Monthly Archives: April 2026

Exact Purchasing is a Pocket Cube Part 2

Today we continue our series on why Exact Purchasing is a Pocket Cube, starting with two of the easier categories to effectively define.

Low Complexity, Low Risk, Low Impact: Transaction Capture

The classic “non-critical” category in the Kraljic Matrix and the “transaction capture” category in the Busch Matrix, this category can be managed simply by capturing the transactions, ensuring they match the spend intent, and occasionally checking the market price. It’s simply checking the purchase against the plan.

As per Busch, the way to manage this category is to:

  • check every PO & invoice line against the contracted price
  • every shipping and handling charge against the current carrier rates
  • every delivery receipt against the order amount

It’s simply a matter of paying what you contract for and contracting at market price.

Great examples are Busch’s examples of MRO, office products, and commodity IT hardware. You’re just buying the lowest cost you can and making sure you pinch every penny and don’t allow your suppliers to purloin any of those pennies you negotiated.

This is a perfect category for (deterministic) autonomous sourcing. Once you verify the suppliers (which can also be automated if you are integrated into government, compliance, carbon, and legal registries), verify their account info (which can also be automated if you are integrated with the right financial entity verification systems), and verify the products, you can auto-source with tail spend auctions and / or RFQs, auto contract with integrated e-signature, auto-order based on projected utilization, and auto-pay on receipt. After all, if it’s low impact, there’s no real risk of a supplier going out of business or their supply becoming unavailable — you can just find another source. And if you have to pay a bit more, no big deal.

Low Complexity, Low Risk, High Impact: Continual Transaction Monitoring

Now, things get a bit more complicated when it’s low complexity, low risk, but high impact. According to Kraljic, it’s a “leverage” item and according to Busch, it’s a “market risk”. But it’s not market risk. The market risk is low. The risk is the degree of impact of sudden unavailability that could cause a price surge, the missed opportunity if prices plunge and you aren’t able to capitalize on the opportunity, or big delays in delivery that cause temporary stock-outs and missed sales opportunities.

But there’s no complexity to the category, and always another supplier, so it’s still a transaction focussed category. Except it’s not just capture, it’s continuous monitoring of your supply chain AND your potential supply chain. It’s not just the PO price, the invoice price, and the receipt — but also the ASN and the PO ACK and the degree of conformance. Lack of PO Ack could mean a lack of a sophistication, lack of ASN can mean a missed shipment, and “errors”, particularly billed amounts (well) over contracts can signal financial jeopardy — all of which can mean that shipment ain’t coming on time, if at all!

But full end-to-end transaction monitoring on its own is not enough! You need market monitoring as well, because, if you detect an issue, you will have to find a new (temporary) source of supply quickly and/or expedite the current one. More importantly, if you’re contract is coming to an end soon or your strategy is spot-buy every six months on a winner-take-all RFQ or e-auction, and a sudden influx of supply in the market creates a significant drop in price that you might not see again for years, you have to rapidly react to take advantage of the opportunity. It’s just good procurement.

This is where you might include Jason’s energy category, even though that could be a market risk, but would more likely include critical commodity categories (like RAM, that skyrockets after every decennial RAM plant fire), MRO categories like fertilizer (that spike with every strait closure), or cellular (internet) plans (where every change in regulation or new entrant causes a shift in prices).

In other words, you need to be monitoring the information supply chain and the corresponding market information chain 24/7 and logging not only delays and discrepancies between expectations but also discrepancies between your supply chain and the market — if prices or delivery times go down, quality increases, anything that would benefit you, you need to be aware and take advantage of that situation as soon as you can — but if the opposite happens, you need to take steps to ensure your continued relationship with suppliers who charge you less, delivery higher quality, and do so faster than your peers.

Exact Purchasing is a Pocket Cube Part 1

Last month we told you that Jason was right when he said that we need exact purchasing, but as we clearly stated then, and stated now, it’s NOT a new matrix. Especially when the original Kraljic matrix didn’t really fix anything in the first place (as it just gave us a methodology to start thinking about Procurement methodically so that we could start on a journey to actually fixing Procurement).

However, any methodology that wants to fix Procurement can’t just try to reinvent the Kraljic Matrix, even if it takes a data, vs process, centric approach. (Although the correct answer will involve both data and process.)

There’s two reasons for this.

First, any answer must take into account people, process, and data. (It’s not tech, tech is just that which implements the process on the right data with the support of people, who at least need to define the process the tech will employ if automation is being deployed.)

Second, any answer must properly take into account the complexity, market risk, and category impact. The only way this can be done is if EACH dimension is analyzed separately — not bundled together in some arbitrary mish-mash of factors that tries to pretend two (or more) dimensions are more-or-less the same.

