If You Can’t Do The Job Without Tech …

Then you can’t do the job with tech.

I’ve said it before and I’ll say it again. If you can’t do the job without tech, then you can’t do the job with tech.

All tech does is automate tasks and workflow processes and allow you to speed them up by a factor of 10 to 1,000,000 plus (depending on the tasks and workflow processes).

It doesn’t make tasks or processes better or worse (unless you Gen-AI, which typically makes it worse) — just faster (unless, of course, you change the process when you implement the tech and make the task or process better or worse).

Now, you’re probably asking why it’s not enough to design the process and simply install the tech. That’s because there’s a difference between designing a process and executing a process. Anyone can design a process at a high level given a highly set of requirements. Not anyone can execute. Among those, even less can execute it effectively.

Only those who can execute it effectively are fit to do the job, regardless of what tech the organization has or does not have. That’s because, if you don’t know how to do the job without tech (and certainly without AI), you don’t understand what the job really is. Business was conducted for thousands of years without modern tech, and computers only became generally available in big business in the 80s and mid-size businesses in the 90s and small businesses in the 2000s. That means everything you do today with modern tech was once done without modern tech (and, 150 years ago, without any tech that we would consider modern at all).

That understanding means you understand the core of the function. You know what has to be done, how, where the time suck is, what can be automated, how, and why. You also know how to verify correct automations has been implemented, and where the results require human interpretation, review, and decisions — and, if necessary, make those interpretations, review, and decisions.

Without that understanding, you can’t properly make use of tech and you definitely can’t make use of AI. Sure some tasks might be 10 to 1,000,000 times slower (and sourcing optimization will be out of the question, just a few bid comparisons), and you shouldn’t do them by hand unless necessary, but the point is you need to be able to — otherwise, you can never judge what the system does. Iin the age of hyper-fast LLM hallucinations, only good human decisions will allow your organization to succeed.

Forget Lean Sourcing, It’s Time for Mean Sourcing!

While it sounds like lean sourcing, which can be defined as a strategic purchasing approach focused on maximizing value and minimizing waste, should be the ultimate solution to strategic sourcing, especially when you consider some of the core activities in Procurement:

  • Value Addition: Identifying exactly what the end customer values and eliminating products, features, services, or luxury materials that do not contribute to it. (Supports Value Definition and Value Stream Mapping)
  • Process Standardization: Simplifying workflows to reduce bottlenecks, speed up purchasing cycles, and lay the foundations for automation. (Supports Flow)
  • Strategic Partnerships: Cultivating close, long-term relationships with a compact, reliable supplier base rather than continually chasing the lowest bidder to streamline the supplier network. (Supports Pull)
  • Continuous Improvement: Cultivating a culture where buyers regularly refine practices and reduce inventory. (Supports Pursuit Perfection)

it should be the perfect solution. But it’s not. The problem is that Lean was born out of manufacturing, not supply chain, and not sourcing and procurement. Here are the problems with Lean in Sourcing/Supply Chain:

  • Myopic focus: Taken to extremes, not only results in a company minimizing not only product lines, and the components used, but their focus on the product lines that consumers want. This is profitable and successful in the short term, but consumer preferences for products change over time, and if you don’t keep up with shifting consumer trends, you’ll be too late to capitalize on major opportunities. (Just like Blockbuster missed out on Netflix, Kodax on digital cameras, and Xerox on the personal computer.) And if you don’t keep an eye out on new developments, you’ll miss opportunities for new integrated components and working with engineering to save money.
  • Automation First Philosophy: the whole point of process standardization was to allow for consistency, transparency, productivity, error reduction, and resource optimization, not necessarily automation — but the interpretation has been to automate everything without any thought as to whether or not humans can do it better or Human Intelligence (HI!) is needed
  • Long Term Agreements: a long term agreement is not a partnership, it’s just a long term contract; most Procurement organizations have failed to grasp what a strategic partnership is! (Japan gets it with keiretsu, but that’s about it.)
  • JIT: you want JIT in terms of factory production, especially since factories have limited space so you don’t want to pull from the warehouse too fast, but it’s one thing to JIT from a local warehouse, it’s another thing to try to JIT across global supply chains filled with fragility and unpredictability and constant disruptions

In other words, in order to succeed from lean, you have to modernize Lean for Procurement and the modern world. And get a little mean while you’re at it.

