Direct materials
Workflow · Stage 1: Define and intake
Parts, drawings and metadata
The part-level record procurement works from: specs, drawings, revisions and attributes. Every direct sourcing decision hangs off a part. This element is the procurement-facing record of each part: the specification and drawing at a given revision, plus the metadata that makes it sourceable (material, process, tolerance class, finish, commodity code, annual volume, program, carryover vs. net new). It also carries the program definition questions that start a program: what are we building, which specs already exist, do we trust the PLM data. PLM is the engineering system of record; this is the procurement view of it, kept in sync by revision.
- Import parts and drawings from PLM by revision
- Tag attributes: material, process, tolerance class, finish, commodity, volume
- Flag carryover parts vs. net new and reuse prior sourcing
- Hold the program definition: scope, volumes, timing, trust level of PLM data
- Version the record so quotes and awards stay tied to the revision they were made against
Where AI accelerates it: Extract attributes from drawings and spec PDFs; Detect revision drift between PLM and sourcing records.
Typical incumbent: PLM exports plus spreadsheets and shared drives
LightSource: Core
Systems of record · Stage 1: Define and intake
PLM
Engineering's system of record: CAD, drawings, revisions, BOM structure, change orders. Product lifecycle management holds the authoritative spec. Spec-to-Scale reads from it (parts, BOMs, changes) and writes cost and supplier reality back into decisions; it does not replace it.
- Release and revise parts, drawings and BOMs
- Run engineering change workflows
- Hold configuration and document control
Typical incumbent: PLM
LightSource: Integrates
Workflow · Stage 1: Define and intake
BOMs
The bill of materials made commercial: costed by line, tracked by revision, with PFEP and enriched items. The BOM is the working object for the whole spec-to-scale flow. Imported from PLM, it is enriched line by line (commodity, make vs. buy, supplier candidates, target cost), costed with quotes and awards, and tracked as cost evolves across revisions. Plan for every part (PFEP) attaches the supply parameters each part needs at scale: packaging, lot size, lead time, replenishment mode, storage. Parsing and enrichment catch missing lines, duplicate part numbers and inconsistent specs before they reach suppliers.
- Import multi-level BOMs from PLM and reconcile against the part record
- Enrich items: commodity, make vs. buy, target cost, candidate suppliers
- Cost the BOM with quotes and awards; track cost by revision and over time
- Maintain PFEP: packaging, lot size, lead time, replenishment, storage
- Flag missing parts, duplicates and inconsistent specs
- Estimate volumes from program plan, EDI history or demand curves
Where AI accelerates it: BOM parsing and enrichment: flag missing parts, inconsistent specs, likely commodity; Suggest candidate suppliers per line from capability data.
Typical incumbent: Excel roll-ups rebuilt every revision
LightSource: Core
Workflow · Stage 1: Define and intake
Should-cost modeling, VAVE and design to cost
Bottom-up cost models and design-side cost work done while the spec is still movable. Should-cost builds a cost from first principles (material mass and price, cycle time, machine rate, labor, scrap, overhead, margin) before or alongside quotes, so the team knows what a part ought to cost. Value analysis / value engineering and design-to-cost use that view to change the spec: relax a tolerance, substitute a material, simplify a feature, consolidate parts. The manifesto's half-millimeter tolerance story (a 1,500T press vs. a 1,000T press, more suppliers, cheaper tooling, $20M a year) is this element in one example. It sits at Define because that is where 70 to 80% of cost is decided.
- Build should-cost models by process family
- Run VAVE workshops with engineering and suppliers
- Set and track design-to-cost targets per part and assembly
- Evaluate tolerance, material and process tradeoffs for cost and supplier base
- Feed should-cost references into benchmarking and negotiation
Where AI accelerates it: GenAI design tradeoffs: tolerance relaxations, material substitutions, manufacturability checks; Should-costing AI: automated benchmarks from cost breakdowns.
