
I work weekends
How they spend without limits
It just blows my mind
While they spend in excess
I have to count the dimes!

So I called up the the Vendor
“Can you spare me some yield”
He said, “We haven’t had those margins here since
Woodstock claimed the field”
And still those voices are calling from far away
Wake you up in the middle of the night
Just to hear them say

Welcome to the Office of Procurement
Such a lovely place (such a lovely place)
Where we fall from grace
They’re livin’ it up at the Office of Procurement
What a nice surprise (what a nice surprise)
Bring your alibis

LED Lights on the ceiling
The Prosecco on ice
And they say, “We are all just prisoners here
Of our own device”
And in the master’s chambers
We gather for the feast
We stab it with our steely knives
But we just can’t kill the beast

Last thing I remember
I was running for the door
I had to find the staircase back
To the place I was before
“Relax”, said the Big Boss
“We are programmed to receive
You can check out any time you like
But you can never leave“