  • while the primary focus is optimizing costs against the value stream, the secondary focus is pushing strategic partners for new designs and products that will change both the value of the customer offering as well as the cost of production and service; in other words, you’re only happy with the status quo today, you expect proposals for improvement tomorrow
  • constantly push for process redesign where you can reliably use unintelligent automation (with rules-based deterministic certainty and adaptive exception management) and not hallucinatory agentic / Gen-AI for true efficiency improvements; it also keeps platform/cloud costs way down even as throughput scales by orders of magnitude
  • shift from cost focus in agreements to co-development focus — that’s the way you form true partnerships
  • migrate to balanced inventory management where you keep extra stock on hand of critical/scarce/hard-to-get materials and components sufficient to cover at least the average delay time when a disruption occurs — it can also optimize logistics costs and production costs at a different economy of scale, making up for the slightly increased inventory costs (which only need to be a fraction of their traditional inventory-cost based percentage with smart inventory management)

In each of these cases you are forcing more than just the process (which your team and suppliers will think is mean), putting cost second (which the C-Suite will think is self-centered because it’s all supposed to be savings to please the board members), and putting more burden on your internal networks (which your team will think is really mean, considering your operations and consultants have spent decades shifting to suppliers).

It might seem mean, but modernizing your practices in a resilient and collaborative fashion is what it will take to thrive in today’s global landscape.

Have We Lost The Economy of Information?

Twenty years ago, we were forming GPOs and Purchasing Consortiums to take advantage of Economies of Information. Ten years ago, we were not only rolling out suites that focussed heavily on consolidating spend (and performance) data globally (with the likes of Coupa and Sievo boasting about how much spend they had managed and normalized) to take advantage of the economy of information global spend data gave us, but building best in class analytics solutions to take advantage of all of the data they (could) gather(ed).

In the age of (predictive) analytics, which preceded the current age of AI Hype, the importance of data finally started to become recognized and you had a number of startups hit the scene providing next-gen data feeds. (Near) Real-time commodity indices, market price data, risk data, company financial data, carbon data, energy rates, water rates, regional overheads, average process time, average GPO and transaction rates, average performance data, etc. Any organization that wanted to build a best-in-class should cost model, best in class performance model, etc. The information was available, there was an economy for information, and the economy of information was right around the corner.

Let’s step back and define what we meant by this. On economies of information, twenty years ago we wrote:

The consortium of the future offers the benefit of expertise more so than it offers the benefit of scale. Eventually, especially with constantly rising raw material prices, the best practices employed by a competent consortium will squeeze all of the fat out of the supplier’s margins and the best price will be obtained. Once this occurs, the consortium will use its expertise to assist its members in advancing purchasing technology, reducing wasteful consumption, and improving the application of the goods and services they purchase. Since a consortium has access to all of the knowledge of its members, it can tap this knowledge to identify the best potential suppliers with the best potential products and services to meet member needs. Furthermore, this gives it a much better chance of identifying and qualifying low risk suppliers.

In other words, with a fact-based outlook on reality, consortiums could help take Procurement to the next level. Then, when the data-stream startups made all of that same information easily available as plug and play data feeds into your suite through standard APIs, the true economy of information hit Procurement for those who wanted it and Procurement could make insight-based and fact-based decisions and get better.

But now that we’re a few years into the age of AI Hype, I believe we’ve lost the economy of information. There a few reasons for this:

  • we’ve replaced data feeds with LLM chatbots like clod and chat, j’ai pété and assume they have access to the same data, and, most importantly, the same ability to run predictive analytics on that data
  • despite claims to the contrary, the LLMs are getting worse by the day … now that the majority of data on the internet is AI generated slop, being cross fed into other LLMs, regurgitated with compounding errors, we are not only losing the core data in the tsunami of slop but the meaning of that data as well
  • with LLMs being cheaper than data feeds, the data feeds have been ignored, a number have went out of business, and the rest are floundering

There’s no information without actual, verified, facts and intelligent interpretation, and the majority of that has been lost in the age of AI hype.

If too many real data providers, as well as applications that deterministically and intelligently integrate and analyze real data and real facts, go out of business, there will be no solid foundations for real information, and, thus, no solid foundations for economies of information — and then we’ll be back to the Procurement dark ages.

Technology has never advanced Procurement. Only facts, data, process and decision improvement based on intelligent interpretation has.

The Lost Art of Service Management

In the age of Services-as-Software, Agentic AI, and BS AI Employees, service management has officially become a lost art!

