Every procurement team knows the asymmetry. A negotiated price cut lands on a tracker, gets reported to the board, and earns the function its budget for another year. Deflecting a supplier’s 12 percent price increase, killing a spend request for a service nobody needed, or catching a supply risk before it becomes a shutdown produces nothing visible at all. The money never left. There is no before-and-after line to point at. As procurement writer Tom Mills put it in laying out the distinction, cost avoidance is arguably the bigger and more important job, and it is the part that largely goes unnoticed, right up until the organisation decides it does not need procurement, because the numbers were never on a tracker, or because Finance did not believe them.

The argument drew procurement executives, category leaders, consultants, and CFO-side voices into a debate that split cleanly. On which discipline creates more value, the verdict was close to unanimous. On whether procurement can prove it, almost nobody was confident.

Reduction Has a Ceiling. Avoidance Does Not.

The clearest structural case came from Navnith Hanumanthappa, who builds procurement technology. “Cost reduction has a ceiling. You can only negotiate so deep before you hit supplier profitability. Cost avoidance has none, because you’re catching bad spend before it’s committed. The hard part is proving a negative. Finance won’t credit money you never spent. Which is also why it’s the bigger job.”

Kshitiz Kumar, a procurement consultant at Alvarez & Marsal, added the compounding argument. “Reduction is a one-time step-down. Avoidance always compounds: every price increase you deflect resets the baseline suppliers negotiate from next cycle.”

That point deserves more attention than it usually gets. A price cut is a single event that improves this year’s P&L. A deflected increase permanently lowers the base from which every future negotiation starts. Over a multi-year horizon, the second is worth considerably more, and almost no savings tracker is built to show it.

Cynthia O’Dell, a procurement transformation VP, framed the visibility problem in the sharpest terms. “Preventing a $5M exposure is less visible than delivering a $500K price reduction, even though the business outcome may be far greater.”

The Baseline Problem

Where the discussion turned genuinely useful was on why avoidance fails to convince Finance, and what would fix it.

Amine Assaoui, a procurement transformation advisor, located the failure precisely. “What makes cost avoidance difficult is that, when it works, it often just looks like the business stayed on budget. Procurement may prevent millions in supplier increases, challenge unnecessary demand, close contract gaps or avoid costly risks. But because those costs never materialise, there is no obvious saving on the P&L.”

His prescription was the most practical in the thread. “The real challenge is agreeing the baseline upfront with Finance. Otherwise, procurement says it protected millions while Finance simply sees that the budget was respected.”

That sentence describes the trap most functions live in. Procurement claims value. Finance sees a budget that held. Without a jointly agreed baseline established before the intervention, those two readings never reconcile, and Finance’s version wins every time.

Amol Ghanekar, a global procurement leader, reframed the whole issue away from recognition and toward governance. “The bigger issue is governance rather than recognition. Until Finance, Procurement and the business align on how cost avoidance is defined, validated and reported, the conversation becomes about defending the numbers instead of demonstrating value. Cost reduction improves today’s P&L. Cost avoidance protects tomorrow’s P&L. The real test is whether we measure prevention with the same discipline as realized savings.”

Mariia Studentcova, a senior procurement leader, offered a concrete mechanism. “Provided a precise measurement methodology is strictly followed and both are validated by Finance, I would add the Savings vs. Budget as a smart way to recognize cost avoidance at the P&L level.”

Matthias Svetic, a negotiation advisor, suggested the presentational fix. “Most stakeholders can’t picture a cost that never happened. Maybe the fix is showing the before and after price on every deal, not just the total saved.”

The Dissent Worth Reading

Not everyone voted for avoidance. Olca Kazanci, a senior strategic buyer, made the case for the discipline that actually pays the bills. “Cost reduction reflects to the budget directly, cost avoidance takes much more time from the procurement time but only impacts on the unnecessary spend. My vote is 1.”

Patrick Richards, a category management and sourcing transformation leader, gave the fullest answer to why reduction remains the default. “Avoidance can be squishy, getting alignment on finance on the calculations, scenarios, etc. to recognize the impact is KEY. Why is savings the standard? It’s easy to track and historical, plus not a crystal ball.”

But his primary vote went the other way, and his reasoning added a dimension the rest of the debate largely missed. “As product assortment changes over time, it is CRITICAL that sourcing improve the product margin UPFRONT. All the work sourcing puts into New Product Intros is a major unlock to the future of the business. It’s where the company is placing its next bet via marketing, sales incentives. A few more percentage points can make a BIG impact for the P&L.”

Randy Piechowicz, who ran procurement finance at a global function, settled it from the CFO side. “The answer is both. When I was a global procurement CFO I had my team develop tracking, reporting, and analysis of both, along with graphics for executive level reporting.”

Where Avoidance Actually Happens

Several practitioners pushed the definition upstream. Veera Baskar K, a supply chain consultant to mid-sized manufacturers, made the point most cleanly. “The strongest form of cost avoidance starts before RFQs are issued. When Procurement is involved during product design and demand planning, decisions around specification rationalisation, MOQ optimisation, and inventory policies prevent costs from entering the system instead of negotiating them away later.”

Vicki Munson, a procurement executive, quantified the cost of late involvement. “When we are not involved, the quote is accepted as is, which oftentimes can equate to 20 to 30 percent more than when Procurement is involved from the beginning.”

Gokulakrishnan Srinivasan offered a concrete IT example. “Anticipating OEM price revisions driven by memory and storage cost increases, we forecasted demand and purchased early. The result wasn’t a bigger discount, it was avoiding future cost escalation and protecting the approved budget.”

The Vocabulary Problem

The bluntest observation came from David Račak, a procurement AI consultant, and it undercuts much of the sophistication above. “Most stakeholders doesn’t see difference between cost avoidance and savings. We need less terms and more easy metrics.”

That is worth sitting with. Procurement has built an internal vocabulary that the rest of the business does not share and has no incentive to learn. John Jodka, a supply chain director at General Dynamics NASSCO, made the same point from the receiving end. Avoidance is always worth more, “but most organizations see that as a part of the job description.”

If the business considers preventing unnecessary cost to be the baseline expectation rather than a delivered result, no amount of methodological rigour will earn credit for it.

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, agree the baseline with Finance before the intervention, not after. Avoidance claimed retrospectively will always read to Finance as a budget that simply held.

Second, move avoidance upstream. Specification rationalisation, demand challenge, and early supplier engagement prevent cost from entering the system. Deflecting a price increase at renewal is the last and weakest place to do this work.

Third, simplify the language. If stakeholders cannot distinguish avoidance from savings, the problem is not their comprehension. It is procurement’s insistence on terminology the business never asked for.

Does your Finance function validate cost avoidance with the same rigour it applies to realised savings, and if not, who is going to propose that it should?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

The case arrived without hedging. Indirect procurement is already dead, argued corporate advisor Ramesh Krishnamoorthy, and most organisations lack the courage to read the autopsy report. The team of fourteen at headquarters is not transforming. It is a legacy structure held together by politics and by leaders who would rather protect headcount than confront an uncomfortable truth. Vendor onboarding, spend analytics, contract extraction, RFx creation, risk scoring, all now automated. Generalist category managers get dismantled by vendor commercial teams that do nothing but that category, across fifty clients at once. Savings that never reach the income statement. Stakeholders who route around the function entirely, because shadow procurement is a rational response to organisational failure rather than rogue behaviour.

What survives, by that reckoning, is two or three people. One to govern the outsourced model, one to manage AI platforms, one for compliance. No VP. No layer of directors. No category lead for every spend bucket.

The argument spread quickly through the procurement community, drawing CPOs, interim directors, transformation advisors, outsourcing providers, and category specialists into an unusually candid exchange. What is striking is how little of the response defended the existing model. The fight was over the arithmetic.

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Most organisations still treat procurement as a cost centre. That framing is increasingly a strategic mistake. If procurement influences profitability, resilience, risk, sustainability, innovation, and capital allocation, why is it still measured primarily through savings? The question sits at the heart of a framework called the Procurement Value Creation Ecosystem, built on a simple premise: procurement does not create value through a single activity. It creates value when disciplines, capabilities, technology, and judgement work together. Sourcing, supplier management, risk, finance, ESG, and operations, supported by negotiation and stakeholder skills, enabled by data and AI, all connected to help the business make better decisions. Because that is where procurement’s real contribution starts. Not in the process. Not in the dashboard. In the quality of the decisions that follow.

The framework drew procurement directors, CPOs, consultants, technology founders, and a supplier voice into an extended debate. The agreement that savings alone undersell the function was near universal. What deepened the conversation were the layers contributors added: decision integrity, revenue enablement, and the honest paradox of proving strategic value before being given a strategic role.

From Transactions to Outcomes

The cleanest reframing came from Colin Ricardo, Founder and CEO of Digital Optima. “Procurement is often still measured like purchasing. Cost in, savings out. But purchasing executes transactions. Procurement orchestrates outcomes. The distinction matters because the moment you start managing risk, resilience, supplier relationships and capital allocation, you are no longer running a cost centre. You are running a decision engine for the business.”

His conclusion drew the line between tools and judgement. “Technology gives you visibility. Judgement is what you do with it.”

The framework’s author extended the point. “Technology can improve visibility, but it cannot decide which trade-offs the business should accept.” That distinction runs through the entire discussion. The trade-offs, cost versus resilience, speed versus compliance, short-term savings versus long-term value, are where procurement earns its keep. As the author put it in a later exchange, “Perhaps Procurement’s role is not to eliminate those tensions, but to help the business navigate them consciously. That is where judgement becomes more important than process.”

The Decision Integrity Layer

The most original addition came from Ricardo Manuel Machado Ferreira, creator of a decision science methodology. “Procurement value is only fully protected when the decisions behind that value can be defended later. Savings can be reported. Dashboards can be shown. Supplier performance can be measured. But the harder questions are: why this demand existed, why this supplier path was chosen, which trade-off was accepted, what alternative was rejected, who owned the risk, what evidence supported the decision.”

His conclusion introduced a concept most procurement frameworks miss entirely. “The most valuable procurement organisations do not only help the business make better decisions. They help the business make decisions it can still defend when conditions change.”

His follow-up sharpened the principle into something every CPO should internalize. “A bad outcome is not always a bad decision. But an undocumented decision becomes very hard to defend when conditions change.”

That layer matters more each year. As supplier risk, ESG, and resilience become board-level issues subject to regulatory and audit scrutiny, the ability to show that a decision was conscious, evidenced, and defensible at the time it was made becomes a capability in its own right.

The Revenue Side Nobody Staffs

Howard Richman, a global procurement transformation leader and co-author of Procurement Confidential, pushed the framework toward the dimension procurement rarely claims. “A core discipline which needs to find its way into graphics such as these is Procurement Enabled Revenue, and how the function helps support the drive toward revenue growth. I see this as key to breaking away from the function always defining itself as a command and control ‘Savings R Us’ function.”

His examples from his own CPO tenure were concrete. “I had my team training our sales teams on how best to negotiate with customer procurement functions when trying to win new business. We also helped our New Product Development team with their licensing deals, and helped the software audit team with negotiations for underlicensed customers. All of this helped to enhance revenue growth.”

Craig Burnett, a supply chain professional, confirmed the gap. “It is under-valued, under-researched, under-focused on, especially on the direct side. I think this is one of the top 2 biggest value-levers that is used the least.”

That observation deserves attention. Procurement expertise in negotiation and commercial structuring is transferable to the revenue side of the business. The functions that lend it out change how the organisation perceives them.

Price Is What You Pay. Cost Is What You Bear.

The supplier perspective came from Mandy Tang, who runs a precision hardware manufacturer supplying NVIDIA, BYD, and Cooler Master. “From the supplier side, we see this play out every day. The lowest quote often isn’t the lowest total cost. Rework, delayed deliveries, extra communication, and quality risks all add up after the PO is signed. Price is what you pay. Cost is what you actually bear.”

The author’s reply distilled the measurement implication. “Price is a transaction. Total cost is the consequence of dozens of decisions made before and after the PO is issued. That is precisely why I believe procurement should be measured by business outcomes rather than negotiated prices.”

Fidel Ferreira, a supply chain and procurement professional, connected the lesson to recent history. “One thing many organizations learned during recent global disruptions is that the lowest-cost decision is not always the lowest-risk or most sustainable decision. That shifted procurement from being viewed as a transactional function toward becoming a strategic business enabler.”

