A few weeks ago, we not only told you that Exact Purchasing is a Pocket Cube, but we broke it down and defined each octant for you, as well as indicating which categories of goods and services were most likely to fall in each octant (with the disclaimer that there is variation between industry and sometimes even companies in the same industry based on size and focus).

This was a great start, but once you understand the breakdown, the next step is understanding how you go about sourcing and procuring the categories in each octant. Today we conclude our deep dive into the core technologies you will use with the Governance focussed-octants.

High Complexity, Low Risk, Low Impact: Spend Governance

Low risk and low impact means it’s almost a prime category for automation, except that high-complexity requires a fair amount of human oversight as not just any product from a catalog (or any service from a random service provider) will do. However, as long as humans are in the loop to approve the providers and the products, this is another category where a lot of automation can be employed, especially if the right technology is available.

This is another category where decision optimization needs to be employed as part of the strategic sourcing process, where continual compliance (as well as risk) monitoring needs to be employed as well as manual verifications of all suppliers and products before they enter the autonomous sourcing process and of all specs and obligation requirements before the contract is inked.

• (Strategic) Sourcing: Autonomous Strategic Sourcing with Decision Optimization that balances cost and compliance
• Supplier Management: APLs and Compliance Monitoring
• Catalog Management: AVLs
• Contract Management: Auto-Creation, Human Review of Specs and Obligations, Auto-Sign
• Procurement (Channel)^*: Goods PO (Catalog), Framework PO, Consignment PO, Service PO
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems;

High Complexity, Low Risk, High Impact: Relationship Governance

High complexity and high impact is tough. Not as tough as when risk is also high, and you need full supply chain architecture that you’re manually sweating through every step of the way, but tough enough because while shipments will mostly be assured, if they aren’t up to spec, that’s just as bad as a missed shipment.

This is another category where sourcing can only be semi-autonomous as you need to verify the model, employ multi objective decision optimization and award review, review the specification, obligation, and risk management aspects of the contract in detail, and monitor the compliance, quality, and timeliness of the delivery. And monitor the compliance continuously.

• (Strategic) Sourcing: Semi-Autonomous Strategic Sourcing with Decision Optimization that balances cost and compliance with Award Analysis and Review
• Supplier Management: APLs, Compliance and Performance Monitoring
• Catalog Management: AVLs and regular review and approval of new product options and regular automatic identification of potential products for review
• Contract Management: Auto-Creation, Human Review of Specs and Obligations, Auto-Sign
• Procurement (Channel)^*: Goods PO (Catalog), Framework PO, Consignment PO, Service PO
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Financial Status, Litigation Monitoring, Sanction Monitoring, News, Event, and Sentiment Monitoring;

This concludes our initial series on operationalizing the pocket cube of Exact Purchasing!

^* Unless the Channel-Master Joël Collin-Demers says otherwise.

A few weeks ago, we not only told you that Exact Purchasing is a Pocket Cube, but we broke it down and defined each octant for you, as well as indicating which categories of goods and services were most likely to fall in each octant (with the disclaimer that there is variation between industry and sometimes even companies in the same industry based on size and focus).

This was a great start, but once you understand the breakdown, the next step is understanding how you go about sourcing and procuring the categories in each octant. Today we continue our deep dive into the core technologies you will use with the Risk (Monitoring) focussed-octants.

Low Complexity, High Risk, Low Impact: Continuous Market Monitoring

If it wasn’t for the high risk, this would be a transaction category. As a result, this is one of the categories that is heavily automated. In fact, the only human intervention that is needed is human review and approval of suppliers and products (and organizational requirements). Once these are defined, autonomous systems can be set up to completely manage the (re) sourcing process.

The main difference between this category and the transaction category is the extent of signals that need to be monitored to detect, and respond, to risk (related) events in (near) real time and ensure the supply chains keep supplying on time. The monitoring has to cross Procurement, Inventory, ERP, and External (News and Event and Financial) (Data Feed) systems and keep tabs on all relevant signals so that any relevant signal is captured and automatically responded to.

• (Strategic) Sourcing: Autonomous Dual (Region) Sourcing with Near-Equal Splits
• Supplier Management: AVLs with strong Compliance and Risk Management
• Catalog Management: APLs
• Contract Management: Auto-Creation and Auto-Sign
• Procurement (Channel)^*: Goods PO (Item Master), Framework PO (Fixed Delivery Schedule), Non-PO Invoice (Emergency Replacement), PCard (Seasonal Purchase)
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Sanction Monitoring, News and Event Monitoring;

Low Complexity, High Risk, High Impact: Market Risk Management

This category isn’t just high risk, but high impact. As a result, while this is one of the categories that you want to heavily automate due to low complexity, it’s a balance between automation and human intervention. Unlike our last category, additional intervention is required before award and upon every significant alert, to see if a relationship, market, mitigation, or re-sourcing/re-purchasing action is needed.