By definition, a service is an act or work performed by a person or group that benefits another. The key word is “person“. Not software. Not machines. Not fake AI. People with Human Intelligence (HI!).

Since service management is the systematic practice of creating, designing, delivering, supporting, and managing the lifecycle of services an organization provides to its customers, that means that the art of service management is using Human Intelligence (HI!) to appropriately design, create, deliver/perform, and support the outcome of the services the organization offers to its customers. Human Intelligence (HI!), NOT AI.

More importantly, it’s the art of:

  • creating services that will provide value
  • designing delivery methods that will be efficient and effective for the provider and the customer in the delivery of the value
  • delivering the services with a human touch
  • supporting the customer through the delivery when they need help fulfilling their end of the service (such as providing data, organizing meetings, making decisions, opening up systems, etc.)

And, generally, delighting the customer with the service by actually providing value. Something that can only be done by an intelligent human that understands what the customer actually values. And that’s a return on their money. It’s not just a strategy in a powerpoint deck (and certainly not one created by hallucinatory Gen-AI), a GPO that takes 10% off of insignificant tail spend, or a flip the switch system integration with no training, ongoing monitoring, or project assurance.

It’s a step-by-step strategy with implementation support at each step; a self-serve Procurement process setup and managed by the GPO in a manner that doesn’t require Procurement to need them on a day-to-day basis; and on-going onboarding training, adoption monitoring, and support process to ensure the system is used, tested, and improved by the daily users as soon as key functions come online.

Service management is becoming a lost art just as art itself is becoming lost in the age of unintelligent Gen-AI. Like art, service management requires humanity to get it right. By definition, humanity is something systems do not have!

It’s Time To Put An End to Business Spend Management!

Coupa may have built their Billion dollar business on it, but the time for Business Spend Management (BSM) is at an end!

Spend Management may have been the business strategy and philosophy that leaders practice and followers fail to understand according to THE PROPHET (who penned it two decades ago), but that was then, and this is now.

While spend management wasn’t supposed to be just cost management, but instead an incremental change that represents a new type of thinking, a way of taking integrated approaches to not just procurement, but all aspects of non-revenue generating operations and a way of thinking about your global supply chain strategy that would reduce costs, improve processes, and increase profits, that’s not what it became.

Spend Management became a fancy term for cost reduction (and, for the most part, that didn’t include cost avoidance), and even when optimization was used, the objective was always price. The majority of analytics focussed on spend, and even when process analytics were run, they were always framed in terms of cost and savings if automation was increased and/or process time decreased. Even multi-objective RFPs were primarily weighted on price, if they were weighted on anything else at all once basic supplier, product, and/or service requirements were met.

And now, in the age of AI (hype), all of the agentic / BS AI Employee offerings are focussed on offering you solutions to your Procurement problems that will reduce overall cost (base cost, human cost, processing cost, etc.). Cost, cost, cost.

But, for as long as it has existed, that’s never what Procurement was about. The goal might be to keep costs down, but the point of Procurement is the acquisition of a good or service. Supply, NOT Spend. Now, it’s true that the spend has to be less than what an individual would pay on his or her own to acquire the product or service or, as per Coase, there’s no reason for the business to exist, but if the business can’t acquire any products or service to allow them to offer a product or service for sale, the spend doesn’t matter.

That’s why BSM (where the “B” doesn’t necessarily mean “Business”) needs to end. It’s time to return to supply management, with guarantee of supply (not minimization of spend) at the forefront. This means a focus on risk minimization, production management, logistics management, trade management, and other variables that contribute to assurance of supply (and prevention of disruption). Costs can only be optimized once all of these other factors are taken care of.

This is the only way to procure in today’s volatile times, and, moreover, the only way to control cost. Real spend management is not just minimizing unit costs, transportation costs, and other purchase prices, but reducing operational costs across the board. You’re not reducing costs if the organization has to buy 30% off of contract because of delays, disruptions, and defects. And you’re definitely not reducing costs if you have to constantly expedite shipments, buy from alternate sources of supply at higher prices, or lose considerable revenue due to stock outs while paying for warehouse space / retail space.

It’s optimizing human intelligence against dumb automation to make sure processes are optimized, exceptions are quickly processed, risks mitigated to the extent possible, and disruptions detected and addressed as soon as they arise.

It’s Supply Management. (Not Spend Management.)