The Knowledge Connector

A recurring theme reframed procurement’s core identity. Sanchita Sur, a GenAI founder incubated by SAP, named it. “Procurement creates the most value when it translates between finance, legal, operations, technology, and the supplier ecosystem, not by owning every answer, but by helping the business make better decisions.”

The author embraced the shift. “The more I reflect on procurement, the less I see it as a function that owns expertise and the more I see it as a function that connects expertise.”

Manivardhan Reddy B, a strategic sourcing lead at Huntsman Corporation, identified the missing piece in most organisations. “Perhaps the challenge for many organisations is not capability availability, but the architecture that connects capabilities into decisions.”

Urszula Woronowicz, a procurement and contract strategy leader in energy CAPEX, grounded the whole debate in the human element. “People create value by thinking ahead, managing risk, and recognising connections that others don’t see.” The author’s reply completed the thought. “AI can generate options. Data can reveal patterns. But recognising which patterns matter, anticipating second-order consequences and making decisions under uncertainty remain deeply human capabilities.”

The Seat at the Table Paradox

Claudia Cebulok, a leadership coach with two decades of procurement leadership, named the catch-22 that traps most functions. “To truly drive value, it needs a seat at the table, so it can show how it enables better business decisions. Ironically, proving that value is exactly what earns procurement a bigger seat, but that’s hard to do without being invited in to begin with.”

The author’s resolution was pragmatic. “The more procurement contributes to better business decisions, the more trust it earns. And the more trust it earns, the greater its opportunity to influence future decisions.”

Volodymyr Babilunga, a supply chain consultant, offered the practical maturity test. “One way to assess the maturity of a procurement function is to look at the conversations it has with the business. If every discussion revolves around price, procurement will probably be perceived as a cost centre. If discussions include resilience, growth, innovation, risk and capital allocation, procurement starts being recognised as a strategic business partner.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, measure decisions, not activities. Savings are one expression of value, but the function’s real contribution is the quality of the business decisions it enables and the trade-offs it helps the organisation navigate consciously.

Second, build decision integrity now. Document why demand existed, which alternatives were rejected, who owned the risk, and what evidence supported the choice. A bad outcome is not always a bad decision, but an undocumented one is indefensible when conditions change.

Third, claim the revenue side. Procurement’s negotiation and commercial expertise transfers to sales, licensing, and product development. The functions that lend it out stop being seen as Savings R Us and start being seen as a business accelerator.

Where does procurement create the most value in your organisation today, and is that where it gets measured?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

For most of its history, fashion sourcing was treated as a commodity. Find a factory. Make a product. Ship it. Then COVID broke the supply chain, and the boardroom finally noticed that the part nobody wanted to own was the part that mattered most.

That shift sits at the center of a candid conversation with Anne-Laure Descours, former Chief Sourcing Officer at Puma and a 30-year veteran of the industry based in Hong Kong. She stepped down from Puma’s board at the end of 2024 and now advises brands, sits on boards, and backs recycling startups. Her view is direct. The old sourcing playbook is finished, and the brands still using it are already two years behind.

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A procurement career rarely follows a straight line. It is built from a series of choices that quietly compound over decades, each one nudging your perspective, your leadership style, and your professional identity in a direction you may not have planned. Direct or indirect spend. Specialist or generalist. Stay or move. Expert or leader. None of these decisions is binary, and most experienced practitioners will tell you the best opportunities of their careers were never part of the original plan. The value is not in picking the perfect path. It is in making each choice consciously rather than by drift.

The conversation gained traction online after a procurement veteran laid out ten major career decisions, from spend area and geography to company size and the choice between deep specialism and broad leadership. The post framed procurement as an adventure with many possible directions and closed with a simple formula for success: do what you are good at, do what you love, stay curious, and be bold. The post drew procurement leaders across pharma, fragrances, real estate, telecom, and CAPEX-heavy industrials. The agreement that careers are built from accumulated choices was universal. What deepened the discussion were the decisions contributors felt the original list had missed.

The Choice of Reputation

The most cited addition came from Luciano Corrêa Garcia, an executive procurement leader. “I would add one more decision: choosing the type of impact you want to be known for. Procurement careers are shaped not only by category, company size, geography or leadership path, but also by the value people associate with you over time.”

His framing turned reputation into a deliberate career lever. “Are you known for savings, risk management, supplier innovation, transformation, governance, stakeholder influence, or broader business value? That positioning matters. You can move across industries, countries, categories and roles, but having clarity on the impact you consistently bring makes those career decisions much more intentional.”

The author endorsed the point directly. “Reputation does matter. Over time people tend to associate you with a particular strength or area of expertise, and that can have a significant influence on your career path.”

That observation reframes the ten decisions. The category you pick and the company you join matter, but the through-line that follows you across every move is what people believe you are good at. That reputation is built on purpose or by accident, and the difference shapes which opportunities come to you.

Managing Suppliers or Managing Change

The sharpest single distinction came from Josemon M R, a procurement and supply chain leader in telecom and automotive. “One of the biggest career decisions is choosing between managing suppliers and managing change. The latter often becomes the foundation for broader leadership opportunities.”

That dividing line cuts deeper than the original post’s category-management-versus-transformation framing. Managing suppliers is the craft most procurement professionals are trained in and rewarded for early. Managing change is the capability that translates into general leadership. The professionals who consciously build the second skill set open doors the supplier specialists never reach.

The author had already gestured at this in the original list, noting that switching between category management and central excellence is entirely feasible. The comment sharpened it into a strategic choice with leadership consequences.

The Project Side Versus Corporate Side Gap

Wael Reda, a commercial director in real estate procurement, surfaced a decision the original list omitted. “One decision that deserves a place on this list is Project Side or Corporate Side. Working for contractors, consultants, developers, and corporate procurement functions teaches very different lessons.”

His reasoning connected the choice to commercial judgment. “The professionals who experience multiple perspectives often develop stronger commercial judgment because they understand how decisions impact the entire value chain, not just their own function. That broader perspective becomes invaluable as careers progress into leadership roles.”

The author conceded the omission honestly. “I did strongly consider this. As a consultant myself it was a big decision whether to stay in-house as an FTE or work outside. Both teach very different things. Having got to 10 good points, I ran out of space to fit it in.”

That distinction matters in project-heavy sectors like construction, energy, and infrastructure. The buyer who has only ever sat on the corporate side sees one slice of the value chain. The one who has worked for contractors and consultants understands how their decisions land downstream, which is exactly the judgment senior commercial roles demand.

Training Versus Hands-On Experience

Fateme Assar Kashani, who works in freight and logistics software, raised a foundational early-career decision. “Decide whether you’ll learn primarily through formal training and certifications or through hands-on experience in challenging roles. The best procurement professionals usually combine both, but knowing when to prioritize each can accelerate growth significantly.”

The author connected the choice to company size. “Typically the learning experience is quite different in larger versus small businesses who often train in more or less structured ways.”

That observation links two of the original decisions. The size-of-company choice is also a learning-style choice. Large multinationals offer structured training, certifications, and defined progression. SMEs offer accelerated hands-on responsibility with less formal scaffolding. The professional who knows which mode they need at each career stage can sequence their moves deliberately rather than taking whatever role appears.

The Move Decision That Resonates Most

Of the original ten, the decision to stay or move struck the deepest chord. Frederick Magana, a CIPS Fellow, spoke from experience. “Number 9 resonates with me a lot. After spending over a decade in one company I had to move to achieve career growth.”

That testimony validates the original advice with a caveat. The post recommended staying a minimum of three to five years per company, switching only if you are not growing. Magana’s decade in one place shows the risk on the other side. Loyalty has a ceiling. When the room to evolve runs out, staying longer stops being commitment and starts being stagnation.

The author’s own career arc, spanning more than four decades, underlined the broader truth that the rules have shifted. Times have changed, and the tenure expectations that governed earlier generations do not map cleanly onto a market where mobility is more accepted and sometimes necessary.

Procurement as Vocation or Accident

Felipe Solano, a procurement manager in fragrance manufacturing, raised an honest reflection on how people enter the field at all. “I’m not sure I know anyone, or heard of, who has had Procurement as a vocation for study-from-scratch career path and a clear direction of what area, sector or industry to get involved in.”

His own anchor was purpose rather than category. “The clear direction is to be within a Procurement function that contributes to the creation of something that people need, like or make a difference to them, which gives me a sense of pride on contributing to it.”

That observation reframes the entire decision framework. Most people arrive in procurement sideways, not by design. The decisions in the post are less a roadmap chosen in advance and more a set of forks encountered along a path that was never fully planned. The author agreed, noting his own career was never a straight line and that many of his best opportunities were never part of the original plan.

Takeaways for Procurement Professionals

Three lessons run through the discussion. First, decide what impact you want to be known for. Category, geography, and company size matter, but the reputation that follows you across every move is what people believe you deliver. Build it deliberately.

Second, choose between managing suppliers and managing change early, with eyes open. The supplier craft is rewarded early. The change capability is what translates into broad leadership. The two paths diverge more than they appear.

Third, seek varied perspectives before you specialize into leadership. Project side and corporate side, structured training and hands-on stretch, large and small companies each teach commercial judgment the others cannot. The leaders with the strongest judgment usually sampled several.

What big career decision shaped your procurement path most, and would you make the same choice again?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

A category strategy is not strategic because it has a slide deck. It becomes strategic when it changes how decisions are made. That distinction sounds obvious until you look at how most procurement strategies actually perform under load. Clean segmentation, a supplier matrix, a clear roadmap, nice governance, good language. The artifacts look complete. Underneath, the basics are often still missing. Nobody can answer with confidence who is really buying, why they are buying it, what should actually be standardized, which exceptions are legitimate, and which trade-off the business is trying to make. Without those answers, a category strategy does not guide decisions. It decorates confusion.

The debate gained traction online when a global indirect procurement leader proposed a single test. When pressure rises, does the strategy make choices easier, clearer, and harder to distort? If not, it is still just procurement thinking, not procurement influence. Good category work is not only market-facing. It is decision-facing. The post drew procurement directors, supply chain leaders, business analysts, consultants, and even a supplier voice. The agreement on the diagnosis was strong. What deepened it were the specific tests each contributor offered for spotting a strategy that is still too abstract to be useful.

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The complaint is familiar in every executive suite. “We can’t find enough capable procurement people.” It sounds like a labor market problem. It is not. The talent exists in volume. What companies are actually struggling with is a structural mismatch between job descriptions written for a world that no longer exists and a business reality that now demands far more. Procurement roles have expanded faster than the operating models, tooling, and competency frameworks meant to support them. The result is a function set up to fail, then blamed for failing to hire its way out.

The debate gained traction recently online when a procurement trainer argued that the shortage is a misdiagnosis. Today’s teams are expected to deliver the core flawlessly, supplier negotiations, supply continuity, cost savings, quality, while also becoming experts in ESG, AI, geopolitics, and complex risk. Yet many remain overloaded operationally, barely trained in the basics, and working with fragmented systems. The post drew procurement directors, CPOs, transformation advisors, and recruiters. The agreement that this is a design problem rather than a supply problem was near unanimous. The disagreement was about what to fix first.

Identity Crisis, Not Talent Shortage

The most cited reframing came from Marcel Van Wonderen, a procurement and supply chain transformation advisor. “There isn’t a procurement talent shortage. There is a procurement identity crisis. Too many functions still optimise categories, savings reports and internal processes while the business is moving toward growth enablement, resilience, speed, ecosystem orchestration and AI-driven decisions. The real question is, is procurement willing to let go of its past?”

That question reframes the entire debate. The problem is not finding people who can run sourcing events. It is whether the function will redefine itself around what the business now needs.

Mario González, a procurement director at Tier-1 automotive, sharpened the language. “We aren’t facing a talent shortage, but a relevance gap. Expecting a single professional to master everything from geopolitics to AI while buried in operational noise is a structural failure. Procurement isn’t a job anymore. It’s a high-stakes commercial orchestrator.”

Sajith Raghavan, a VP of Procurement with experience at ICL, Reliance, and DuPont, named the precise mismatch. “The talent shortage is actually a gap between yesterday’s job descriptions and today’s business reality. Companies aren’t struggling to find buyers. They’re struggling to hire the hybrid commercial architects needed to navigate a volatile world with outdated tools and narrow criteria.”