The main difference between this category and our previous continuous market monitoring category is that the high impact nature of this category means that simply re-sourcing is not enough of a risk management strategy and mitigation options need to be pre-defined so they can be quickly executed if a risk is detected.

• (Strategic) Sourcing: Semi-Autonomous Dual (Region) Sourcing with Near-Equal Splits, Human Award Analysis and Review
• Supplier Management: APLs and Performance Monitoring
• Catalog Management: AVLs and regular review and approval of new product options and regular automatic identification of potential products for review
• Contract Management: Auto-Creation, Human Review of Obligation and Risk Mitigation Clauses, Auto-Sign
• Procurement (Channel)^*: Goods PO (Catalog), Framework PO (Fixed Delivery Schedule), Non-PO Invoice (Emergency Replacement), Consignment PO (VMI)
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Financial Status, Litigation Monitoring, Sanction Monitoring, News, Event, and Sentiment Monitoring;

^* Unless the Channel-Master Joël Collin-Demers says otherwise.

A few weeks ago, we not only told you that Exact Purchasing is a Pocket Cube, but we broke it down and defined each octant for you, as well as indicating which categories of goods and services were most likely to fall in each octant (with the disclaimer that there is variation between industry and sometimes even companies in the same industry based on size and focus).

This was a great start, but once you understand the breakdown, the next step is understanding how you go about sourcing and procuring the categories in each octant. Today we continue our deep dive into the core technologies you will use with the Architecture focussed-octants.

High Complexity, High Risk, High Impact: Supply Chain Architecture

This is the most critical of all the octants — the far upper, upper right no matter which way you look at the pocket cube. These are your most critical, most complex, and most risky purchases where any interruption can be devastating, and a long term interruption could even bring the risk of bankruptcy (as you lose your key product line and/or ability to serve your customers).

While a lot of automation (and hardened AI) is used for constant monitoring, this is the category where the least automation is employed in the sourcing, contracting, supplier management, procurement, and analysis. Every decision needs to be human made and human reviewed as these are the categories where a single slip-up (or automation mistake because someone miskeyed data somewhere along the chain) can cost millions.

This isn’t to say that advanced technology isn’t extensively deployed — as it most certainly is at every single step of the process, just that the focus is on Augmented Intelligence (and making your employees super-human in their productivity and decision making prowess).

For example, best-of-breed multi-objective strategic sourcing decision optimization that can handle not only multiple providers and product options but also multiple carriers using multiple modes while balancing overall landed cost, supplier and supply chain risk, and compliance is a key requirement of RFP analysis and multi-regional dual-source award definition (as two suppliers in the same province of China that use the same port that could both be taken out by a single natural disaster, port shutdown, or local energy plant failure is NOT dual-sourcing and NOT risk mitigation).

AI might be used to pull together the first pass of the RFP, but the specs will have to be human reviewed and validated, key aspects of the response will have to be human reviewed and validated, and the award analyzed by multiple stakeholders before approval. AI can assemble a contract off of templates, but due to the complexity and risk, legal and risk management will have to carefully review that all risks that can be covered are (and mitigated to the extent possible from a legal perspective) and engineering that product/project management that the specs are complete and the obligation timeline appropriate.

Constant risk monitoring on every signal available will need to be employed, and alerts propagated on the detection of an event that could lead to an issue, not days, weeks, or months later when the issue finally materializes. (And if a human doesn’t review and respond in the system — not an issue, keep monitoring, escalate, etc., escalate the alert up the human command chain.)

• (Strategic) Sourcing: Strategic Sourcing with Multi-Objective Optimization that balances cost, risk, compliance, and organizational objectives
• Supplier Management: Compliance, Risk, and Performance
• Catalog Management: Detailed product (sample) review and verification
• Contract Management: Manually constructed off of templates, LLM and Human Reviewed to ensure all required obligations captured and risks addressed
• Procurement (Channel)^*: Goods PO (Catalog), Contract Invoice (Payment Schedule), Framework PO (Fixed Delivery Schedule), Consignment PO (VMI)
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Financial Status, Litigation Monitoring, Sanction Monitoring, News, Event, and Sentiment Monitoring; Commodity markets, marketplaces, and currency exchanges;

High Complexity, High Risk, Low Impact: Cost-First Architecture

The only difference between this category and the last category is that the impact, while likely relatively significant if any disruption or issue is not resolved promptly, is not as severe (and not organizational life-threatening). It’s still a complicated category to manage due to the high complexity of the products and services, and the high risk they carry due to the supply chain or (current) market conditions, but one that you don’t need to spend nearly as much time.

You’re still doing everything at least semi-manual every step of the way, but you’re not going nearly as deep — you’re covering all the angles, but you’re not triple measuring and verifying them. You’re still using decision optimization, but it’s merely a two-factor cost vs compliance optimization. You’re reviewing the award recommendation, but you don’t need to get the stakeholders involved once you have collected their requirements. You’re verifying specs, but unless it’s a component to be integrated, you don’t have to review samples. And so on.

