Category Archives: Procurement Innovation

Despite what they say, Size Matters! Part I

Before your mind wanders off in the wrong direction, I’m talking about your manageable external spend size. (Not your company size, or revenue size, but your actual external spend size!)

You see, not every solution fits every company, and it’s not just a matter of company, process, and Procurement Maturity; not just a matter of what is being bought and for what; but a matter of spend size.

Here’s the thing, sourcing strategy depends on three primary factors:

the category
current market conditions
spend size

The third is critical. If you’re only spending 100K, you’re not going to do a multi-stage RFP with multi-objective optimization analyzing multiple factors against multiple award scenarios and spend 10K in personnel time and cloud costs for a 5K savings. If you’re spending 100M, you’re going to do a multi-stage event with deep supplier and product vetting, should and target cost analysis, multi-objective optimization models against multiple potential award scenarios, multi-round negotiation, and so on.

This is very important. If you’re a small mid-market that only spends 20M a year externally, and your largest category is 200K, your sourcing scenarios are going to be pretty simple. Even though those categories are strategic for you, they are not strategic sourcing in the enterprise sense of the word, which is the sense the big suites try to sell you. All you need is an e-Procurement+ solution with simple RFPs for your big categories and RFQs for the rest.

Now, if you’re a mid-mid-market spending 100M a year with categories 1M plus, that’s not enough. You need sourcing support, but it’s not full fledged strategic sourcing as defined by an enterprise suite. It’s sourcing execution. You need some onboarding, some qualification, some multi-round RFP support with feedback, some basic analytics, and some negotiation support. You don’t need deep optimization or a top-of-the-line analytics solution, an end-to-end third party risk management and compliance solution, or extensive integrated contract creation and redlining support — you just need Word document support as you’re redlining in Word.

In other words e-Procurement isn’t enough. You need some supplier management, sourcing, analytics, and contract document management. And it should all be integrated cohesively. But it’s not a suite.

Now, if you’re a large global organization, spending 500M plus with 10M to 100M categories, that’s different. You need broad and deep. Full multi-stage sourcing with auto-RFX generation, scenario support, and sourcing optimization, which needs to be deeply integrated into the deep supplier and third party management module with extensive onboarding, compliance, risk, and performance support; the analytics module that can analyze offers and compare them against historical, project, should, and target cost scenarios; and the contract lifecycle module that manages the full negotiation, indexing, tracking, and execution of the contract.

This is all very relevant because it determines two things

what type of solution you need
how much you should expect to pay

So how much should you pay? Stay tuned.

There is No One Optimal Team Structure for Procurement …

… not even if you get industry and size specific! But first, let’s backup.

Today I’m going to pick on Tom Mills because he’s well followed, a great practitioner, and gets a lot of stuff right (and I mean a lot of stuff right) … including key functions your “optimal” procurement team needs to support. We’re tackling this now because, in addition to prophetic prediction posts which are full of fantasy, the new year also brings the annual posts that tell you what the Procurement function is, what it’s primary tasks are, and what team you need to address it. And even the most well intentioned ones by the smartest consultants and practitioners don’t always get it right — at least to the extent they think they do.

There’s a couple of reasons for this, and they all relate to their Procurement world view which:

boils down to their (limited) experience, which is usually with a few companies in a single industry or related industries
typically consisted of sourcing primarily one or two of the six major types of Procurement (which are indirect, direct, services, tail, software, and strategic consulting / commissioning projects — all of which need to be approached differently and often need completely different solutions from different providers to tackle)
and usually revolved around a small set of systems and software offerings

Now, I’m not saying I can give you a perfect team model for your company, because I can’t. (In fact, without a deep analysis and evaluation of your company, no one can!) Not even if I created a starting one by industry, size, and geography — because every company is different, and those differences will create minor variations in optimal structure — which sometimes comes down to the talent you can get your hands on.

For example, in most companies product management and product marketing is usually two different functions because it’s rare that one person can do both. But someone who could do both would shift the organizational structure because a person who can do both would bring unique value — being able to design product and communicate the unique value to the market not only ensures all communication is accurate but all design is influenced by market need and reiterated to the market in a meaningful manner.

Now let’s review Tom’s proposal. As per our opening, it’s quite good. In fact, the elements are really good. You need business and category leads. You need sourcing and supplier value. You need operations and governance and someone definitely has to do that. And you need data and digital.
(And if it’s so close, why are we picking on Tom? Because to pick on someone who’s model is bad would require us to write a long multi-part essay or book chapter, and that’s just too much to make a single point.)

So, you need all of the people that are named (or at least the skillsets), but are they leads? Maybe. Maybe not. And is the model appropriate. Somewhat, but not really — not for a lot a of organizations (not being run by Tom or those with his Procurement world view).