The Structural Mismatch

The deepest diagnostic came from Asif Manzoor, a supply chain and operations leader. “The issue is structural mismatch. Procurement roles have expanded faster than their operating models, tooling, and competency frameworks. Without redesigning jobs, systems, and expectations in parallel, organizations keep labeling a design problem as a hiring problem, while complexity continues to accumulate internally.”

That phrase, “labeling a design problem as a hiring problem,” is the entire argument in seven words. The hiring process filters out capable people because the criteria were written for the old role. Manzoor extended the point. “Capability exists, but linear hiring models and legacy competency frameworks filter it out. Until organisations redesign jobs, decision rights, and evaluation criteria for AI-native and non-linear expertise, they will keep optimizing recruitment for the past while struggling to execute in the present.”

Raghavan offered the operating model alternative. “Organizations must pivot toward building multi-disciplinary teams supported by robust digital architecture, rather than searching for the mythical procurement professional who can do it all.”

That distinction matters. The unicorn who masters negotiation, ESG, AI, and geopolitics simultaneously does not exist at scale. The solution is team design, not an impossible individual hire.

Hire From Outside the Function

A second thread argued the talent fix requires breaking the procurement-only hiring habit. Mathew Schulz, founder of Pennywurth, held firm to a contrarian thesis. “Next-gen procurement talent will come from outside the function.”

Felipe Solano, a procurement manager in fragrance manufacturing, exposed the flaw in hiring the finished article. “Companies want to hire the guru that ticks all the role boxes of today’s description. The finished article of today is obsolete tomorrow. Who wants to be hired to do what you have already done? Hire someone who has some strong skills and can grow on the role. The job role published today is too old tomorrow, and hungry professionals are the ones who will adapt, evolve and deliver. Not the perfect full box ticking one.”

That observation cuts at the recruitment logic directly. Hiring for a perfect match to today’s spec guarantees obsolescence tomorrow. Hiring for adaptability and growth potential is the only durable strategy in a role that keeps changing.

The Salary and Career Problem

James Meads, a procuretech advisor, named the elephant in the room. “It’s risk aversion and lack of vision from the hiring companies most of the time. Also, UK procurement salaries are part of the problem. Consulting pays better. Working for a startup is more fun and gives you real responsibility and a fast track to leadership roles. So inevitably, people leave because the stress isn’t worth it for the salary and very limited career progression.”

That observation reframes the shortage as a retention and attraction failure. If procurement cannot compete with consulting on pay or with startups on responsibility and progression, the talent does not vanish. It goes elsewhere. The function loses people it trained because the value proposition no longer holds.

Luke Tomlinson, a procurement leader, added the pipeline dimension. “Build a framework where young and new talent can genuinely thrive. This is anything from entry level training, to progression routes, and core competencies.” The shortage narrative obscures a self-inflicted wound. Functions that fail to train and progress junior talent manufacture their own future scarcity.

The Investment Catch-22

The most uncomfortable structural truth came from Jehanzeb Alam, a procurement and supply chain leader. “The solutions all assume leadership is convinced already. In reality, procurement generally has to fight the internal case for its own investment while in parallel being held accountable for underperforming without those investments.”

That catch-22 is the trap most procurement leaders live in. They are denied the tools, headcount, and training needed to perform, then judged for underperforming. The investment that would close the gap requires a business case that the function lacks the resources to make compelling.

Maria C., a global procurement leader, located the root cause in the C-suite. “C-Suite executives do not take the time to understand procurement. Many see it as simply a cost reduction and procure-to-pay role without considering the intricate legal, commercial and operational details. A good CEO or President understands this.”

Rewrite Your Own Job Description

The most empowering response came from Michael Shields, VP of Procurement at Tropic. “We need to re-write our own job description to some degree. If we start operating differently and show the business the results, the job and expectations can evolve too.”

His adventure metaphor captured the strategic choice. “You can either be taken with the current, which is risky, or you can try to fight the current, which is exhausting and maybe impossible, or you can use the current for momentum but still steer.”

That framing matters. The function is not powerless against the mismatch. Procurement leaders who demonstrate strategic value reshape the expectations and the role itself, rather than waiting for leadership to redesign it for them.

Clarice Camacho, a global energy procurement and risk leader, drew the final distinction. “The gap is no longer operational capability. It is strategic leadership capability. We trained procurement teams to buy better. We now need leaders who can lead differently.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, the shortage is a design problem wearing a hiring problem’s clothes. Capable people get filtered out by competency frameworks and job descriptions written for the old role. Redesign the criteria before blaming the market.

Second, the solution is team architecture, not the unicorn hire. No single professional masters negotiation, ESG, AI, and geopolitics at once. Build multi-disciplinary teams on strong digital infrastructure instead.

Third, procurement must make its own case. The investment catch-22 is real, but waiting for the C-suite to understand the function is a losing strategy. Demonstrate strategic value, rewrite the role through results, and steer the current rather than fighting it.

Is your organization hiring for the procurement role of five years ago, or the one the business actually needs now?

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Few questions split procurement, legal, and the business as cleanly as this one: who owns contract management? The honest answer is that it depends. It depends on company size, risk appetite, business maturity, and the type of contract on the table. Large corporates split ownership across procurement, legal, and budget holders with formal governance. Mid-sized companies often hand most of the lifecycle to procurement, with legal stepping in at key risk points. SMEs centralize ownership with the budget owner or procurement, supported by external legal as needed. Ownership shifts as organizations scale. What does not shift is the cost of getting it wrong.

The debate gained traction after a post mapped contract ownership step by step, from platform setup through renewal and termination, and proposed a RAPID framework to remove ambiguity. Recommender, Approver, Performer, Inputter, Decision Maker. The post drew commercial managers, in-house counsel, academics, and procurement leaders. The agreement on “it depends” was near universal. The disagreement on who should actually hold the pen was sharper.

Procurement at the Center, or Too Much Orange

The most direct challenge to the framing came from Nicholas Seiersen, a trading partner advisor. “The example in the coloured chart seems to put procurement at the centre of everything, which is not how I see it. The business sets the requirements and procurement helps develop a strategy to approach the market. Legal advises on key risk approaches. There is too much orange in the chart, particularly when you think of the sales side of the story.”

That observation matters. Most procurement-authored ownership models place procurement at the hub. The sell side rarely appears. A contract has two parties, and the buy-side-only view of ownership misses half the lifecycle reality.

Freddie Hinkley, a procurement specialist, took the opposite position with equal force. “There is no chance that the legal team has time to effectively handle contract management. They are already at capacity in simply having to review contracts. Procurement all the way. Often budget holders don’t have the time or will for contract management either.”

The tension between those two views is the entire debate in miniature. Procurement has capacity legal lacks. The business has accountability procurement lacks. Neither has all three of capacity, accountability, and skill.

The Research Says the Business Owns It

The most data-grounded contribution came from Colin Linton, an academic who has researched the question for over a decade. “Most contract management responsibility actually sits within the business areas, which are typically the budget holders and the primary users of the contract. Usually responsibility for day-to-day contract management doesn’t sit with trained or qualified procurement practitioners.”

His sample size gave the claim weight. “Over 600 surveys and now nearly 50 interviews. These span more than 600 organisations, split 50/50 between public and private sector. More than 90 percent of these organisations have a model where the majority of contracts are managed by the numerous business areas, not by Legal or Procurement.”

His sharper point cut at the resourcing trend. “There’s definitely been a trend for central Procurement teams to become smaller, less operational and more strategic. So these aren’t resourced for day-to-day contract management. The most important contracts might be managed by Procurement. But everything else will be with the business users to manage.”

That observation reframes the entire debate. The aspiration is that procurement or legal owns contracts. The reality is that overworked budget holders manage most of them as an add-on to the day job. Linton’s central question lands hard. “Do these people with contract management responsibility have the right skills and tools to manage contracts effectively? And do they actually have time to manage contracts properly?”

The Training Gap Nobody Owns

James Meads, a procuretech advisor, exposed the skills problem from the practitioner side. “For a long time as a practitioner, I didn’t really see contract management as a part of my job. Commercial terms, yes. But the legal side was always where I struggled. And it’s rarely an integral part of a JD or interview process. I’ve never once been asked if I’m comfortable or competent at writing and negotiating contracts.”

His conclusion explained why ownership debates stay unresolved. “So many procurement professionals have had zero formal training on this, and are just expected to wing it.”

That gap matters. Assigning ownership to procurement assumes procurement was trained to manage contracts. Many were not. The ownership question hides a capability question that no function wants to answer honestly.

Legal Should Not Own It Either

The legal perspective came from practitioners who declined the responsibility. Rachelle Hare, a construction lawyer and commercial manager, was direct. “With my legal hat on, Legal isn’t the right person to own contract management. Legal needs to be an input and a SME, not the owner.”

Her preferred model was specific. “I’d rather the project or budget holder own contract management than Procurement. Procurement does an amazing job, but their skill-sets aren’t tailored to managing a contract. The business is better off getting a dedicated Contract Manager who can do so more cost-effectively. As Commercial Manager, I can supervise a Contract Manager. Even better if the Commercial Manager and Contract Manager are embedded in the Project.”

Her closing line captured the resolution most experienced voices reached. “Really, it’s one glorious partnership of SMEs.”

The Contract Is an Operating System, Not a Document

The deepest reframing came from Arne Rheeder, a commercial and contracts specialist in mining projects. “One of the biggest mistakes organisations make is treating contracts as a legal document instead of an operational control system. Legal protects the wording. Procurement protects the commercial structure. Operations live with the consequences. And the budget owner usually carries the pressure when reality starts diverging from the assumptions.”

His warning about fragmented accountability was precise. “When procurement owns pricing, legal owns risk wording, operations own delivery, finance owns approvals, and nobody owns the full commercial outcome, projects slowly start developing governance blind spots. The contract is not the end of the procurement process. It is the beginning of operational reality.”

Arjen Van Berkum, a contract management strategist, sharpened the structural critique. “Ownership without process clarity is just politics dressed as governance. A 6-page manual and a shared folder do not constitute a process framework, yet that is the reality in far too many organisations. When there is no real foundation, the ownership debate is simply a power struggle dressed up as best practice.”

His distinction between hierarchy and process ownership was the strongest line in the thread. “Process ownership is fundamentally different from hierarchy. It is not about who sits highest on the org chart. It is about who owns the logic, sequence, responsibilities and governance across the full lifecycle.”

Collaboration, Not Conquest

Clarice Camacho, a global energy procurement and risk leader, offered the model most voices converged on. “Procurement owns sourcing, negotiations, supplier relationships, and commercial performance. Legal owns contractual risk, compliance, and governance. Finance oversees budget alignment and payment controls. Business stakeholders own vendor outcomes and service delivery.”

Her closing reframing resolved the ownership question without picking a single winner. “Procurement doesn’t own contracts alone. It owns collaboration around them.”

Sajith Raghavan, a VP of Procurement with experience at ICL, Reliance, and DuPont, named the stakes. “Too many organizations still rely on informal ownership models, which creates delays, missed renewals, compliance gaps, and unnecessary disputes later on. Clear governance turns contract management into a strategic capability instead of an administrative task.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, the realistic owner is often the business, not procurement or legal. Research across 600 organizations shows over 90 percent leave most contracts with business users. Any ownership model that ignores this manages an aspiration, not the reality.

Second, ownership hides a capability gap. Most people managing contracts received no formal training and have no time allocated. Assigning ownership without addressing skills and capacity guarantees that contracts slip through the cracks.

Third, the contract is an operating system, not a legal artifact. Fragmented accountability across pricing, risk, delivery, and approvals creates governance blind spots. Clarity on who owns the full commercial outcome matters more than the exact functional split.

Who actually manages your contracts after signature, and do they have the skills and time to do it well?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

Procurement software pricing was set in a world that no longer exists. Per-seat licensing made sense when human analysts logged in at 8 a.m. to build spend cubes, run sourcing events, and manage supplier onboarding by hand. That world was 2013, maybe 2021. By 2026, AI runs most of that work end to end, supplier onboarding requires no human, and tail spend operates autonomously. Yet enterprise procurement teams continue to write checks for $200K to $2M per year on legacy platforms priced for the workflow that AI has already replaced.