Typical incumbent: Cost engineering spreadsheets; point tools owned by engineering
LightSource: Partial
Workflow · Stage 2: Discover suppliers
Supplier engagement
Finding and involving suppliers early: discovery, early involvement and DFM with engineering. Direct sourcing is collaboration, not PDF exchange. Supplier engagement covers finding candidates who could make the part, involving them before the design is frozen, and running design-for-manufacturability reviews so feasibility and cost feed back into the spec. The manifesto's Model 3 examples (yoke steering wheel, BOM cost push, child-seat hooks) are all engagement loops. Suppliers get a stage to win on design rather than unit price.
- Identify candidate suppliers for each part family
- Bring suppliers into DFM reviews before design freeze
- Collect feasibility feedback: process, tooling, tolerances, alternates
- Track supplier engagement history per part and program
- Coordinate NDAs, drawings access and early sample requests
Where AI accelerates it: Agentic supplier discovery where the cost of a wrong answer is low; Supplier engagement agents to collect feedback and status.
Typical incumbent: Email, meetings, tribal knowledge
LightSource: Core
Systems of record · Stage 2: Discover suppliers
Spec-to-Scale (S2S) system (LightSource)
The operating system for direct materials, spanning Discover suppliers through Scale and sustain, between PLM and ERP. One surface for parts, BOMs, quotes and cost breakdowns, awards, contracts, supplier data, readiness and price compliance. It imports specs from PLM, runs the spec-to-scale workflow, and feeds awards and price records into the ERP where scheduling agreements and recurring orders live. It spans stages 2 through 7 because Spencer's rule is that order is ERP and beyond, and because stage 1 belongs to PLM as the record even though the S2S system reads from it. LightSource is named as the reference implementation of the category.
- Hold the costed BOM and spec record for procurement
- Run spec-aware sourcing with normalized breakdowns and iterative pricing
- Record awards, formulas and contracts
- Track industrialization, ramp readiness and supplier status through the portal
- Enforce price compliance and run index adjustments
- Integrate with PLM upstream and ERP downstream
Where AI accelerates it: AI-native quoting engine and flexible ontology; BOM parsing, breakdown normalization, comparison, risk surfacing; Agents for supplier data collection outside the portal.
Typical incumbent: Excel and email, or an indirect suite bent to direct (p. 5)
LightSource: Core
Workflow · Stage 2: Discover suppliers
Supplier capability mapping
A structured record of what each supplier can make: equipment, processes, materials, certifications, capacity. A supplier's relevance is inseparable from the spec. Capability mapping records, per site, the equipment (press tonnage, molding machine sizes, five-axis machining), processes, materials, certifications (IATF 16949, AS9100, ISO 13485), automation level and capacity so that discovery answers 'who can actually make this part' rather than 'who is in the vendor master'. Small in effort, large in effect: it is what lets a tolerance relaxation open up dozens of new suppliers.
- Capture equipment, process, material and certification data per supplier site
- Map capabilities to part attributes for matching
- Refresh capacity and utilization signals
- Score fit between part requirements and supplier capability
Where AI accelerates it: Supplier capability mapping: turn specs into a living, searchable database of who can deliver.
Typical incumbent: Buyer memory and supplier PDFs
LightSource: Core
Workflow · Stage 3: Source
Spec-aware sourcing
Sourcing events created from BOM data with drawings attached and category-specific quote templates. The direct RFx starts from the BOM, not from a blank form. Each event carries the part records and drawings at the right revision, the volume assumptions, and a quote template tailored to the category (stamping is not chemicals; a lane bid sheet is not a PCB quote). Suppliers receive what they need to quote accurately, and every quote comes back tied to the spec revision it answered. This is the first of the four direct-sourcing elements Spencer called out.
- Create sourcing events directly from BOM lines
- Attach drawings, specs and volumes at revision
- Select category-specific cost breakdown templates
- Invite suppliers from the engaged and capability-matched list
- Manage supplier Q&A and spec clarifications inside the event
Where AI accelerates it: Auto-generated sourcing setups: RFQs, quote formats, baseline analysis.