But let’s start with the business and category lead and sourcing and supplier value lead. Maybe these are separate, maybe they are not. It all comes down to your philosophy on how you run Procurement. Are you event-based or category-based? If you are truly category-based, sourcing is part of category management, it’s not a separate function or activity — and your category leads know how to source. They will use analysts to help them understand the current market conditions; break down the cost structures; create should and target costs; identify the most likely suppliers; etc. But they will choose the strategy and own the sourcing event. There will be no “sourcing leads”, just “analyst leads” and “supplier development” leads.

Now let’s tackle the “data and digital lead” category. You’ll have a senior analyst lead who runs the team, which will consist of one or more spend and performance analysts and risk and resilience analysts, but the most critical member will be the Procurement Master Data Manager who will work with IT to ensure the necessary data is captured, maintained, enriched, and applied appropriately. Especially since any AI tool you use will blow up in your face without good data. (And if you’re using an LLM there’s no guarantee that it won’t blow up even with good data, but it’s much less likely to blow up with good data than with bad data.)

As for “digital and enablement specialist”, let’s start by clearly stating that any professional that isn’t digital 31 years after Nicholas Negroponte published Being Digital isn’t going to survive much longer in a world where everyone is chasing the AI Dream and trying to automate everything, even that which can’t be automated. Especially since those departments that lie and say it’s AI and adopt tech that works will be three, five, and even ten times more efficient than those that don’t. Every member will be responsible for digital enablement, not just a lead. The team may use expert consultants to help them pick the right tech and evaluate AI (to identify the hybrid or, better yet, old-school AI that actually works), but it shouldn’t be a separate lead in a modern organization.

Working back through the structure, let’s review the ops. An ops manager is critical — and a lot of departments miss this trying to be lean and mean. Someone has to ensure that all of the operations are aligned to support all of the category manager’s requirements from analysis through sourcing support though supplier development through compliance and risk management. And you probably will need a policy and compliance specialist, but should buying channel leads be separate from category management? And if so, is it a channel manager or a technology manager you need? You’re either buying off of contract, usually through an auto-reorder or catalog; from a marketplace; or through a sourcing event. Are those channels? (We’re not talking sales.) But you probably need an internal catalog manager and a marketplace expert.

Finally, the commercial advisory specialist and the contract and commercial manager should probably be on the same team in many organizations (i.e. the commercial advisory team).

In other words, the presented team structure is a great start for identifying key roles, but might not be the perfect org structure for you … or it might be. As noted above, it depends on whether or not you are category driven or not, tech centric or tech supported, and how much support the different roles need.

But most importantly, it depends on what industry you are in and what you are primarily purchasing. If you are in manufacturing, and are primarily purchasing direct, you will need a category manager for each major category as well as a liaison in the appropriate R&D and Manufacturing production teams for each major category. And since, in some categories, the supply will be limited it will be more about negotiation and target costs than open strategic sourcing, you will need engineering experts for target costs; risk experts to identify potential regional, natural, and economic risks related to a supplier; negotiation experts who understand BATNA who can balance supply assurance, quality, and cost; etc.

But if you are a retailer and just need finished goods, you barely even need a category manager. And you certainly don’t need to have a category expert embedded in another department. You just need to source, source, source. And there’s not a lot of risk analysis that needs to be done. It’s finished goods. If one supplier doesn’t supply, you go to another. Unless the retailer is a luxury retailer, it doesn’t care too much what the brands are as long as it can supply products that will satisfy its customers’ needs. And it will be the one organization that latches onto the digital and AI specialist as it will need tech constantly scouring for new suppliers, distributors, and marketplaces that can enhance supply certainty, quality, and/or cost effectiveness — because achievine any two of its three desires ain’t bad!

In other words, the optimal team depends on what the organization actually needs to succeed based on its industry, size, and maturity. It can start with a great template, but it will need to customize based upon its specific circumstances, processes, and maturity. And it might need help to define what that is.

Theoretical Procurement Models Are Cool – But Not Always Recipes for Success

For this piece, I’m going to pick on a recent post, and graphic, from James Meads. Not because he got the models wrong, they’re perfect, but because neither are appropriate for today’s Procurement. We’ll first discuss what, at a high level, the right model actually is and then discuss what ALL models miss that is key for Procurement success.

In short, it’s a blend. It’s a model that shoots for the ultimate expression of what Procurement should be in a perfect world, while accepting the reality that the world is not perfect (and there ain’t no living in a perfect world anyway) and you have to function accordingly. To explain this, we’ll tackle each of the six dimensions and explain why entrepreneurial procurement, the perfect model for a perfect world, is not always the recipe for success and why, occasionally, it’s no better than the old-school technocratic procurement most procurement departments are still stuck in (which, while successful yesterday, is no longer successful today).