The debate gained traction after a post from an AI procurement leader and McKinsey alum argued the renewal math has fundamentally shifted. The post drew CPOs, transformation consultants, AI-native vendors, product leaders, and procurement veterans who had built careers on legacy suite implementations. The agreement on the diagnosis was strong. The disagreement on what enterprise complexity still costs was sharper.

Outcomes Are Not a Commodity. Software Is.

The original argument rests on a clean separation. “Software is becoming a commodity. The features that used to differentiate enterprise platforms are showing up in newer tools at a fraction of the cost, and AI is closing the gap faster every quarter. Paying a premium for the logo on the contract doesn’t mean what it used to.”

What replaces feature-based pricing is outcome-based commercial logic. “What’s not a commodity? Outcomes: savings captured, suppliers onboarded, supply chain risks avoided, spend brought under management, tangible results. That’s what procurement gets measured and evaluated on.”

Sergey Zarubin, CTO at Zinit, sharpened the operating principle. “Procurement platforms should be measured less by the number of features they offer, and more by how quickly they help teams make better decisions and eliminate manual work.”

That reframing matters because most legacy suite roadmaps still lead with feature counts, module additions, and platform breadth. The buyer scorecard has moved. The vendor scorecard has not caught up.

The Enterprise Complexity Counterargument

The most credible pushback came from Divyanshu Singh, an AI and digital transformation leader. He drew a parallel that lands. “This feels similar to what happened in MarTech. AI disrupted campaign creation, personalization, analytics, and automation yet enterprises still pay heavily for platforms like Adobe, Salesforce, and HubSpot because the real value isn’t just features. It’s governance, integrations, security, scalability, compliance, and operational reliability at enterprise scale.”

His procurement application followed. “AI can automate sourcing, onboarding, and tail spend workflows, but large enterprises still need deep ERP integration, supplier governance, auditability, global process control, and accountability. That’s why platforms mentioned still command premium pricing. Not because workflows haven’t changed but because enterprise complexity hasn’t disappeared.”

The original author conceded the point on enterprise complexity, then sharpened the disagreement. “Where I’d push back is on whether those capabilities still justify premium pricing the way they did 5 to 10 years ago, because most of them have become table stakes rather than differentiators. SOC2, ISO, deep ERP connectors, and global process control, accountability, are now standard on platforms built in the last few years.”

That distinction matters operationally. Enterprise complexity is real. Whether incumbents still hold a defensible moat on capabilities that newer AI-native platforms now ship out of the box is the unresolved question.

The Influence Problem Procurement Won’t Admit

The sharpest critique of the procurement function itself came from Brian Mangano, Founder of Balestra Group. “I don’t think the problem is as simple as ‘you’re picking the wrong tool.’ Procurement struggle to influence the allocation of budget to pay for new products, both upfront cost and resourcing, and the average business has worked out that low-level automation mostly just gets you to a poor result faster. Efficiency has been the pitch for twenty years and the function isn’t measurably better at its job.”

That observation cuts harder than the original post. The pricing problem is not just that legacy software is overpriced. It is that procurement has spent two decades selling efficiency as a justification for spend on procurement tools, and the function still cannot prove it moved the needle on commercial outcomes. AI changes the price tag on automation. It does not automatically change procurement’s ability to influence enterprise budget.

James S., a procurement transformation and strategy leader, identified the structural barrier to renewal renegotiation. “It’s changing the minds of the legions of procurement veterans still stuck in the mud of the early 2000s S2P suites that is the hard part.”

The author replied with the institutional reality. “Most of these veterans built their careers around running these platforms. Asking them to rethink that is a tough ask, especially when their CFO signed a 5-year deal two years ago.”

That sentence captures the real obstacle. Renewal math is rational. Renewal politics are not. A CPO who recommended a five-year suite contract two years ago cannot easily walk into the CFO’s office in year three and recommend tearing it up.

The Value Architecture Alternative

A second thread argued that the question is not suite versus AI-native, but decision intelligence layered above whatever stack already exists.

Oii.ai, an industry vendor, made the case directly. “The renewal conversation is becoming less about software replacement and more about value architecture. A lot of enterprise stacks still hold useful transactional, planning, and workflow data. The question is whether leaders can turn that data into better decisions quickly enough, without spending months ripping systems apart.”

Their commercial model proposal added a sharper point. “We start with a co-invest Proof of Value, prove the benefit on the client’s data, then scale once the value is visible.”

That commercial structure matters. Co-invest proof of value is a meaningful departure from per-seat licensing or even outcome-based AI credits. If the vendor takes upfront risk on whether the platform actually delivers savings, the burden of proof shifts entirely. Most legacy suite vendors cannot match that commercial logic because their cost structure assumes long contract terms and stable per-seat revenue.

The AI-Native Platforms Are Already Here

Arne S., focused on agentic AI for enterprise procurement, pushed back on the framing that this was a future state. “There are already AI-native platforms for S2P out there. They are overrolling the market at the moment.”

That observation matters because the original post implies the market is in transition. Vendors building inside the category argue the transition has already happened in specific segments. The question for incumbent vendors is whether their installed base will renew long enough to fund the rebuild that AI-native platforms have already shipped.

The 70 Percent No One Talks About

The most important caveat in the original post deserves more attention than it got. “License fee is maybe 30 percent of the real cost of being on a platform. The rest is integrations, change management, data migration, business risk.”

That 70 percent is the real reason renewal cycles run their course even when the renewal math looks bad. Integration depth, master data dependencies, and change fatigue create switching costs that have nothing to do with software pricing. A procurement leader running the renewal math honestly has to price not just the license differential but the cost of breaking eighteen integration points, retraining four hundred users, and reconciling spend data across two systems during the migration.

Daniel Thulfaut, Head of Product, captured the shift in tone. “The renewal math conversation is finally happening. Refreshing to see this articulated so clearly.”

The author confirmed the underlying dynamic. “Most CPOs I talk to are looking at their next renewal very differently than they would have a year ago, even if most of them aren’t ready to say it out loud in front of their current vendor yet.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, the pricing logic of legacy procurement suites was built for human labor that AI now performs. Renewal math at flat per-seat pricing makes less sense each quarter.

Second, enterprise complexity has not disappeared. Governance, ERP integration, and global process control still cost something. The open question is whether incumbent vendors still hold a defensible moat on those capabilities, or whether AI-native platforms now ship them as table stakes.

Third, the real switching cost is not the license. Integration depth, change fatigue, and political risk for the CPO who signed the original contract are the actual barriers. Running the renewal math honestly means pricing all of them, not just the license differential.

When does your next major procurement platform renewal come up, and have you run the math at AI-native pricing yet?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

Procurement has been here before. Every wave of technology has arrived with the same promise and the same threat: automate the POs, self-service the catalog, let the portal do it. Each time, the function was supposed to shrink. Each time, it didn’t. Not because the technology failed, but because a machine still doesn’t understand leverage. The latest wave, agentic AI, is louder than the last. But the underlying question hasn’t changed. Who actually does the thinking?

The debate gained traction online recently and drew reactions from procurement directors, sourcing leaders, AI consultants, and operators across pharma, energy, automotive, and FMCG. The agreement on the diagnosis was strong. The pushback on where AI actually stalls was sharper.

Exposing the Hiding Place

The most cited reframing came from Mario González, a procurement director at Tier-1 automotive. “AI won’t replace procurement, but it will expose something uncomfortable, how much of the function still hides behind process instead of judgment. The next gap isn’t tool adoption. It’s whether leaders redesign decision rights, capability, and accountability fast enough for AI to matter beyond productivity theater.”

That phrase, “productivity theater,” lands hard. It captures what most AI rollouts in procurement actually look like. Prompts that save individual hours. Dashboards that look impressive. Use cases that never connect to a real decision. The function looks busier, not sharper.

John Cross, an advisor to mining executives, drew the same line. “AI isn’t replacing procurement, it’s just exposing who actually understands leverage and who was hiding behind process. The tech gets sharper, but the edge still comes from the human holding it.”

José Gabriel Tovar Taracena, a strategic procurement manager, sharpened the principle. “AI will not replace procurement. It will replace procurement without strategic judgment. Because negotiation is not just data analysis. It is about reading risk, building trust, aligning the business, and making decisions under uncertainty.”

Where the Wall Actually Sits

The deepest operational critique came from Rabih Suleiman, an SAP Ariba and Jaggaer end-to-end specialist. He accepted the productivity layer worked, then pointed to what doesn’t. “What breaks is when you try to embed AI into the S2P process itself. Three patterns I keep seeing.”

His diagnosis was specific. “Master data. AI amplifies what you feed it: dirty supplier records, inconsistent category trees, and half-maintained contracts. The tool produces confident output on a shaky foundation.”

The second pattern was about ownership. “AI in a P2P flow needs someone who owns the exceptions. That role is often vacant.”

The third was about trust. “Teams either over-trust the output and skip review, or redo everything manually. Both kill the ROI case.”

His conclusion explained the MIT statistic without blaming the technology. “The 95 percent MIT number doesn’t surprise me. It’s rarely the tech. The operating model around it was never built.”

That observation matters because most procurement AI conversations end at the prompt. Suleiman’s framing moves the conversation to where it actually lives: data foundation, exception ownership, and trust calibration.

The Data Confidentiality Layer

Tom Hathaway, a supply chain improvement specialist and CIPS member, raised the constraint most enterprise procurement leaders feel daily. “Data security is a major worry for large procurement operations. Loading data into anything potentially ‘leaky’ in a world of hacks undercuts a duty of confidentiality to suppliers.”

Megane Morel, a procurement manager working across FMCG, pharma, and luxury, made the same point with sectoral nuance. “Not every sector can move at the same pace. Data sensitivity and confidentiality risks are real constraints.”

That constraint matters because most published procurement AI use cases assume the data can be pasted into a public model without consequence. For pharma, defense, energy, and any regulated category, that assumption breaks the moment compliance reviews start. The productivity gain is real. The deployment path is narrower than the prompt list suggests.

Jay Perkins, focused on commercial intelligence platforms, listed the cascade. “Tokens, carbon footprint, AI output accuracy, poor data leading to incorrect AI responses, hallucinations, AI not following guidelines even though they are documented in the agent, legal challenge.”

His punchline summed up the operational reality. “Right place and right use case, but the AI rollout will be won or lost on the data input.”

The Suppliers Are Using AI Too

The most uncomfortable observation came from Oksana Barabash, a procurement and supply chain professional. “We should start recognising how much AI is already being used by suppliers and stakeholders and CPOs in their communication with us and how. Are they actually reading and engaging with our points, or are we effectively speaking to a text generator?”

Her closing line was the sharpest. “Reading the room only works when there is a room, not just an email thread.”

That observation extends the original argument in a direction most procurement leaders have not yet processed. AI is not just a tool the buying side wields. Suppliers are using it to draft proposals, anticipate objections, and structure negotiations. The traditional procurement advantages, asymmetric information, slower response times for the supplier, the ability to surprise, are eroding from both sides simultaneously.

Alex Quek, a senior contracts manager in marine container shipping, captured the trajectory. “I can imagine a day when supplier and procurement are using AI to counter AI. Best AI wins.”

Encoding Beats Prompting

The most forward-looking critique came from Skillsora, a procurement platform. “The 8 prompts work for individual judgment-assist. Next layer for procurement teams: encoding those patterns as vertical agents that run across every contract, RFP, and supplier review automatically. Teams who encode their playbooks pull ahead of teams still copy-pasting prompts one document at a time.”

That point matters operationally. Individual prompting is an entry-level skill. Encoded vertical agents that run procurement playbooks across every artifact, with quality assurance from senior buyers, is the operating model where AI actually scales. Most procurement teams are stuck at the first level because the second level requires the operating-model investment Suleiman flagged.

David Račak, a procurement AI consultant, gave the practical entry point. “I would suggest to put these to AI model within company policy and ask for better prompt. Copilot rules these days if you just build a custom agent for stuff like these.”

Don’t Become the Tool

The closing principle came from Tom Ruello, VP of Sales at SpendHound. “AI provides a tool for procurement to significantly lift its status internally to a strategic thought partner. If you don’t use it, though, you will be eventually replaced. There are some pretty aggressive pitches coming from agentic AI companies out there that they will replace procurement leaders. If they catch a CFO or CEO on the wrong day, you’re in trouble if you’re not leveling up.”