Typical incumbent: Email with Excel bid sheets
LightSource: Core
Workflow · Stage 3: Source
Quote breakdowns with normalization
Full cost breakdowns from every supplier, normalized to one structure so quotes compare apples to apples. Unit price is insufficient in direct. Leading teams require breakdowns: raw material (mass, price, scrap), labor (rate, time), machine (rate, cycle time, utilization), tooling amortization, logistics, packaging, markup. Normalization puts every supplier's version into the same structure, flags outliers (a scrap rate nobody else quotes, an unusual overhead), and turns the breakdown into a structural agreement that updates as designs change instead of triggering ground-up renegotiation. This was the first problem LightSource had to solve.
- Collect breakdowns in the category template
- Normalize units, currencies, assumptions and line structures
- Flag outliers and inconsistencies across suppliers
- Compare cost drivers, not just totals
- Lock agreed breakdowns as the basis for future changes
Where AI accelerates it: Automated cost breakdown normalization for apples-to-apples comparison; AI highlights deltas between quotes and flags outliers.
Typical incumbent: Cell-by-cell reconciliation in Excel
LightSource: Core
Workflow · Stage 3: Source
Iterative pricing
Re-quotes as designs change, tracked as cost walks across rounds and revisions. Direct sourcing is not one round. As engineering changes the design, suppliers re-quote; as volumes firm up, prices move; as negotiations proceed, rounds accumulate. Iterative pricing keeps every round and revision, so the team can see the cost walk from first quote to award, attribute each step to a design change, a volume change or a negotiation, and never lose the thread across months of churn.
- Run multiple quote rounds per event
- Re-quote against new revisions without rebuilding the event
- Track cost walks: what changed, why, by how much
- Compare rounds side by side per supplier and part
- Preserve history for audit and post-award reference
Where AI accelerates it: AI-driven comparisons highlighting cost, risk and readiness differences across rounds; AI-driven negotiation strategies tuned to market conditions.
Typical incumbent: Versioned spreadsheets named final_v7
LightSource: Core
Workflow · Stage 4: Contract and award
Award and nomination
Choosing the supplier portfolio and making it official: scenarios, nomination, long-term agreements. The moment sourcing intent becomes commitment. Award scenarios compare portfolios across cost, capacity, risk, resilience and landed cost including tariffs and duties (HTS classification, country of origin), because in 2025 and 2026 tariffs change who wins. Nomination letters and long-term agreements carry volumes, pricing formulas and terms into the industrialization phase. In direct the output is rarely a one-off PO; it is a commitment that the ERP will later execute through scheduling agreements.
- Build award scenarios: single vs. dual source, regional splits, capacity constraints
- Evaluate landed cost, duties, tariffs and TCO per scenario
- Issue nomination letters and LTAs with volumes and terms
- Record award rationale for audit and future reference
- Hand off awarded parts to industrialization tracking
Where AI accelerates it: Award scenario analysis recommending supplier portfolios optimized for cost, capacity and resilience.
Typical incumbent: Excel scenario tabs and Word nomination letters
LightSource: Core
Workflow · Stage 4: Contract and award
Pricing formulas
Formula-based pricing agreed at award: index-linked material, FX, volume tiers, conversion cost. Many direct prices are not a number but a formula: material content times an index (LME aluminum, steel coil, resin), plus a fixed conversion cost, adjusted for FX and volume tiers, sometimes with tooling amortization per piece. Pricing formulas define that structure at award so that later index adjustments are mechanical rather than renegotiated. Spencer listed this under direct sourcing; it sits at Contract and award because the formula becomes binding in the LTA, and it feeds price compliance at scale.
- Define formula structure per part or family: index, weight, conversion cost, FX basis
- Agree reset frequency, lag and caps and floors
- Set volume tiers and tooling amortization
- Store formulas so adjustments can be computed and audited
- Publish formulas to suppliers and to the ERP price records
Where AI accelerates it: Simulate index adjustments across programs; Draft formula clauses from agreed breakdowns.