Also, by continually monitoring for new products and suppliers, and verifying these as they are selected, it’s pretty quick on a disruption to spin up a new event using automation that will essentially recreate the last event but send the RFP to new suppliers as well as suppliers that didn’t win last time (pre-populating with their last responses and bids to make it super easy for them to participate).

And once the key risks that have be captured in a contract are defined, and acceptable clauses created, Legal doesn’t have to review every contract (and you can handle it), and Engineering only has to get involved if a supplier is proposing a change to the spec, material composition, or obligation timeline.

• (Strategic) Sourcing: Strategic Sourcing with Decision Optimization that balances cost and compliance
• Supplier Management: Compliance
• Catalog Management: Product Spec Verification
• Contract Management: Automatically constructed off of templates, LLM and Human Reviewed to ensure all required obligations captured and risks addressed
• Procurement (Channel)^*: Goods PO (Catalog), Contract Invoice (Payment Schedule), Framework PO (Fixed Delivery Schedule), Non-PO Invoice (Emergency Replacement)
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management and Production Systems; Sanction Monitoring, News and Event Monitoring; Commodity markets, marketplaces, and currency exchanges;

^* Unless the Channel-Master Joël Collin-Demers says otherwise.

A few weeks ago, we not only told you that Exact Purchasing is a Pocket Cube, but we broke it down and defined each octant for you, as well as indicating which categories of goods and services were most likely to fall in each octant (with the disclaimer that there is variation between industry and sometimes even companies in the same industry based on size and focus).

This was a great start, but once you understand the breakdown, the next step is understanding how you go about sourcing and procuring the categories in each octant. In this follow-up series we dive in and define the core technologies you will use for each octant as well as their focus.

Today we start with the Transaction focussed-octants.

Low Complexity, Low Risk, Low Impact: Transaction Capture

This is the most “non-critical” of all of the categories in the pocket cube … the true lower left. The impact is minimal if a purchase is delivered late, or has to be replaced with another order. It’s so unimportant compared to literally every other category that, with the right technology, you can literally automate all of it without any worry whatsoever — because the worst case is an ASN/delivery doesn’t materialize and you re-order from someone else, a shipment doesn’t meet spec and you return it and reorder (from someone else), or a service isn’t up to snuff and you don’t (fully) pay for it.

The core technologies are the following:

• (Strategic) Sourcing: (Deterministic) Autonomous Sourcing
• Supplier Management: AVLs (Approved Vendor Lists)
• Catalog Management: APLs (Available Product Lists)
• Contract Management: Auto Creation and Auto-Sign
• Procurement (Channel)^*: Goods PO (Item Master), Service PO (Fixed Cost Service), PCard Purchase (One Time)
• Monitoring: ACK, ASN, and Receipt in the Procurement System

Basically, once you define what the categories are, what the product requirements are in each category, and which vendors you have vetted as being real and “safe” enough to source with, you automate the entire sourcing process end-to-end. (You can even use experimental AI here if you want — the vast majority of the time worst case is that a wrong order is made, and you will have to inform the system of its error, return it, and order again. Unless, of course you ask for 100 10g pot for your nursery, and it interprets that as you needing 100 bags of 10gs of pot and orders 1,000 grams of marijuana for you off the dark web in a state where that’s still illegal … but that is rather statistically unlikely so you’re probably safe.) Once you have your AVLs and starting APLs that capture the specs, as well as your standard RFP/RFQ templates, classic robotic process automation can do the entire event from trigger (stock falls before a certain level, an approved buyer request comes in) to final payment on final delivery on final receipt. You step in if a human detects an issue, and otherwise, you just let (for what is typically tail spend) the process flow.

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

The difference between this category and the last is that while the products are simple, commodity, and very low risk, you need them to keep operating day to day and you can’t be without them for too long. However, the lack of complexity and risk means that this is another category you heavily (heavily) automate and only step in to review the award recommendation to make sure the specs are met. You set up additional monitoring, and the system kicks off another event or PO (to a backup supplier) the minute an ACK or shipment from the primary is too late (and even sends a cancellation to the primary for breach of terms), again involving you only to verify an award (if the award is not one that has been previously verified, since a re-sourcing/re-order should be automatic).

This can again be handled mostly by classic RPA, but some AI will be used to monitor for new products from the existing supply base that can be used (even if the supplier hasn’t supplied the category/product before), because the human award review will ensure that new products get human approved before they are purchased.

• (Strategic) Sourcing: (Deterministic) Autonomous Sourcing with Award Review
• Supplier Management: AVLs and Performance Monitoring
• Catalog Management: APLs and regular review and approval of new product options
• Contract Management: Auto-Creation and Auto-Sign
• Procurement (Channel)^*: Goods PO (Catalog), Service PO (Fixed Cost), Contract Invoice (Fixed Payment Schedule), Blanket PO (Fixed Delivery Schedule)
• Monitoring: ACK, ASN, Receipt in the Procurement System; Lead Time, Delivery, Quality Trends in the Inventory Management System;

^* Unless the Channel-Master Joël Collin-Demers says otherwise.