What Is "Direct" Intake & Orchestration?

Archive | Upgrade to Premium | Sponsor

Hi readers,

2024 was undeniably the “Year of Intake & Orchestration” in ProcureTech.

However, I don’t know about you but… I’m tired of seeing the now classic “I need to buy new software” use case.

Yes, buying software can be complex… BUT, if we’re being honest, “direct” procurement use cases is where all the complexity lies… (you’ll see why I put “direct” in quotation marks if you read on…)

For example, raw material is usually much more complex (and critical) to buy than a new software license… Why? The volume/scale of purchases and the integration required with the rest of operations makes purchasing Microsoft project licenses look like a walk in the park…

• Manufacturers account for about 30 to 40% of companies in the S&P 500, depending on how you define manufacturing.

• Manufacturers also account for 40% to 50% of total S&P 500 revenue.

Yet, I haven’t seen very many Intake & Orchestration providers attack this segment…

In tonight’s article, I detail what it will take to serve manufacturers correctly with Intake & Orchestration.

I’m hoping 2025 is the year I see a great “I need to replace an obsolete material listed on a raw material requisition related to a production order” demo 😅

Onwards!

📰 In this week’s edition:

• 📋 5 procurement jobs that caught my eye

• 🏆 The Road to the ProcureTech Cup : Episode 19

• 🌙 What Is "Direct" Intake & Orchestration?

Tap the poll at the bottom of this email after reading.
It helps me ensure I haven’t yet turned into a mad scientist…

Note: Some of the content listed above is only available in the email version of this newsletter. Don’t miss out! Sign up for free to get the next edition.

👀 In Case You Missed It…
My Best Linkedin post this week:

Are you waiting for your manager to map out your career? Risky move.

The Journey Continues…

This Friday MESH Works comes on the show to demo their Source-to-Pay Suite tailored for manufacturing.

MESH Works is helping manufacturers find, connect and transact with high quality suppliers effortlessly.

Last Episode

Graphite was on the show last Friday to demo their Intake & Supplier Management Platform.

If you missed it, I’ve made ALL the replays available for you on YouTube:

What is the ProcureTech Cup? Start Here.

Did You Know…

There’s a Pure Procurement Newsletter YouTube Channel?

Lots of content planned for 2025. Subscribe now.

What Is "Direct" Intake & Orchestration?

In 2023-24, we saw an explosion of interest for Procurement Intake Management & Process Orchestration (I&O) technology. Why?

Because it helps make procurement functions more efficient by giving structure, quality and order to:

• Requests coming into procurement (Intake)

• Processes executed across systems and stakeholders for each request (orchestration)

I suspect the growth will continue as we keep seeing case studies of successful projects come out.

*That being said I&O is not a silver bullet and you can still screw up when implementing!*

However, one thing that’s clear for me is that we need to start making a distinction between 2 different sets of I&O use cases:

• Assistant Initiated Intake & Orchestration (“Indirect purchasing use cases”)

• Third-Party System Initiated Intake & Orchestration (“Direct purchasing use cases”)

What’s the difference?

Assistant Initiated Intake & Orchestration

The first use case is the one we’ve seen over and over again in I&O vendor demos.

In a nutshell, a given requester in the business has a requirement to procure a good or service.

1. They interact with a virtual assistant via messaging software or email (call it how you want to - copilot, chat bot, AI agent, whatever…).

2. The assistant asks clarifying questions until it can determine the purchasing intent of the requester (like determining a commodity code)

3. The assistant identifies the associated purchasing channel (configured by you, the system administrator sitting in central procurement).

4. The assistant starts the user down a request journey based on the context (“purchasing channel”) supported by flexible, configurable forms to gather contextually required information (e.g. a professional service will require different information than a spot buy for a widget)

5. If the commodity can be procured via catalog items, the catalog platform is “called” to fetch possible catalog items that can meet the user’s request.

6. Once the requester completes all required information (potentially with help from the assistant and/or a “human in the loop” and submits his request, we fall into process orchestration.

7. A fit-for-purpose procurement workflow is generated to loop in all relevant stakeholders and systems to get the request to a purchase order. For example, if the request is for software, information security and their systems will be looped into the process automatically (based on your configuration). The requester has end-to-end visibility of what needs to happen to get to an order.

8. Once all the workflow steps are completed/resolved, the workflow is finalized in the orchestration layer and we can proceed to the purchasing transaction.

9. At this point, the rest of the Procure-to-Pay (P2P) process can occur in your transactional system such as a Source-to-Pay Suite or an ERP system.