Typical incumbent: Clauses in contracts, recalculated by hand each quarter
LightSource: Core
Workflow · Stage 4: Contract and award
Third-party and internal benchmarking
What a quote is judged against: market indices, third-party data, should-cost references and the company's own quote history. Benchmarks turn a quote comparison into a negotiation position. Third-party benchmarks are commodity indices and market data (metals, resins, energy, labor rates, freight, FX) and category intelligence. Internal benchmarks are the company's own quote and award history across programs and regions, plus should-cost references. Together they answer whether a price is good, not just whether it is the lowest of three.
- Subscribe to and maintain index and market data feeds
- Build internal benchmarks from quote and award history by part family and region
- Compare live quotes to external and internal references
- Surface cross-program leverage: same part or process priced differently
- Feed references into negotiation and award
Where AI accelerates it: Generative benchmarking: pull data across sourcing events to identify structural cost opportunities; Index monitoring with suggested category strategies.
Typical incumbent: Analyst reports, index subscriptions read by hand, buyer memory
LightSource: Partial
Workflow · Stage 5: Industrialize
APQP, PPAP and supplier quality
The supplier quality gate on readiness: APQP planning, PPAP approval, corrective action, material declarations. Advanced Product Quality Planning sets the plan; the Production Part Approval Process proves the supplier can make the part to spec at rate (dimensional results, material certs, process capability, control plan, PSW). Material declarations (IMDS, conflict minerals, REACH, RoHS, PFAS) travel in the same package, which is why product compliance lives here. Supplier corrective action (SCAR, 8D) closes the loop when parts fail. In aerospace the equivalent is first article inspection (FAI / FAIR).
- Plan APQP phases per awarded part
- Collect and approve PPAP packages by level
- Gather material declarations and compliance data
- Issue and track SCARs and 8D reports
- Run acceptance testing and incoming inspection during ramp
Where AI accelerates it: Supplier engagement agents to collect APQP data, status updates and escalate risks.
Typical incumbent: QMS point tools plus email
LightSource: Partial
Workflow · Stage 5: Industrialize
Tooling, prototypes and pilot builds
Getting suppliers physically ready: tooling, prototypes, pilot builds, capacity, material readiness date. Industrialization is where launches slip. Tooling has to be kicked off early enough (and paid for, and owned, and located), prototypes and pilot builds have to be coordinated while the design is still moving, capacity has to be verified, and the material readiness date has to hold. The manifesto's Model 3 story about air-freighting parts from China to keep pilot builds on track is this element under pressure.
- Kick off tooling with capex, ownership and location recorded
- Coordinate prototype and pilot build part deliveries
- Verify supplier capacity against ramp volumes
- Track MRD per part and escalate slips
- Manage tooling amortization and tool moves
Where AI accelerates it: Timeline agents integrating logistics, tooling and supplier updates to predict cascading delays.
Typical incumbent: Program trackers in Excel and PowerPoint
LightSource: Partial
Workflow · Stage 6: Ramp and launch
Production ramp and timeline management
Start of production and the climb to rate, with suppliers tracked against milestones. SOP is a date; the ramp is a curve. This element tracks supplier readiness and delivery against launch milestones, integrates tooling, logistics and supplier updates into one timeline, and predicts where a slip will cascade. It is the reality-over-theater view the manifesto asks for: live percent sourced, tooling readiness, lead time plus buffer plus logistics, all pointed at SOP with risk flags that escalate before dates move.
- Maintain the launch timeline across procurement, engineering, quality and suppliers
- Track ramp curves and supplier delivery against them
- Flag and escalate risks to SOP and rate attainment
- Coordinate early POs and the transition into production orders
- Run launch readiness reviews
Where AI accelerates it: Timeline agents predicting cascading delays; Risk flags from supplier status and external signals.