Let’s start with goals. It’s obvious that yesterday’s technocratic goals of cost savings and compliance are not a recipe for success, as the emphasis they place overlooks risk and resilience and sees Procurement being involved too late in the process to have any significant impact on total cost. On the flip-side, it’s not all innovation and value-creation — innovation can take years to from ideation to reality and value-creation usually involves new service offerings which rely a lot on suppliers who will need to be developed to get there. That’s why success is a balance between the original goal of Procurement — supply assurance (because No Sale, No Store) — and value generation. It’s conceited and absurd to think Procurement is the source of all value creation in an organization. It’s not. But it is the source of all value realization and generation — because it’s up to Procurement to acquire the required products and services in perfect orders where, when, and at the right TCO that is required for the value realization, and, preferably, at lower cost and higher quality than budgeted for to generate additional value beyond what was expected. It’s a fine balance between aspiration and cold, harsh, reality.

Now we’ll move on to process. The process should be engineered in a layered fashion that builds on must-have, should-have, and nice-to-include steps that, when layered and strung together completely defines a well engineered, almost rigid, process that a junior buyer new to the category can follow and be guaranteed success in typical market circumstances; that an intermediate buyer can strip down to the should-haves, adapt slightly to current market conditions and time-constraints, and use their sourcing experience to take advantage of the specific market conditions and/or an expanded supplier pool; and that a senior buyer with category expertise can strip down to the absolute must haves (engineering part verification, mandatory compliance requirements, etc.) and execute rapidly in an emergency situation. Not all categories are created equal, and the degree of agility and flexibility that can be supported is highly dependent on the category, the market conditions, the buyer’s experience, and urgency of the need. For example, you can’t be 1mm off in (electronics) hardware acquisition. But if the paper/posters are off 1mm from specs, who cares!

Mindset needs to be balanced between the reality that can crush you (and even bankrupt your organization on a bad, experimental, sourcing decision) and the future state you hope to some day achieve. While being too risk-averse can close off the discovery of great new suppliers with great new production methodologies, or great new software technologies to accelerate your Procurement (capability), being too experimental and open-minded can lead to decisions that ignore emerging risks that can result in supply lines suddenly disappearing, production lines going down, and losses in the tens of millions. In an age where geopolitical tensions are at an all time high, tariffs are materializing daily, sanctions are one retaliation away, shipping lanes are being cut off by terrorist activity (Red Sea) and lack of rainfall (Panama Canal), and your entire rare earths supply is one dictatorial decision away from disappearing, you have to be risk-centric in all your decisions. For critical products, you can’t increase risk if they are (primarily) sole-sourced (or primarily dependent on a sole-source somewhere downstream).

Technology is not about UX, because that ultimately comes down to UI for the majority of users, and that results in the prettiest system being selected. But you have to remember, it’s not about pretty, it’s about function, and if you want success, remember what the Northern Pikes told us 36 years ago when you’re selecting tech and being sold a flashy UI: she ain’t pretty, she just looks that way. You want something easy to use, but first and foremost it has to do what you need done. It HAS to support the process. UI/UX ONLY comes into play once the baseline functionality has been established. (And if someone won’t learn the necessary processes and systems required to ensure success, they should be replaced. That includes Chat-GPT addicts who prefer cognitive decline to actually trying to learn and improve!) Furthermore, the technology must be more than just configurable (using adaptive rules), but it must also be agentic so that, once appropriate rules are defined [and exception cases identified], it can run automatically so that, over time, the buyers spend less and less time on tactical tasks and more and more on strategic decision making, supplier development, and value generation and realization. Finally, it must not just be “connected” but be “concentric” and be built to be connectivity-first so that it can sit at the center of all of the organization systems that contain the data Procurement needs to do a proper analysis and make the right decisions.

Supplier Focus should definitely lean towards partnership and growth, but “partnership” and “growth” are nebulous and subjective and fuzzie-wuzzies don’t guarantee that the relationship is valuable to the buyer and definitely don’t provide a foundation for joint value growth for both parties over time. While there must be a joint commitment to improve, the focus needs to start with 360 performance measurement which become the foundation for jointly created and agreed upon development plans that will increase value, and it must continue with a constant eye out for risks and the development of mitigation and remediation plans should the risks become significant. It’s not about touchie-feelies, it’s about true value realization over time.

Finally, while the organization wants to be seen as an indispensable business partner, there’s no way that’s ever going to happen if it’s not seen as a source of value. And even if it is, considering Procurement is always going to come with process, overhead, and forced evaluation before a “preferred choice” can be selected, organizations like Marketing, IT, etc. are never going to see it as an IBP. But as long as the C-Suite sees it as a core source of value, it’s utilization is always going to be mandated!