In traditional Kraljic, you balanced profit vs a risk-complexity mish-mash. It sounded good, except risk and complexity are NOT the same thing. Risk is external (market) risk that you can try to mitigate, but that you have no control over. Category and product complexity is completely under your control — you control the design, the raw material mix, the production process, etc. You can choose to make the product simpler or more complex, use better or worse materials (as long as they meet minimum/maximum industry and government safety and compliance requirements), or less (or more) intensive production processes. Your choice.

In the proposed Busch model, you replace impact with influence and map that against a risk-complexity mish-mash, and then you use this mapping to translate Kraljic’s definition of what a category is into an actual data-backed strategy to purchase it. It’s progress, but not the answer.

The answer, as per our last post, is the pocket cube, where you break out risk and complexity into their own dimensions and deal with the categories accordingly. Especially when there is a mis-match between the risk and complexity ratings.

It’s easy when the risk and complexity match in severity, and Jason is dead on when the risk, complexity, and category impact (not cost, or profit, but criticality) are low and when the risk, complexity, and category impact (again, not cost, or profit, but criticality) are high. In the first case, it’s transaction focussed (but not necessarily continuous real-time transaction monitoring) and in the latter case it’s fundamentally a cost-based architecture, but more complex than Jason presents.

Where it gets tricky is the grey areas when there is a mismatch in two of the categories and, more specifically, when risk and complexity are diametrically opposite. But we’ll get to that in a later post. Starting tomorrow, we’ll take the first two of the four easy categories.

AI has NOT changed the fundamentals of Procurement. It HAS Strengthened Them.

Procurement, one of the last-areas of the back-office to be hit, is still drowning in the AI-Hype machine that is going full-force 24/7/365, as a result of the self-propagating A.S.S.H.O.L.E. that does nothing but excrete derivative nonsense on a continuous basis, piling it so high that it’s hard not be be Blinded By The Hype!

But, as we’ve seen, this new age of Agentic AI is not accelerating us into the Intelligence Age, but instead devolving us into the Neolithic Age (as it’s now been proven that these technologies are eroding [our] critical thinking skills, and only a few critical thinkers seem to realize that AI is dulling our minds).

Plus, it’s not effective. Studies by MIT and McKinsey last year demonstrated that only 5%/6% of early adopters saw a return. That’s a 94% failure rate, which is even worse than the general technology failure rate of 88% that is the highest it’s ever been in two and a half decades of project failure.

All AI has proven is that you can fail much faster than ever before, but still lost just as much money. That’s because the situation in Procurement is the same as in every other back-office function. Results come from the classic formula of:

  1. PEOPLE first
  2. PROCESS second
  3. TECHNOLOGY third

You need good people more than ever. Sure AI can “process” mounds of data at speeds we’ve never seen, but that doesn’t mean it can extract meaningful intelligence, and even if the intelligence is accurate, that it’s actually useful. Remember, these systems not only process data faster, they hallucinate faster than a field full of hippies at a Woodstock revival concert. But since their grammar and paragraph construction is now better than 90% of the population thanks to the social media revolution that has resulted in the average person having an attention span less than a goldfish and an IQ significantly less than our great-great-great Victorian grandparents, the majority of the population is willing to accept anything they pump out as accurate (even when it’s not).

Only top trained people can properly process complex situations, come up with the right solutions, and execute them. They should be using the most advanced tools available to them to process and make sense of the data using modern Augmented Intelligence technologies, but they should NOT be doing what a dumb system, guaranteed to hallucinate on a regular basis, tells them.

Once you have good people, they need to implement good processes that ensure best practice execution not only by them, but by everyone else who is involved in the process, inside and outside the organization (in partners, providers, and clients). Process allows emerging talent (with good education, great cognitive capacity, and an exceptional [dumb AI free] work ethic) to execute at the level of top talent with the guidance the top talent built into the process, and get the experience they need to become the next generation top talent in the organization.

Finally, once you have the right people, who know what to do, and the right processes, that help them get things done, then, and only then, do you identify the right technology to fit into, and accelerate, the processes. Maybe it’s AI, but chances are it’s traditional, domain-specific, (A)RPA that supports the process to automation levels of 95% to 99%. Dependable, fit-for-purpose, technology is always faster, better, and significantly cheaper than general purpose hallucinatory AI that may, or may not, work on any particular problem.

If you want to survive the current chaos, remember these fundamentals.

And if you can’t remember more than one fundamental, just remember PEOPLE first!

(While you can still find, and hire, people who know what they’re doing. Those of us who grew up before tech took over are getting older and greyer. Without us, not only will you not survive today, but you’ll have no one to train your staff for tomorrow. To think that, as a race, we survived The Great Extinction and, more recently, the The Great Decline during the Younger Dryas era only to risk global civilization collapse as a result of The Great Retardation.)

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.