Typical incumbent: Weekly launch meetings and slide decks
LightSource: Partial
Workflow · Stage 6: Ramp and launch
Alternate sourcing and tier-N visibility
Sub-tier mapping and pre-qualified alternates so disruption is a plan, not a scramble. Map suppliers to sites to parts beyond tier 1, monitor the signals, and qualify alternates before they are needed. The manifesto's COVID chip shortage story is the case: tier-2 visibility told Tesla which sub-suppliers still had stock, engineering requalified alternative chips, and cars kept shipping. This is part-level and action-oriented, which is why it sits in the direct row rather than with shared risk monitoring.
- Map tier-2 and tier-N suppliers and sites per critical part
- Identify single-source and single-site exposure
- Pre-qualify alternates and hold them warm
- Scenario plan for disruption: what moves, at what cost, how fast
- Trigger re-sourcing when signals fire
Where AI accelerates it: Risk detection agents scanning external signals and triggering alerts; Alternate suggestion from capability data.
Typical incumbent: Nothing, until the shock
LightSource: Partial
Workflow · Stage 7: Scale and sustain
Price compliance and index adjustments
Making sure the price paid is the price agreed, applying formulas correctly, and forecasting where cost is going. Detect unexplained increases, deviations from agreed terms and misapplied index or FX adjustments; run the adjustment cycle mechanically from the formulas set at award; reconcile invoices to contracts. Forecasting and what-if simulation project cost evolution months or years ahead under index, FX, volume and design scenarios. The manifesto claims 1%+ compliance savings from error containment and variance detection alone.
- Run index and FX adjustment cycles from agreed formulas
- Detect variance between invoice, PO and contract price
- Investigate and resolve unexplained increases
- Forecast cost under index, FX, volume and design scenarios
- Report compliance savings
Where AI accelerates it: Index monitoring and variance detection: flag unexplained increases, suggest category strategies; Forecasting and simulation: project cost and availability shifts.
Typical incumbent: Quarterly spreadsheet exercises and AP disputes
LightSource: Core
Workflow · Stage 7: Scale and sustain
Engineering changes and cost-downs
The post-launch change loop and the continuous improvement it drives: ECO/ECN, cost-downs, refreshes, end-of-life. After launch, engineering changes keep coming (ECR, ECO, ECN) and each one means re-quote, re-PPAP and re-price. The same loop is the engine for cost-downs (design changes, cross-program consolidation, negotiation), program refreshes, warranty obligations and end-of-life transitions. Spencer placed engineering change downstream; this box is where the manifesto's 3 to 5% annual continuous-improvement savings live and why procurement cannot be sidelined after SOP.
- Receive ECR/ECO/ECN from PLM and assess cost and supply impact
- Re-quote, re-PPAP and re-price affected parts
- Run cost-down programs and VAVE at scale
- Manage refreshes, warranty cost recovery and end-of-life buys
- Track savings against baseline
Where AI accelerates it: Generative benchmarking to find structural cost opportunities; Automated impact assessment of change notices.
Typical incumbent: PLM change workflow with the commercial side handled by email
LightSource: Core
Workflow · Stage 8: Order and pay
PO, release and order collaboration
Scheduling agreements, releases, EDI and ASNs: the order layer around the ERP. Direct's transactional output is a scheduling agreement or a forecasted call-off, not a one-off PO. Releases go out from MRP, suppliers acknowledge, ship and send ASNs, and changes are negotiated in a collaboration layer that sits around the ERP (supplier portals, EDI, supply chain collaboration networks). This is 'ERP and beyond' on the map and outside Spec-to-Scale.
- Issue scheduling agreements and releases from MRP
- Exchange acknowledgements, ASNs and invoices by EDI or portal
- Collaborate on order changes, expedites and de-expedites
- Monitor supplier delivery performance at order level
Typical incumbent: ERP plus EDI, portals, phone calls
LightSource: Integrates
Systems of record · Stage 8: Order and pay
ERP and MRP
Finance and operations' system of record: POs, scheduling agreements, invoices, GL, inventory, MRP. The ERP executes what Spec-to-Scale decides: price records, scheduling agreements, releases from MRP, receipts, invoices and payment, general ledger. 'Order is ERP and beyond.'
