Get Out of the “Bad Habits” of Traditional Procurement by Leveraging 21st Century Technology
By Matthew Mills, Solutions Consultant at Arkestro
Procurement has long been at the forefront of organizational strategies, with the objective of managing spend efficiently and driving cost savings. Historically, the focus has been on optimizing portfolios of spend—prioritizing what to address, defer, or ignore—using well-known frameworks such as the Kraljic Matrix and the Pareto Principle. However, as supply chains have evolved into complex, global systems, the demands on procurement, and associated workload have increased significantly. Today’s procurement challenges go far beyond cost negotiations and sourcing. Businesses must now navigate sustainability, risk management, and total cost of ownership (TCO)—which now are shifting more spend into the “defer” or “ignore” buckets.
In response to these shifting needs, enterprise resource planning (ERP) systems and Source-to-Pay (S2P) platforms have played a pivotal role in enabling procurement teams to manage non-strategic or low-priority spend more efficiently. However, even with these tools, traditional procurement practices remain susceptible to inefficiencies and overspend. The advent of 21st-century technologies presents an opportunity for companies to break free from these limitations and move toward a smarter, more scalable approach. In this blog, we explore how cutting-edge solutions, like Arkestro, are reshaping procurement processes and allowing businesses to maximize value from every dollar of spend and break free of the inefficiencies of 20th Century procurement practices.
The “Bad Habits” of Traditional Procurement
Over-Reliance on Portfolio Management Frameworks
For decades, procurement teams have relied on portfolio management frameworks to make decisions on what spend categories to prioritize. The Kraljic Matrix and the Pareto Principle have been instrumental in determining where to focus attention, typically prioritizing high-value, high-risk areas, while pushing non-strategic categories to the background. While this approach has been effective for managing large portfolios, it creates blind spots. As companies defer or ignore certain spend categories, they risk missing significant opportunities for cost savings and improved supplier relationships.
The Limits of Long-Term Contracts and Blanket Purchase Agreements
One common practice to manage non-strategic spend is the use of long-term contracts and blanket purchase agreements. These agreements allow procurement teams to “set it and forget it,” minimizing the need for frequent renegotiations. While this approach saves time and effort, it also comes with inherent risks. The very nature of long-term contracts and blanket agreements discourages active management, leaving procurement teams vulnerable to missed opportunities for cost savings unless they are consistently market testing and analyzing their contracts, which is contrary to the intent of a long-term contract, but most procurement teams have accepted the over spend as an acceptable cost to drive efficiency.
The Pitfalls of Catalog Pricing
Catalog workflows, often compared to Amazon-style experiences, have made it easier for organizations to delegate spend management to other teams. However, this convenience comes with a downside. Pricing in these catalogs can quickly become stale, as it is not updated regularly to reflect market changes. Worse still, some companies allow suppliers to manage and update their own catalog pricing, creating a situation akin to letting the “fox guard the henhouse.” Suppliers are incentivized to keep prices favorable to themselves, and procurement teams can unknowingly pay more than they should for routine goods and services.
21st-Century Technology: Moving Beyond Inefficiencies
Embedding Intelligence in Procurement with Arkestro
Modern procurement solutions, such as Arkestro, are revolutionizing the way organizations approach sourcing by embedding science and data-driven insights into every aspect of the procurement process. These technologies enable businesses to treat every dollar of spend the same—whether strategic or non-strategic—without the overhead required using traditional methods. By using predictive methods, these solutions are able to automate a large portion of the sourcing process to reduce the time and resources required to such a degree that companies can address more spend more effectively without increasing headcount.
Arkestro introduces a templatized, embedded approach to sourcing events. This allows procurement teams to set up events quickly and efficiently, pre-populating supplier bid sheets with suggested prices. By anchoring suppliers to an acceptable price point, Arkestro transforms negotiations from open-ended “essay questions” into more straightforward “multiple-choice” scenarios. This subtle shift helps procurement teams achieve better outcomes by setting clear expectations from the outset and aligning suppliers with desired results.
Dynamic Bidding for Real-Time Feedback
One of the most powerful features of Arkestro’s technology is its dynamic bidding system, which provides real-time feedback to suppliers on every line item during each round of bidding. This approach enables procurement teams to invite more suppliers to participate in events, increasing competition and driving down prices, all without the additional burden of manually analyzing and providing feedback on every supplier-line item pair. By automating this process, companies can manage larger portfolios of spend without sacrificing the detailed attention necessary to achieve optimal outcomes.
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The Future of Procurement is Data-Driven and Scalable
The “bad habits” of traditional procurement—over-reliance on portfolio management frameworks, complacency in long-term contracts, and the pitfalls of stale catalog pricing—no longer serve organizations in today’s fast-paced, global economy. Modern procurement challenges require modern solutions, and 21st-century technologies like Arkestro are leading the charge. By embedding intelligence into sourcing events and enabling dynamic bidding, these solutions empower procurement teams to maximize value from every dollar spent, whether it’s strategic or non-strategic.
Organizations that embrace these technologies will be better positioned to navigate the complexities of today’s supply chains, mitigate risk, and capture untapped savings. As procurement continues to evolve, those who move beyond traditional approaches and leverage the power of modern tools will find themselves ahead of the competition, poised for long-term success.
Leave legacy tools in the Museum of Procurement where they belong. Is your team ready to step into the 21st Century with Arkestro? Reach out to learn how Arkestro can ensure that you’re securing a competitive market price for everything you buy, every time.
About Matthew
Matt Mills joined Arkestro in 2022 as a Solutions Consultant, using his expertise to support GTM efforts in key verticals. Prior to joining Arkestro, Matt has led pre-sales solutions consulting, customer success and value engineering practices at numerous early-stage, SaaS software companies in the supply chain and procurement space, such as Supplyframe, ONE Network, Everstream Analytics, LevaData, and Resilinc.
Matt also brings over 15 years of high-tech operations experience from companies such as Dell, EMC, and Flextronics where he held a variety of roles in the supply chain organizations including finance, new product introduction, digital strategy, risk management and strategic sourcing. He holds a bachelor’s in economics from The Johns Hopkins University and an MBA from Duke University. Matt lives in Nashville, TN with his wife Amy.