Tactical, non-strategic spend is a time suck to pretty much every organisation, regardless of their size.
Managing this through traditional channels - i.e. ERP systems - is a cumbersome process for both the procurement professional who has to manage it, and the stakeholder who just wants a simple, user-friendly interface to be able to buy something.
Henning Hatje, Co-Founder and CEO of Berlin-based startup Lhotse is my guest on this week's show.
He explains how their solution helps to simplify tactical, non-strategic and tail spend (we look into each of these definitions during the show, too!)
The fact that such a young company has managed to secure this kind of funding is tantamount to the need for a solution on how to manage tactical and tail spend.
Operational efficiency topped the list of most urgent priorities among those surveyed for the 2021 Deloitte CPO Survey. Finding a more productive use of buyers' time when it comes to the huge operational workload of dealing with non-strategic spend will no doubt be high on the wish list.
Lhotse views "tactical spend" as:
When it comes to other ways of handling tail or tactical spend, Integrators and Business Process Outsourcing (BPO) are still common, but as Henning explains, they can often have flaws.
It can send the wrong message to stakeholders when low value spend is farmed out to an external organisation. But more importantly, there is now technology that can automate or semi-automate large parts of these processes.
This moves the organisation away from functionally managing a BPO or an integrator and instead towards a more strategic process of researching and integrating technology into the procurement function.
Lhotse can integrate system data into existing processes to give relevant supplier recommendations based on internal and external data points.
Using technology can also speed up the opportunity for supplier consolidation in indirect procurement on areas of tactical and tail spend, through trained algorithms and data points.
Supplier identification - the ability to identify a potential supplier, without the need for someone with historical experience to source a vendor. It may not be 100% accurate but will guide you along the right path.
Semi-automation of requisitioning process - technology can enable the human being the purchase requisition to be much more self-sufficient and effective in how they request something. The guided sourcing possibilities which are created by the historical data as well as the additional data points from Lhotse can remove the need for a procurement professional to be involved for the large part.
He also explains how he feels that procurement as a function will see an increased role as people are brought on board to bring about all of this change. These roles will be rather different from the category manager roles of today.
As we move towards a self-service model, the question is whether stakeholders will see this as a positive or a negative.
Many procurement professionals today may not necessarily possess the skills necessary to
More agile processes will very likely replace the more rigid procedures to which many procurement organisations are adhering to at present.
This should also have an impact on user experience, for both buyer and stakeholder alike, as we move to a better designed B2B software experience!