In short, while theoretical perfect-world models are great in theory, and do a great job of giving us something we should want to strive for, success requires not forgetting the reality that surrounds us and in an age where free trade is crumbling, supply sources are at risk, and supply lines are crumbling. We have to be reality first to ensure supply, which has again become Procurement’s most critical function. Nothing else matters if there are no products or services to sell because critical supply sources/lines disappeared and Procurement wasn’t ready to replace them.

Don’t Focus on Spend …

In a recent LinkedIn post by Celia SGAR, she made a very important point on a key requirement for good Procurement advice.

Focus on Impact, Not Spend!

Now, her advice, governance, assessment, and relationship breakdown was focussed on Supplier and Vendor Management, because otherwise you’re wasting your time reviewing the same suppliers over and over again, but the reality is that it’s good advice that should be applied across the Source-to-Pay and Category Management lifecycle and the only way you’re going to get good results in today’s turbulent trade tussles.

Right now, the typical focus when analytics is first implemented is to find the top suppliers and top categories. Then, you’re supposed to measure those suppliers and source any of these categories not currently under contract or coming up for contract in six months. Then you’re supposed to track those over the next year, match all of the invoices, and report on the savings. Which will end up being less than you expect because the reality is that most organizations know 8 to 9 of their top categories and 8 to 9 of their top suppliers without any analysis, those are the suppliers they are managing, and those are the categories that are being “sourced”, “spot bought”, or a combination of both based on what the organization feels is best.

But this typically isn’t where the biggest opportunities are! The biggest opportunities are in the suppliers providing critical components who aren’t being managed, the categories from the next tier that are not managed because the organization doesn’t realize they’ve went from tail to mid-tier, and the categories where extensive market research has not been done to not only understand market price but should cost.

Contract Management needs to focus on reviewing contracts that don’t have standard terms and conditions, don’t have risk management clauses for emerging and newly identified risks, and don’t have regular measuring, monitoring, and reporting clauses from both sides.

In other words, teams start off on the wrong focus, and continue on the wrong focus all the way through sourcing, contracting, and supplier management because they focus on spend, not impact.

And when it gets to supplier management, by not identifying which suppliers present the most risk due to supplier instability, part criticality, regional uncertainty, trade wars, sanctions, etc, the organization is overlooking, the organization is exposing themselves to risks with severe impact potential by not managing those suppliers first and foremost.

So, if you want to get Source to Pay right, focus on impact, not spend. Not only will you save more, but you’ll be more efficient, and more resilient, overall.

The Sourcing Innovation Source-to-Pay+ Cascading Mega Map! (2026 V2 Edition)

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Still useless, but still slightly less useless than every other logo map that clogs your feed!

1. Every vendor still offering software/services as of 4 days ago!

2. Every vendor logo is clickable and takes you to a live site (as of 4 days ago)!

3. Every vendor is mapped to a meaningful category as of the last date of analyst investigation!

So what’s the point?

To again make it utterly clear you can’t select a vendor based on a random grouping of logos on a map, even if they are categorized!

Not even if the map categorizes the vendors by market size, industry, and/or geography. Those are just proxies for organizational spend, solution needs and cultural requirements. And not every mid-market manufacturing plant in the USA is the same.

The only way to select a good vendor is to follow a proper assisted process and engage an expert who understands what vendors are out there to identify the right vendors to invite to the RFP process once your true needs have been identified.

Especially considering the true number of vendors out there is many times more than what an average big analyst firm will tell you, especially when they restrict their recommendations to their paying clients in their maps, and multiples of what an average big consultancy will tell you, especially when that consultancy only knows their partner solutions (that they need to maintain significant focus on to maintain their preferred partner status).

So, what’s the value?

As we explain in detail in the real value of the sourcing innovation mega map (2026 Ed), it shows you

why you need proper proper assisted solution selection (and we can’t stress this enough)
it shows how unstable the space is:
- fixty-six (56) companies are gone
- a dozen-plus (12+) companies have been acquired or renamed
- there are just too many options for an average buyer to make sense of
it (statistically) proves quite a few vendors ARE NOT GOOD (for you at least)

So let this be proof that there are a lot of logos in our ProcureTech+ space and that, if you want logos, you got logos!
666 of them!
Enjoy!

			Source-to-Pay
Souce-to-Contract			Procure-to-Pay				Intake-to-Orchestrate
Sourcing + SXM + CLM	Sourcing + Analytics	SXM + Analytics	e-Procurement	Invoice-to-Pay / AP	Expenses	Payments (& P-Cards)	Training
Sourcing + SXM	Sourcing + CLM	SXM + CLM		Sourcing	SXM	CLM	Analytics
Direct Supply Chain	Cyber Monitoring	ESG / Carbon	Marketplaces	Legal	Marketing	SaaS	Intelligence