Erick Andrian, a head of supply chain and procurement working on turnarounds, captured the response. “Use AI to kill the administrative ‘blank page syndrome’ so you can spend your energy on what moves the needle, like S&OP governance and TCO architecture. Master the tool to reclaim the time you need to lead.”

Pankaj Tuteja, Head of Operations at Dragon Sourcing, gave the cleanest summary. “The goal isn’t to be an AI expert. It’s to be a procurement expert who knows how to use a sharper tool.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, the productivity layer of AI works. Eight well-crafted prompts can save hours per week on contract review, negotiation prep, and drafting. That layer is the entry point, not the destination.

Second, the operating model is where AI actually stalls. Master data quality, exception ownership, and trust calibration determine whether AI moves from individual productivity to embedded process. The 95 percent MIT statistic is an operating-model failure, not a technology failure.

Third, the suppliers are using AI too. The asymmetric information advantage procurement has historically relied on is eroding. Reading the room is harder when half the room is generating text.

Is your procurement function using AI to amplify judgment, or to perform productivity?

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Marketing remains the procurement category that defeats most playbooks. Stakeholders avoid the function. Spend resists clean classification. Traditional RFP processes feel like a foreign language imposed on creative teams that live in weeks, not quarters. And the cost-savings metric that earns finance applause loses marketing immediately. The structural mismatch has frustrated procurement leaders for years, and the latest debate makes clear it has not improved.

The conversation gained traction online after Tom Mills, a procurement expert, argued that procurement keeps blaming the marketing team when the real problem sits one level deeper. The CFO-driven scorecard, the post argued, sets procurement up to fail in this category. The fix proposed was a new measurement model built around speed-to-supplier, stakeholder NPS, marketing ROI uplift, and supplier-led innovation. The post drew CMOs, CPOs, transformation leaders, agency veterans, and former marketers who had crossed over. The agreement on the diagnosis was strong. The pushback on the prescription was sharper.

Different, Not Difficult

The most cited reframing came from Simon Frost, a sustainable procurement and category management trainer. “What one comes to realise is not that they’re difficult, it’s that they’re different. They think differently and have different objectives. Procurement will look equally and opposite different to them. But when each team understands the other’s requirements, it’s absolutely possible to have a very fruitful relationship that delivers amazing results.”

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The cheapest supplier almost never is. The number on the invoice tells one story. Defect rates, downtime, rework, switching costs, and operator workarounds tell another. By the time the second story shows up in the P&L, the original sourcing decision has been forgotten and the procurement team is blamed for problems someone else locked in.

The debate gained traction after a LinkedIn post on Total Cost of Ownership broke down the iceberg model. Above the waterline: purchase price, freight, duties, taxes. Below the waterline: onboarding, training, quality failures, downtime, maintenance, contract management, disposal, risk. The post drew procurement directors, supplier quality leads, manufacturing operators, and CPOs across healthcare, semiconductors, automotive, food, and infrastructure. The agreement on the framework was strong. The pushback on whether procurement actually owns the decision was sharper.

The Cheap Supplier Doesn’t Fail in Sourcing. It Fails at Volume.

The most cited operational insight came from Dror Ofir, who oversees mass production validation in Vietnam. “The cheapest supplier doesn’t fail in sourcing. It fails when volume hits. First batches pass. Then variation creeps in, rework builds, and operators start compensating just to keep shipments moving. At that point, it’s no longer sourcing. It’s the daily pressure between the floor and the supplier.”

His follow-up captured the silent escalation. “By the time finance sees TCO, customers already feel it.”

Mario González, a procurement and supply chain leader at Tier-1 automotive, drew the same conclusion. “Cheap suppliers rarely stay cheap. They just move the bill to quality, maintenance, and lost attention. TCO matters because procurement is not paid to buy the lowest number, it is paid to prevent the most expensive illusion.”

Mars Cantillano, a strategic sourcing specialist in semiconductors, gave a concrete number. Two die attach machines for high-volume power semiconductor packaging. Supplier X at $5.7M initial cost. Supplier Y at $7.4M. After one year at 10K wafers a month, Supplier X carried 4% yield loss plus 12 hours of unplanned stops a week, costing $1.5M in lost output. Supplier Y carried 0.8% yield loss with 99.9% uptime, costing $410K. Total TCO: X at $9.0M, Y at $8.2M. “The ‘budget’ machine erased its savings via scrap, idled lines, and rushed maintenance during a 2025 ramp-up.”

Procurement Doesn’t Always Get to Pick

The sharpest reframing came from Chris Sherry, a Supply Chain Manager. He pushed back on the implicit assumption that procurement made the cheap choice. “I take great exception to this post. You said ‘Procurement picks A. Job done.’ No no we didn’t. Finance and business picked supplier A on the strength of cheapest quote, despite the input of procurement. Procurement spends a year managing the fallout of that decision and then finally moves to supplier B, who now know they can push through a price premium because of the ‘journey’ your organisation has been on. And tomorrow it will start all over again.”

Allan W., a Head of Procurement and CxO, recognized the pattern. “CFO says ‘Why did you not take the cheapest’ or ‘You have to take cheapest now and then perhaps you can negotiate the cost for the remaining time of lifetime.’ If you don’t take the cheapest now the business case will not be approved.” His punchline captured the daily reality. “What you have presented here is the right way. And as procurement pros in real life one thing is on paper another thing is to get it passed all stakeholders.”

Marica Barabas, a senior procurement and supply chain specialist, made the structural point. “The unit price is visible, concrete, easy to defend. The hidden costs are scattered across departments, often untracked, and nobody ‘owns’ them. Procurement ends up carrying the blame for a quality failure or a supplier switch cost that was never part of the original conversation. Getting stakeholders to agree on a shared cost model before the decision is made, not after, is where the real work happens.”

The Exit Cost Most Teams Never Calculate

Several commenters pointed to a hidden category that almost no organization models: the cost of leaving the cheap supplier once the decision has gone wrong.

Alice Muyendekwa, a final-year supply chain student with growing field experience, made the sharpest observation. “The switching costs are consistently underestimated. By the time a cheaper supplier has underperformed long enough to justify changing, the cost of transitioning, new onboarding, qualification time, and relationship rebuilding often exceeds what was saved on unit price in the first place. TCO at selection stage matters, but TCO at exit stage is the calculation most procurement teams never run until they are already stuck.”

Hamilton Lindley, VP of Procurement, Compliance and Risk, drew the practical conclusion. “The real failure mode is winning the argument with data after the cheap supplier has already been selected, the relationship is established, and switching costs make the right decision feel impossible. Build the TCO model at sourcing. Present it jointly. Make the true cost visible before anyone signs anything.”

Delta TCO Is Where Real Work Happens

The most useful methodological pushback came from Angus McIntosh, a procurement consultant and former Global CPO. “TCO is clearly a better measure than price, but I’d argue we need a more practical way to apply it. In most organisations, full TCO modelling at this level of completeness is rarely resourced or proportionate. In practice, teams almost always work on a delta TCO basis, focusing on the few TCO components that actually change between decision options. That keeps the analysis grounded and much more actionable.”

The principle is important. Modeling every category of cost on every sourcing decision is theoretical. Modeling the few components where suppliers actually differ is operational.

Olga Lokshin, a procurement leader focused on strategic sourcing and SRM, raised the data problem behind even that lighter approach. “The hardest part is not what to include, it’s how to estimate it upfront. How do you approach maintenance and unplanned repair costs when there is no historical data yet, for example for new equipment or new suppliers?” Her solution: cross-functional input. Engineering benchmarks, supplier MTBF data, analogues from similar assets, and scenario-based modeling beat waiting for perfect data.

The Stakeholder Tax

The deeper problem in most organizations is internal, not external. Procurement is held responsible for bottom-line cost but pressured to hit unit price targets.

Adam Mostafa, a 16-year retail market builder in Saudi Arabia, captured the tension. “Stakeholders often hold procurement responsible for the bottom-line cost while simultaneously pressuring them to hit unit price targets that force the wrong supplier choice. The real art is getting the operational teams to own the long-term impact of these supplier decisions so the true expense is visible before the contract is even signed.”

Sean Dollar, a procurement leader focused on TCO optimization, framed the negotiation that actually matters. “The real negotiation is often an internal effort to convince stakeholders that a low unit price is a high-risk gamble for the business. We must drive a cross-functional approach where Operations and Quality help quantify the ‘invisible’ costs of managing a discount vendor.”

Norma Duran, a supply chain strategy leader, distilled the mindset shift. “Mature organizations stop asking ‘who is cheaper?’ and start asking ‘who makes us stronger, faster, and more profitable?’ Price wins spreadsheets. TCO wins businesses.”

Strahinja Jovanovic, a supply chain builder in eCommerce, added the discipline that turns the calculation into a system. “TCO only works when the people who ‘feel’ the cost help quantify it. One extra point I would add is tracking TCO during the contract. If defect rate or maintenance drifts, the decision needs revisiting before year two.”

The Cultural Layer

Faiq Ali Khan, an FCIPS-certified procurement professional, captured the pattern in one line. “Price wins the decision, but TCO decides the outcome.”

Eman Abouzeid, a global procurement and logistics expert, widened the frame. “The business never pays the price. It always pays the consequences. TCO doesn’t complicate decisions, it makes them real.”

Felipe Solano, a procurement manager in food industry, gave the analogy that lands with finance. “Just think about buying a used car without service history or another with full service history. What is under the bonnet is what matters, not the price difference.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, procurement does not always own the decision it gets blamed for. Building cross-functional TCO models at sourcing, with finance and operations co-signing, is the only way to stop the cheap-then-switch cycle.

Second, focus on delta TCO. Modeling every cost category is theoretical. Modeling the few that differ between suppliers is operational and defensible.

Third, model exit costs at entry. Switching out of the wrong supplier is often more expensive than the unit-price savings that motivated the choice. That calculation belongs in the original decision.

Who in your organization is responsible for the operational consequences of a cheap supplier decision?

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Put the same AI product in front of ten companies and you can walk away with ten completely different commercials. Each one will be delivered with a straight face, defended as the “market rate,” and structured to make the buyer feel late to the party. The problem is not that any one quote is wrong. The problem is that none of them are anchored. The market is inventing its pricing logic in public, and “market rate” has become the most convenient phrase in the seller’s vocabulary.

The debate gained traction after a LinkedIn post from a Senior Procurement Transformation Advisor flagged what she called a structural gap between AI hype and AI commercial reality. Her argument: the technology is moving fast, the pricing is still catching up, and treating both as equally mature is expensive. The post drew CPOs, third-party risk specialists, energy procurement leaders, AI vendors, and category strategists across banking, infrastructure, and tech. The agreement was strong. The disagreements were sharper, especially on what procurement should actually do about it.

The Confidence Premium

The most cited reframing came from Farah Boukillou, a procurement leader and former OCP Group executive. “AI is being sold on potential, but priced on confidence.” Her diagnosis explained the variability without needing a conspiracy. Procurement teams need to anchor conversations back to value realization, not vendor narratives.

Nuha Luqman, who works in procurement for energy ecosystems, captured the dynamic in one line. “’Market rate’ in AI right now often just means ‘what someone managed to get away with.’”

Nicolas Frendo, a financial executive at Acephalt, used a different metaphor to make the same point. “Pricing AI always feels like a weird game of telephone, every company hears a different number and nobody knows which came first. Seeing ‘market rate’ show up in a room honestly just means, yeah, no idea what the market actually is, someone had to improvise.”

The structural reality behind those observations is straightforward. When vendors lack benchmarks themselves, they price based on what each buyer signals they can absorb. Procurement teams without independent reference points end up funding the seller’s price discovery.

Commercial Maturity Lags Technical Maturity

The most consistent thread was that procurement teams keep confusing the two.

Azfar Wasim, a business and digital transformation consultant, put it directly. “Too many teams assume technical sophistication equals commercial maturity. It’s a very expensive assumption to make.”

Jahabar Ifthikar, a senior procurement and digital transformation leader on $1.8B+ infrastructure projects, framed the trap precisely. “AI may be advanced, but its commercial models are still immature and inconsistent, which creates a dangerous gap between perceived value and actual cost. What’s often sold as ‘market rate’ is, in reality, a moving target shaped more by narrative than fundamentals.” His verdict on the procurement role: “Not just negotiating price, but challenging assumptions behind usage, scalability, and value realization. If pricing isn’t transparently linked to outcomes or if it shifts risk disproportionately to the buyer, it’s not innovation, it’s poor commercial design.”