This is typically called an “indirect purchasing use case” because the goods you buy in this fashion don’t typically fit into your accounting department’s Cost of Goods Sold (COGS).

Although… There are certainly exceptions which is why I called it Assistant Initiated Intake & Orchestration instead of indirect…

You could certainly buy production supplies in this manner even if they figure in your COGS…

So far, things are all well and good…

Third Party System Initiated Intake & Orchestration

However, for purchasing requests (or requisitions) that aren’t currently generated by a requester in your business (and there are a ton), the above use case won’t work… When is that the case?

• When you’re using a Materials Requirements Planning (MRP) system to generate requisitions based on inventory levels (Min/Max) or ERP material reservations.

• When you’re using a maintenance system that generates requisitions tied to parts added to maintenance work orders

• When you’re using a project management system that generates requisitions tied to the Work Breakdown Structure (WBS) elements of the project

• Etc.

In short, whenever purchasing requisitions are generated automatically by a system, you can’t optimize this process with Assistant Initiated Intake & Orchestration…

But, especially in industrial businesses, the lion’s share of the spend is managed in this fashion… Think raw materials, spare parts, capex projects, etc. These are all big ticket purchasing categories with lots of stakeholders involved.

Are these categories doomed to be underserved by I&O?

No… That’s exactly where Third-Party System Initiated Orchestration (or “Direct purchasing use cases”) comes in:

In a nutshell, purchasing requirements don’t come directly from the requester’s head…

1. These requirements are fed directly or indirectly into third party enterprise systems, for example:

   • Production schedules for finished goods are entered in the ERP and have associated bill of material information for raw material

   • Maintenance plans generate work orders with standard part lists given associated equipment bill of materials

   • CAPEX project purchasing requirements are entered into project management systems

   • Etc.

2. In certain cases, you *could* leverage an intake experience if you wanted to as part of these processes. For example, when a maintenance planner is manually populating the parts required for a specific work order in the maintenance system, they *could* punch out to your virtual assistant to help find the required parts (but I feel like this will typically be a “level 2 maturity” development).

3. In any case, the requirements are entered into the third party system and this automatically generates purchase requisitions (usually via a MRP - Materials Requirements Planning - run).

4. This is where “Direct Process Orchestration” can come into play. Instead of manually looking over generated requisitions and launching a bunch of emails, text messages or conversations with other stakeholders to resolve issues, you import all the requisitions into the orchestration layer.

5. From there, you apply business rules on those requisitions (and the underlying master data).

6. These rules are used to validate requisition conformity and compliance and to launch appropriate workflows to resolve any issues. For example, perhaps all items for a given supplier *should* be on a contract in the system but the requisition in question has a new “off contract” item on it… You could automatically launch a workflow to get the new item added on the contract (and pricing checked) before allowing the conversion of the requisition into an order.

   These workflows could require additional connections to source systems if you want to automate related tasks. For example, in our example, you could automate the addition of the new contract item to the back end system contract object from the orchestration layer if it made sense to.

   Buyers could also launch manual workflows on certain requisitions if manual checks are still required…

7. Once all workflows are finalized on the requisition, the requisition (or source object governing the requisition) would be updated so that the requisition can proceed to order.

This type of workflow is typically called a “direct purchasing use case” because you typically buy raw materials for production in this fashion. Those are included into your Cost of Goods Sold (COGS) and therefore part of “direct procurement”.

However, as you saw in my examples above, big business also buys many “indirect” goods and services this way such as Maintenance, Repair and Operations (MRO) spare parts, goods and services for projects (e.g. CAPEX). Therefore, calling it a “direct” use case is a misnomer that leads to confusion… (but one that will keep happening)

I hope these two high level examples illustrate the difference, potential complexity AND value intake and orchestration can bring to the table in both types of use cases.

You could also imagine additional “orchestration heavy” use cases being applied to post-PO activities such as expediting, order confirmation management, Advanced Shipment Notice (ASN) management, receiving, invoice processing and returns management.

So as Intake & Orchestration continues to capture hearts and minds with their “Assistant Initiated Request Demos”, I really do hope we start seeing and hearing more about what I&O providers are doing about dealing with the “crunchy”, value-laden “direct” orchestration use cases.

Have you seen great “direct” Intake & Orchestration providers out there?

Let me know in the comments 👇

1. Need Help Building Your Digital Procurement Roadmap?
   I’ve been helping global procurement teams digitalize their processes and practices for 12+ years. Reply to this email to get a conversation started.

2. You have something to share with our 10,000+ readers?
   The digitally-minded procurement professionals reading this newsletter are thirsty for knowledge, insights, and solutions. Reply to this email to get in front of them.