Abdulmajeed Al Sheraim, a procurement and contracting leader, identified the shift required. “The key shift here is moving from price validation to value validation. How does usage scale? Where does cost outpace value? What happens under different adoption scenarios? If those questions aren’t clear, then the risk isn’t just overpaying, it’s locking into a model that doesn’t hold as usage grows.”

Fatima Sayalı, a procurement officer in manufacturing, drew the discipline back to basics. “We apply TCO thinking to every category we manage. AI contracts deserve the same discipline. Lock-in risk, adoption assumptions, renewal terms, these are not ‘AI problems.’ They are procurement problems. The hype does not change the fundamentals.”

The Token Trap

Several commenters dug into the mechanics of where the cost risk actually sits.

Brian Mangano, founder of Balestra Group, drew a useful distinction. The pricing chaos fairly accurately describes LLMs and services that are just wrapping an LLM, but does not hold for AI use cases that are not purely a token exchange. The counterpoint that emerged was that even when buyers do not directly pay for tokens, they pay indirectly. Vendors absorb the token cost in their price, which means token volatility still shows up downstream, just less visibly. Tokens are not expensive by themselves, but they increase unpredictability whenever the use case consumes them aggressively.

Scott Cohen, a former Cloudflare, Spotify, and MongoDB procurement technologist, raised the reverse risk. “This does present an opportunity for purchasers to do token arbitrage. Essentially buy a flat fee AI feature in their platform and then use it so much they exceed the fee in token utilization.”

That arbitrage is happening in practice. The reverse risk for vendors is real. No one wants to launch a software company and watch it go bankrupt because of overusage of tokens. The instability runs both ways.

Pricing Models Are Multiplying

Clarice Camacho, a global energy procurement and risk management leader, mapped out the most common approaches now in market. Usage-based pricing offers scalability but kills predictability. Subscription is predictable but limits flexibility. Per-seat is ideal for teams but rarely tied to actual value. Tiered scales with customer needs and complexity. Outcome-based is powerful but hard to measure.

Her core principle: “The real question isn’t ‘which model is best?’ It’s: which model aligns with the value your users actually get?” The strongest AI companies, she noted, are blending models. Subscription plus usage caps. Freemium entry plus premium tiers. Custom enterprise pricing for scale. “If your pricing doesn’t match how value is delivered, you’ll either leave money on the table or lose customers.”

A Public-Utility Model for AI

The most concrete buyer-side proposal came from Matt Vander Weg, a supply chain operations executive. “AI pricing in Procurement needs to be treated like a public service. Think of it as your electric bill, water bill etc. You have an allotment of use that is fixed (estimated consumption) plus overage costs.”

His negotiation playbook was specific. Negotiate year one as a variable cost to set the company’s average mark. Year two, set the fixed rate at the previous six months’ consumption rate. From there, run the fixed rate on a rolling six or twelve month prior baseline with allowable adjustments up and down. He went further, suggesting that cable, electric, and energy companies should be the ones negotiating directly with OpenAI, Anthropic, xAI, and others to remove the burden of individual commercial entities negotiating ambiguous pricing models.

Build Versus Buy Gets More Attractive

A second strategic thread argued that pricing instability makes building in-house more attractive.

Gael De Martelaere, a Chief Procurement Officer, put it bluntly. “Building becomes more and more attractive versus buying. Buy basic capabilities and infrastructure and build your AI on top of it yourself. Most AI buys end up being single-use case apps that with the right inhouse capabilities can be fairly easily built.”

The counterpoint that emerged was practical. Building in-house only works when the resources exist. At minimum, that means one procurement professional who understands the processes and data freed from other duties for weeks to months depending on complexity, plus the right technical people. Without that, the build path becomes more expensive than the buy path.

Adoption, Not Just Price

The deepest critique came from Christian Engler, a strategic procurement leader in public sector and IT. “The pricing model is only half the story. Many companies negotiate AI commercials as if cost control alone solves the problem. In practice, weak adoption, unclear ownership and poor use-case discipline destroy ROI faster than pricing ever will. Commercial maturity and organisational maturity need to move together.”

Bob Thompson, a procurement transformation specialist, raised the prior question. “Does the tech I buy today really work and has it been properly implemented? Yes or no? Then ask yourself, will adding AI actually enhance or increase my ROI, or will it simply cost me more money?”

John Hatton, a CPO and FCIPS, kept the framing grounded. “Nobody’s talking about the costs, nor the short to medium term stability and viability of the AI natives.” Good practice advice on AI procurement, he noted, frankly applies to just about any procurement activity.

Ghanshyam Rao, a procurement and supply chain strategist, distilled the test. “If procurement cannot clearly measure value, usage risk, and lock-in exposure, the pricing model is not mature enough yet.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, “market rate” is not a benchmark when the market is still inventing itself. Independent reference points, usage modeling, and TCO discipline matter more in AI than in any settled category.

Second, the pricing model has to match how value is actually delivered. Subscription, usage-based, per-seat, tiered, and outcome-based each carry different risk profiles. Blended models with usage caps are emerging as the most defensible structure.

Third, commercial maturity and organizational maturity have to move together. Weak adoption destroys ROI faster than any pricing model. The procurement team that locks in a great price on a tool nobody uses has not won anything.

How are you anchoring AI procurement decisions when there is no real benchmark to anchor to?

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Most procurement functions are structured for control. Very few are structured for impact. The work gets done. The dashboards exist. The compliance boxes get ticked. And yet the function consistently arrives too late to change the outcomes that matter. By the time procurement enters the conversation, requirements are fixed, budgets are set, and suppliers are pre-selected. What looks like negotiation is often just managing constraints someone else already locked in.

The debate gained traction after a recent post laid out a five-layer model of procurement maturity. Layer 1 is process. Layer 2 is compliance. Layer 3 is reporting. Layer 4 is influence. Layer 5 is impact. The argument: most organizations operate at Layers 1 to 3, where work gets done but value is limited. The real shift sits higher, where procurement shapes demand before it is locked and aligns stakeholders before constraints are set. The post drew procurement directors, transformation consultants, CPOs, and senior buyers across energy, pharma, manufacturing, and infrastructure. The agreement on the framework was strong. The implications most leaders had not yet voiced were sharper.

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Most procurement teams treat every pound leaving the business as “spend.” One bucket. One playbook. One set of negotiation tactics. The result is predictable. They cannot find savings because they never separated where the savings actually sit. Direct spend protects gross margin. Indirect spend bleeds EBITDA when unmanaged. Services spend spirals when scope is loose. CapEx locks in mistakes for years. Four categories, four failure modes, four different sourcing logics.

The debate gained traction after a LinkedIn post laid out a four-bucket spend model. Direct (cost of production), indirect (cost of running the business), services (cost of expertise), and CapEx (cost of assets and investment). The post drew procurement directors, category managers, sourcing transformation leaders, and senior buyers across pharma, manufacturing, energy, FMCG, and financial services. The agreement on the framework was strong. The pushback on what the framework alone can achieve was sharper.

Taxonomy Is Not Governance

The most cited critique came from Mario González, a procurement and supply chain leader at Tier-1 automotive. “Most teams do not mismanage spend because they lack categories. They mismanage it because visibility without category-specific authority changes nothing. Spend taxonomy explains the problem. Governance is what actually moves money.”

Shehab Hagag, a supply chain and operations transformation leader in KSA and the GCC, drew the same line. “Each spend category requires not only a different sourcing strategy, but also a different governance model. The biggest gap I’ve seen is not in defining the categories, but in aligning stakeholders and decision rights accordingly, especially for indirect and services spend.”

Balaji Swaminathan, a global sourcing and supplier strategy leader working with global OEMs, completed the picture. “The real unlock happens when this segmentation is combined with ownership and capability.”

The pattern is consistent. Categorizing the spend tells you what you have. It does not tell you who decides, who approves, or who absorbs the cost when the decision goes wrong. That second question is where most organizations stall.

Services Spend Is the Biggest Mess

The category that drew the most concern was services. Multiple operators flagged it as the most immature, the most poorly governed, and the largest unmanaged opportunity.

Mark Coulson, Co-Founder of SmartBuyer and a CIPS-qualified procurement expert, was direct. “In my experience, Services spend is the most immature, poorly governed and undefined. A bit of a catch-all for spend that doesn’t fit in the other categories nicely, and the data quality is typically very poor. It’s a big opportunity, but you need the streetwise experience to manage it.”

Omer Sasson, a direct sourcing specialist working with 7 and 8-figure D2C and Amazon brands, agreed. “Services spend is the one that quietly gets out of control. Clear scope and outcome-based payments make a massive difference.”

Jon Milton, a services procurement consultant, pushed the best-practice list further. Beyond clear scopes and milestone payments, he argued for “enable competition” and “ensure effective project governance.” His logic: “If, as McKinsey make us believe, c70% of projects fail, helping line managers to collaborate effectively with suppliers on projects post go-live is surely value-adding. Plus, it ensures variation orders and land and expand activities are controlled to protect the bottom line.”

Sean Dollar, a Senior Buyer focused on strategic sourcing and SRM, gave a shop-floor view of how badly the category gets handled in practice. “I have seen MRO buyers forced to act like a Swiss Army knife while juggling office supplies, CapEx projects, and even a few direct material accounts. This creates massive P&L blind spots.” His framing of where procurement adds value: “We add the most value when we act as a strategic bridge between the production line and the finance office. How do you gain that seat at the table before an irreversible decision drains your EBITDA?”

Marketing Should Not Be in Indirect

The sharpest reframing on the category boundaries came from Rebecca Bellairs, Co-founder of Pitch’d. “I honestly don’t think marketing spend should sit in the indirect cost bucket or be treated in the same way as other services. Consolidation often loses technical mastery, cheap impacts return, and desired outputs eg brand awareness and loyalty take time that no procurement metric can and should try to interfere with. I want to start a petition to move it out of procurement and go rogue, reporting into the CMO.”

Her appeal to procurement on promotional items was specific. “Just please ban all low quality promotional items. No one needs £5 branded headphones or a key chain, and they definitely aren’t wearing a gifted baseball cap.”

Bellairs’ point lands on a real tension. The same procurement playbook that consolidates IT software vendors will destroy value when applied to creative agencies. Different categories require different governance. Marketing may be the clearest case for category-specific decision rights.

The Data and Classification Problem

Several commenters argued the four buckets only work if the underlying data lets you separate them.

Abdulmajeed Al Sheraim, a procurement and contracting leader, pinpointed the gap. “The biggest gap is usually visibility and classification. Many organizations don’t have clean spend data to even separate Direct, Indirect, Services, and CapEx properly, so strategies end up reactive rather than intentional. Procurement maturity starts with understanding what you’re managing before deciding how to manage it.”

Chong Wan Yun, a learning and transformation leader, surfaced an even more basic problem. “Some organisations don’t even know how to differentiate between trade and non-trade. When that basic clarity is missing, everything gets lumped as ‘expenses,’ and procurement is expected to deliver savings without a clear foundation. At that point, it’s not a strategy issue. It’s a culture issue. And that’s the hardest part to change.”

Muhibuddin Soekarno, a procurement advisor with 20 years in energy and petrochemicals, put the practical question to the original framework. “What’s your practical approach to classify these spend buckets quickly assuming the Procurement org use SAP when relying only on standard procurement reports?”

That question, often asked but rarely answered cleanly, is where most spend transformation projects spend their first six months.

The Procurement Pro as Financial Architect

Bishowjuti Bhattacharjee, a strategic procurement professional and chartered MCIPS, widened the role description. “A modern procurement professional acts as a Financial Architect of the business cycle too. Beyond simple sourcing, managing categories, they strategically manage the Cash Conversion Cycle to ensure the organisation’s ‘metabolism’ remains healthy. By aligning AP with AR and tailoring payment terms to specific spend categories based on their nature, they protect operating cash flow.”

Dr. Srinivasan CT, Head of Infrastructure and Procurement in financial services, added three operational refinements. “CapEx to be tracked till capitalisation and extend to asset management to create best value. Opex to inwarded with order to receive and tracked till consumption. Service cost structure to be fixed to variable to outcome based.”

Veronica Scorrano, a strategic sourcing and procurement leadership specialist, made the connection to the broader financial plan. “Leading organizations go further, refining these categories to build a roadmap that clearly connects sourcing strategy to cost savings and cost avoidance impacts across the financial plan.”

The Strategic Shift

Pankaj Tuteja, Head of Operations at Dragon Sourcing, captured the broader transition this enables. “When the procurement team clearly separates direct, indirect, services, and CapEx spending, the team gets real visibility into where money is going and what levers to pull, whether it’s protecting margins, controlling maverick spend, tightening scope, or optimizing long-term investments. In this context, procurement shifts from cost-cutting to value creation, making decisions based on insight rather than assumptions.”

Olga Catena, a supply chain consultant and educator, summarized the operational consequence. “When you separate spend by category, you stop negotiating blind and start making decisions with real criteria.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, taxonomy without authority is theater. The four-bucket model only works when each category has its own governance, decision rights, and accountability.

Second, services is the highest-leverage category to fix. Poor scope, poor data, and weak governance combine to make it the largest unmanaged spend in most organizations.

Third, the foundation is data and culture. If finance and procurement cannot separate trade from non-trade, no sourcing strategy will land.

Which of the four spend categories is most poorly governed in your organization?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

Most supplier decisions still come down to one number: the price on the offer. That number is real. But it is also the first layer of a much deeper cost structure most procurement teams never quantify, never charge back, and never present to finance. The result is predictable. Organizations think they bought cheaper. In reality, they bought fragility and paid for it in fragments scattered across the P&L.

The debate gained traction recently from a Director of Procurement working on what he calls Value Hacking, a method for mapping the five layers of cost that traditional Total Cost of Ownership (TCO) analysis tends to ignore. Layer 1 is visible costs (price, transport, customs, storage). Layers 2 and 3 cover risk, firefighting, urgent orders, air freight, and line stops. Layers 4 and 5 cover internal friction (hours lost managing incidents) and lock-in (the inability to pivot when markets shift). The post drew procurement directors, supply chain transformation leaders, IT category managers, packaging buyers, and economists who pushed the framework into operational territory.

Bought Fragility, Paid in Fragments

The most cited line on the thread came from Tomasz Tyras, a senior supply chain and S&OP architect. “The most expensive supplier decision is often the one that looked cheapest in the tender file.” His diagnosis went further. “Price is easy to compare because it is visible. Instability, escalation, lost planner hours, expediting, and reduced room to pivot usually sit somewhere else in the P&L, so they get treated as ‘operational noise’ instead of procurement cost.”

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Most procurement job descriptions still treat direct and indirect as variations of the same role. Anyone who has actually run both will tell you that is wrong. The categories share a vocabulary. They share almost nothing else. Direct rewards rigor, supply risk management, and category depth. Indirect rewards political navigation, demand challenge, and influence without mandate. One playbook does not fit both, and the skills that make a great direct buyer can stall an indirect one.

The debate gained traction recently on social media and drew commentary from CPOs, category managers, S2P specialists, and consultants across pharma, manufacturing, energy, and tech. Some agreed sharply. Others pushed back. The most useful additions came from operators describing what actually breaks in the field.

The Skills Are Not the Same

Aiman Nadeem, a global sourcing expert, captured the divide in one line that became the most-liked sentence on the thread. “Direct teaches you how supply chains work, but Indirect teaches you how organizations actually work.”

Mario González, a procurement and supply chain leader at Tier-1 automotive, drew the same line from his career. “Direct taught me rigor. Indirect taught me influence.” His diagnosis went further. The real complexity in indirect is not the categories themselves. “It’s navigating budget owners who don’t see themselves as stakeholders until something goes wrong. In industrial manufacturing, indirect spend governance fails there first.”

Mayar Aljahmani, a strategic procurement and finance professional, pinpointed where the difficulty actually sits. “Indirect procurement becomes complex not because of the market, but because of the internal environment. In direct procurement, demand is usually clearer and more structured. In indirect, requirements can be vague, changing, and influenced by multiple stakeholders with different priorities.”

Not Everyone Agreed Indirect Is Harder

Two senior voices challenged the complexity ranking head-on.

Rune Alleslev, Head of Procurement at PwC Denmark, pushed back directly. “I tend to disagree on the differences in complexity. I think they are different in complexity but you can’t say one is more complex than the other. Indirect is complex as it covers the whole value chain of the company and purchasing is typically done more local and decentralised meaning higher focus on those stakeholder relationships. Direct is an integral part of the supply chain so a much bigger focus on supply risk. We’ve seen the past 6 years how complex that is.”

Angus McIntosh, a procurement consultant and former Global CPO, offered the same balance. “Indirect is generally more challenging in terms of stakeholder complexity, but direct often demands more deep category expertise. There are exceptions but those are the general patterns.”

The reframing is useful. Each side punishes a different weakness. Direct exposes weak category and supply risk skills. Indirect exposes weak political and demand-challenge skills.

Demand Management Is the Missing Tactic

The single most cited gap in the original post was demand management. Multiple operators argued that challenging the need beats negotiating the price.

Sean Dollar, a Senior Buyer focused on strategic sourcing and SRM, framed indirect as “the management of organizational entropy.” While direct “deals with the predictable order of a Bill of Materials,” indirect must navigate “the natural chaos of decentralized, non-standardized spend across a complex stakeholder ecosystem.” His missing tactic: demand management. “The discipline of auditing the ‘What’ before we ever negotiate the ‘How much.’” In MRO buying, he noted, the biggest wins come from identifying specification creep or aligning consumption patterns across IT and Finance before the RFP cycle even begins. “This shifts our role from being a transactional price-checker to a ‘Systems Auditor’ who can prove that reducing unnecessary demand is far more impactful to the bottom line than a marginal price concession.”

Serhat Soyer, an Indirect Procurement Manager, made the same point in tighter form. “In Direct, demand is structured. In Indirect, it’s often unclear, which means Procurement must challenge needs, not just source. That’s where real influence starts.”

Strahinja Jovanovic, a supply chain builder in eCommerce, summarized the principle. “Before sourcing, challenge ‘do we need this?’ and standardize where possible. In indirect, controlling consumption can beat renegotiating price.”

Influence Without Mandate

The hardest critique of the trust-and-data tactics came from Rabih Suleiman, an SAP Ariba and Jaggaer end-to-end specialist. He flagged three things missing from the typical indirect playbook.

First, category management. “Trust, data and strategic sourcing are tactics. Without structured category management underneath them you are reacting to spend rather than shaping it.”

Second, real partnership requires substance, not regular meetings. “An IT leader who sees procurement as a brake does not become a partner because of a regular meeting. He becomes one when procurement speaks his language and helps him move faster.”

Third, and the hardest one. “Indirect procurement without budget ownership is influence without mandate. If the budget sits across twelve departments and procurement has no formal role in allocation, strategic sourcing stays a recommendation not a decision.”

That mandate gap is what Mario González described from manufacturing. Budget owners do not see themselves as stakeholders until something goes wrong, by which point the leverage has evaporated.

Change Management and Adoption

Pankaj Tuteja, Head of Operations at Dragon Sourcing, added what he called Tactic 4. “Change management is critical. User adoption is vital in indirect categories. Even the best sourcing strategy can fail without it. Whether it’s a new SaaS tool or a marketing agency, we have to drive adoption very well to get success, manage resistance, and embed new ways of working.” His framing of the broader debate: “Direct builds strong fundamentals (cost, negotiation, supply risk). Indirect sharpens strategic thinking and business alignment. Both are essential.”

Olga Catena, a supply chain consultant, reinforced the point. “In indirect procurement, you’re constantly convincing internal teams to adapt, align, or adopt new processes. That’s where emotional intelligence and communication become as critical as negotiation skills.”

The Data Problem No One Has Solved

Magda Paslaru, founder and CEO of Rainbowidea, raised the data reality that operators recognize immediately. “Big one for me is how messy the data gets in Indirect. Direct usually means some kind of SKU discipline (or at least a system that sorta tries). Indirect is expense lines in 10 different systems, 3 naming conventions, and a guessing game every quarter. Untangling that into ‘actionable spend’ is a whole job on its own. Ever seen anyone truly nail automated visibility across indirect, or is everyone just halfway there?”

Hisham Serry, a supply chain director, described one practical workaround his team built. “We added value by requiring a specific format for free-text fields in indirect POs. This allowed us to use Power Query to extract the data from the ERP and transform it into a structured table, providing better visibility into our spending.”

Orhan Savaş, founder and CEO of Zentria Flow, added the cross-functional layer. “Indirect procurement often surfaces hidden bottlenecks that only show up when you really dig into cross-department workflows. Mapping those out early has saved us a lot of headaches later.”

Indirect Engagements Never End

Colin Butts, a value creation and procurement leader, captured what makes indirect different in nature, not just in skill. “In indirect procurement, engagements aren’t transactional. We don’t exchange money for goods. Instead, we purchase software, ongoing services, capex expenditures (and maintenance), and facilitate the management of facilities and construction. None of these activities conclude after the purchase is made. The relationships and needs of the company are constantly evolving, and indirect procurement must adapt to support these changes.”

That ongoing-relationship framing explains why a transactional mindset breaks down faster in indirect than in direct.

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, the skills are different, not interchangeable. Direct demands category depth and supply risk discipline. Indirect demands political navigation, demand challenge, and adoption work.

Second, demand management is the most underrated lever in indirect. Auditing the “what” before negotiating the “how much” produces bigger wins than price concessions on services the company may not need.

Third, influence without mandate is the structural ceiling. If procurement has no formal role in budget allocation, strategic sourcing in indirect stays a recommendation not a decision.

Have you worked in both direct and indirect procurement? Which set of skills moved your career faster?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

Most procurement teams treat every pound leaving the business as “spend.” One bucket. One playbook. One set of negotiation tactics. Then they wonder why savings run out, maverick purchasing keeps growing, and finance stops taking them seriously. The problem is not effort. It is architecture.

The debate gained traction after Tom Mills posted a breakdown of the four spend categories on LinkedIn. Direct spend, the cost of production. Indirect spend, the cost of running the business. Services spend, the cost of expertise. CapEx spend, the cost of assets and investment. Each demands a different approach. Each fails in a different way. The post drew procurement leaders, transformation consultants, CFO advisors, and operators who pushed the framework into sharper operational territory.

Different Failures, Different Logic

The strongest framing came from Tomasz Tyras, a senior supply chain and S&OP architect. “A lot of procurement leakage starts when companies call everything ‘spend’ and then manage none of it with the right logic.” His diagnosis landed with the most engagement on the thread. “Direct, indirect, services and CapEx may all hit the P&L differently, but more importantly they fail differently. That is why one sourcing playbook across all categories usually produces cosmetic savings in one area and value destruction in another.”

His prescription was specific. Margin protection for direct. Compliance and demand control for indirect. Scope discipline for services. Lifecycle economics for CapEx. “Procurement becomes strategic the moment it stops chasing price and starts shaping financial outcomes.”

Sanchita Sur, a Gen AI founder and thought leader incubated by SAP, reinforced the point in one line. Each category operates on a completely different value logic. “Margin (direct), efficiency (indirect), outcomes (services), and long-term returns (CapEx). Applying one lens across all four is where most teams go wrong.”

Romain Ducrocq, a global indirect procurement leader with a $160M international scope, drew the same conclusion from enterprise transformation work. “Many professionals don’t struggle with spend first, they struggle with spend architecture.” When categories are aggregated, he noted, “margin levers get mixed with opex control, scope-based services get managed like unit-price buys, and lifecycle decisions get reduced to purchase price.” That, he argued, is when value leakage stops being a negotiation issue and starts becoming a structural one.

Visibility Is the Starting Point, Not the Solution

A second thread argued that categorization is only the first step. Governance is where most organizations break down.

Mark Strange, a procurement and supply chain transformation leader and founder of Möbius Nexus, pushed back on the idea that structure alone solves the problem. “Categorising spend is only the first layer. The real problem many organisations face today is not what bucket the spend sits in, it is how the spend is governed once it enters the system.” He listed the failure modes he sees regularly: fragmented catalogue governance, uncontrolled supplier onboarding, disconnected P2P processes, poor demand management. His verdict was sharp. “Spend visibility does not automatically create spend control. The real shift happens when procurement moves from spend classification, to spend orchestration across the entire enterprise.”

Sebastian Grigoras, a tail spend specialist, added the cross-functional angle. “Visibility as a starting point. The challenge may sit in getting procurement, Finance, and the wider business aligned closely enough to turn visibility into different decisions and better buying behaviours.”

Nis-Peter Iwersen, an interim procurement and supply chain excellence leader, warned that without a structured Total Spend Analysis there are no clear priorities, no category-specific strategy, and no sustainable savings. “Analysis alone doesn’t deliver impact, execution does.”

The Cost of Confusion

Mark Coulson, Co-Founder of SmartBuyer and a CIPS-qualified procurement expert, surfaced a category that most frameworks miss entirely. “For me, the real challenge isn’t managing them separately, it’s when they collide and overlap.” He gave two examples. IT needs Facilities for their data centre. Marketing needs IT for their martech stack. That spend, he argued, sits in no-man’s land and is only half-managed. He proposed a fifth bucket. “Hybrid spend (maybe call it ‘cost of confusion’?).” Cross-functional projects nobody owns. The spend that falls between departments. “There’s savings to be found in those ‘gaps’.”

Jeff Miller, a global procurement leader, voted for the indirect-plus-services combination as the biggest governance problem. “Very often departments or individuals do their own sourcing for those services.”

Where the Real Money Bleeds

Several operators pointed to specific category leaks most procurement teams underestimate.

Pamela Hopper, a procurement executive focused on TCO and value creation, flagged direct tail, indirect, service spends, and freight as chronically overlooked. “In most manufacturing environments, freight belongs right under Direct COGS.” Her discipline: a formal review of Direct “B”, Freight, Indirect, and Service spends at least every 3 years. “With current AI technology, we can now also manage the Direct C tail spend with much higher efficiency.”

Omer Sasson, a direct sourcing specialist working with 7 and 8-figure D2C and Amazon brands, drew the clearest comparison. “I’ve seen teams chase 5 to 10% indirect savings while direct spend leaks millions through poor should-cost modeling and weak supplier partnerships.”

Clayton Michael-Butler, a veteran-led business consultant working with $1M to $50M founders, pointed to the structural reality in smaller organizations. For many of his operators, all money leaving the business is just “expenses.” They have no procurement team. The categories blend into one drain. “We find $60K in duplicate software under Indirect, or $95K in mispriced service contracts because scope blurred over time. That’s real money that bleeds straight off the margin. It’s a structural problem before it’s anything else.”

Matt Hunter, focused on energy and sustainability management, added the energy spend angle. For direct, “energy spend on process is usually held to a budget that doesn’t take into account the recent volatility or upward trend of tariff and supply rates.” For indirect, facility energy spend is seasonal with decentralized procurement, no benchmarking, and no strategy.

Conversations With Finance Change

Matthias Svetic, an advisor on deal communication, captured the shift that happens when teams finally separate the four categories. “The real problem here isn’t the categories. It’s that most teams never separate them in the first place. Once you do, every conversation with finance and leadership changes. You stop defending costs and start showing where margin is being built or lost.”

Chantell L., an enterprise value leakage advisor, pointed to where the fastest value sits. “The mistake isn’t lack of effort, it’s using one playbook for four very different spend types. The fastest value is in Services and CapEx: tighten decision rights, lock scope to outcomes, and manage total lifecycle impact.”

Strahinja Jovanovic, a supply chain builder in eCommerce and qCommerce, summed up the architecture point. “Getting the supplier wrong isn’t just a cost issue, it’s a depreciation + downtime + switching cost problem for years. Procurement + Finance alignment here is everything.”

Takeaways for Procurement Leaders

Three lessons run through the discussion. First, different spend categories fail differently. Direct bleeds margin. Indirect bleeds EBITDA. Services bleed scope. CapEx bleeds the balance sheet for years. One playbook cannot fix four different failure modes.

Second, visibility is not control. Structured Total Spend Analysis is the starting line. Spend orchestration, governance, and demand management are where value is actually created.

Third, watch the gaps. Cross-functional spend that sits between departments is often the largest unmanaged category. The “cost of confusion” is real and quantifiable.

Which spend category is most often unmanaged in your organization: direct, indirect, services, or CapEx?

Continue the discussion on Chain.NET, the global supply chain community, at www.chain.net. Ask questions, join events, and access exclusive resources.

Every procurement team faces the same quiet dilemma. Control too much and stakeholders route around you. Control too little and spend slips out of the budget. Both failures look different from the outside. Inside, they come from the same weakness. A function that has not found its role.

The debate gained traction after Tom Mills, a procurement commentator, posted on LinkedIn about what he calls the Procurement Paradox. His argument is simple. Overcrowding the process kills delivery, blocks innovation, and feeds shadow procurement. Rubber-stamping everything invites compliance failures, budget overruns, and maverick purchasing. “The answer isn’t picking a side. It’s mastering the middle,” he wrote. The post drew procurement leaders, consultants, and operators who pushed the idea into practical territory.

Design, Not Intent

The strongest thread in the discussion was that the middle has to be engineered. It does not emerge from good intentions.

Read more

A year ago, China sourcing was a risk management conversation. In 2026, for many industries, it has become a crisis management conversation.

That’s the assessment from Ugo Flumian, a Chief Procurement Officer who has been tracking the structural forces reshaping global sourcing decisions. His analysis has sparked debate among procurement leaders about how to navigate what has become one of the most complex sourcing environments in decades.

“Five structural forces have landed simultaneously, and they are reshaping the equation,” Flumian wrote, outlining the convergence that has transformed procurement strategy.

The Five Forces

CBAM is live. The Carbon Border Adjustment Mechanism took effect January 1st. This is not a future threat but a present cost. For Chinese steel and aluminium, analysts are already tracking 15-20% increases in total landed cost. Expansion to chemicals and plastics is already on the legislative roadmap.

China has weaponised critical minerals. Gallium, germanium, graphite, tungsten: export controls imposed in successive packages through 2024-2025. Companies that have not yet developed alternative sources are operating in a structurally fragile position.

Tariff unpredictability is now structural. Annual procurement cycles can no longer keep pace with the speed of regulatory change. The most advanced companies are shortening contract durations and keeping alternative suppliers qualified even when not immediately using them.

Chinese overcapacity is a strategic trap. Lower prices today equal deeper dependency tomorrow. Companies that hollow out their European supply base chasing Chinese deflation will face an expensive rebuilding exercise when the next disruption arrives. And the next disruption is not a question of if.

The Atlantic fracture complicates everything. Europe is navigating between US economic coercion and Chinese strategic competition. The practical implication: every category now requires a different answer, “strategic” or “commercial,” with entirely different regulatory and board-level implications.

Not All Categories Are Equal

Pierre Courtemanche, a sustainability and supply chain strategist, highlighted a critical shift in how companies must think about the China question.

“The China question is no longer a country-level decision. It’s becoming a product and material-level decision,” Courtemanche observed. “Two products sourced from China can carry completely different risk profiles depending on upstream materials, export controls, carbon exposure under the Carbon Border Adjustment Mechanism, or regulatory pressure.”

His reframe: “The real question is no longer ‘China or not China?’ It’s ‘which inputs, with what risk, and with which alternative ready?’”

Flumian’s category-by-category breakdown reveals the nuance required in 2026:

Potential Exit, Critical: Sensors and IP-sensitive power electronics carry potential risk of IP leakage from Chinese manufacturing partners. Companies need to carefully evaluate how sensitive the technology is for finished products and weight European or Japanese alternatives’ landed cost on the finished bill of materials.

Near-Shore, Urgent: Aluminium diecasting math has changed under CBAM. Chinese aluminium production remains heavily coal-powered. European and Turkish foundries, predominantly electric arc furnace-based, now can have a structural cost advantage once CBAM is included in the total landed cost model. For sheet metal and machining, steel CBAM plus lead time plus cost of capital on in-transit inventory means Eastern Europe can become competitive again in some cases.

China+1, Qualify Now: PCBA presents a mixed picture. China’s dominance at ecosystem level remains intact, but semiconductor export controls are creating lead time unpredictability on advanced chips. For complex, IP-sensitive PCBA, the case for European qualification has become stronger. For high-volume commodity assemblies, China with Vietnamese contingency remains rational.

Electrical motors require particular attention. “Watch the hidden rare earth dependency,” Flumian warned. “Motors ‘assembled in India or Eastern Europe’ often use Chinese-sourced NdFeB magnets. True resilience requires tracing rare earth content back to origin.”

Stay, But Rebuild Your Cost Model: Structural steel, plastic injection, and commodity PCBA still show real Chinese advantage, but cost models need updating. Anti-dumping duties, Corporate Sustainability Due Diligence Directive compliance, and in-transit inventory cost of capital all change the equation.

The Ecosystem Challenge

Wil Liew, who specializes in cross-regional tooling and manufacturing execution, offered a practical perspective on the ground reality.

“In practice, what we often see is that companies are not really replacing China, but rebalancing sourcing risk,” Liew observed.

He identified the core challenge many companies face. “China still offers unmatched speed in tooling development and engineering iterations. The challenge for many companies is not leaving China, but replicating its manufacturing ecosystem elsewhere.”

This ecosystem advantage explains why wholesale exits from China remain rare despite the mounting pressures. The infrastructure, supplier density, engineering capabilities, and speed that China offers took decades to build and cannot be replicated quickly elsewhere.

The Cultural Dimension

Roberto Cavani, a founder and CEO with Chinese business experience dating to 1998, offered a reminder about perspective.

“Don’t look at China with European eyes,” Cavani cautioned. “To understand China in depth you need to look at China with Chinese eyes.”

The comment underscores a tension in the current debate. While structural forces are undeniably reshaping the sourcing equation, understanding how China will respond, adapt, and compete requires more than spreadsheet analysis. Companies that have built deep relationships and cultural understanding in China over decades face different calculations than those treating it purely as a commodity sourcing decision.

The Real Landed Cost

Flumian’s central message cuts through the complexity: “Stop comparing ex-works prices. The real landed cost in 2026 includes CBAM, compliance cost, geopolitical risk premium, and cost of capital.”

When everything is modeled, he argues, the Chinese advantage is narrower than procurement dashboards suggest.

This represents a fundamental shift in how procurement teams must operate. The traditional approach of comparing supplier quotes and selecting the lowest price no longer captures the full picture. Total landed cost now includes:

Carbon costs under CBAM that penalize coal-powered manufacturing. Compliance costs for sustainability due diligence requirements. Geopolitical risk premiums for supply chain fragility. Cost of capital tied up in longer lead times and in-transit inventory. Qualification costs for maintaining alternative suppliers even when not actively using them.

The Strategic Framework

Don XU, a procurement head with over 20 years of experience, described Flumian’s analysis as a “very realistic view,” reflecting the sentiment of practitioners navigating these challenges daily.

The framework emerging from this discussion suggests three levels of decision-making:

Category-level assessment: Not all products carry the same risk. Sensors require different treatment than commodity plastics. IP sensitivity, carbon exposure, and critical mineral content all factor into categorization.

Alternative readiness: The most advanced companies are qualifying alternative suppliers even when not immediately using them. Contract durations are shortening. Flexibility is being built into procurement structures.

Total cost modeling: Ex-works prices are no longer sufficient. Every procurement decision now requires modeling CBAM impact, compliance requirements, geopolitical risk, and capital costs.

What Comes Next

The procurement leaders engaging with this analysis are not debating whether China sourcing has changed. They’re debating how to respond.

Some categories will exit China entirely where IP sensitivity or regulatory pressure makes continued sourcing untenable. Others will near-shore urgently as CBAM transforms the competitive equation. Many will pursue China+1 strategies, maintaining Chinese suppliers while qualifying alternatives. And some will stay, but with completely rebuilt cost models that reflect the true 2026 reality.

The companies that will navigate this best are those that have moved beyond binary thinking. The question is not China or not China. It’s which category, with what risk profile, with what alternative ready.

As Flumian summarized: “The next disruption is not a question of if.”

The procurement teams that have already done the work, qualified the alternatives, rebuilt their cost models, and understood their category-level exposure will be positioned to respond. Those still comparing ex-works prices will find themselves in crisis management mode when the next shock arrives.

Continue the discussion with procurement and supply chain professionals on Chain.NET.