- Run MRP and issue releases
- Hold price records and scheduling agreements
- Receive, invoice, pay, post to GL
- Manage inventory
Typical incumbent: ERP
LightSource: Integrates
Systems of record · Stage 9: Plan and fulfill
Planning and logistics systems
Downstream supply chain systems: demand and supply planning, S&OP, TMS, WMS, VMI. Demand and supply planning, sales and operations planning, transportation management, warehouse management, vendor-managed and consigned inventory. Outside Spec-to-Scale; shown so the map ends where supply chain execution takes over. Merged from two first-draft boxes.
- Plan demand and supply
- Plan and execute transport
- Run warehouses and inventory policies
- Operate VMI and consignment
Typical incumbent: Planning and logistics suites
LightSource: Out of scope
Both direct and indirect
Lifecycle · Stage 1: Define and intake
Category management and strategy
Segmenting spend into categories and setting the strategy for each: make vs. buy, supplier base shape, sourcing waves. Category management applies equally to stampings and to logistics lanes. It segments spend, sets category strategies (consolidate or diversify, regional or global, index or fixed), decides make vs. buy at the category level, and plans sourcing waves. It is the discipline that makes strategic indirect behave like direct.
- Segment spend into categories and sub-categories
- Set category strategy and supplier base targets
- Plan sourcing waves and renewal calendars
- Own category-level make vs. buy and risk posture
Typical incumbent: Slide decks and category playbooks
LightSource: Partial
Cross-cutting analytics, risk and governance · Stage 1: Define and intake
Spend analytics and savings tracking
Spend cubes and classification plus tracking of savings and value delivered against baseline. Analytics tells you what you spent; savings tracking tells you what procurement delivered. Combined because teams buy and use them together, and because the manifesto's argument about incentives depends on making procurement's inputs and outputs measurable.
- Extract, classify and cube spend
- Set baselines and track savings realization
- Report by category, supplier, program
- Measure procurement inputs: suppliers per bid, cycle times, benchmark use
Typical incumbent: Excel and BI tools
LightSource: Partial
Lifecycle · Stage 2: Discover suppliers
Supplier discovery
Finding candidate suppliers: databases, directories, AI discovery, referrals. Kearney's vendor identification. Finding companies is common to direct and indirect; engaging them against a spec (D-W4) and mapping their capability (D-W5) is direct-specific. Discovery here covers directories, third-party databases, AI-assisted search and referral networks.
- Search directories and databases
- Screen candidates on basics: location, size, certifications
- Build long lists per category
- Hand off to engagement or RFx
Typical incumbent: Web search and trade shows
LightSource: Partial
Cross-cutting analytics, risk and governance · Stage 2: Discover suppliers
Risk monitoring and third-party risk
Supplier-level risk signals and TPRM: financial health, cyber, sanctions, geopolitical, natural disasters. Shared risk monitoring watches suppliers as entities: financial distress, cyber posture, sanctions and ownership, geopolitical exposure, weather and disaster events, with TPRM workflows for assessment and remediation. Part-level, action-oriented tier-N mapping is D-W15 in the direct row.
- Monitor external signals per supplier
- Assess and remediate third-party risk
- Alert owners and trigger mitigation
- Report risk posture by category
Typical incumbent: News and credit reports read by hand
LightSource: Partial
Lifecycle · Stage 3: Source
Marketplaces
Buying channels with pre-aggregated suppliers: parts marketplaces for direct, business marketplaces for indirect. Spencer's call: marketplaces are both. Direct has real marketplaces for machined, molded, sheet-metal and PCB parts, often used for prototypes and low volumes; indirect has business marketplaces for catalog goods. Both compress discovery and quoting into a channel. GPOs, by contrast, stay indirect.
- Quote and buy prototype or low-volume parts through a marketplace
- Buy catalog goods through a business marketplace
- Compare marketplace pricing to sourced pricing
Typical incumbent: Ad hoc buying
LightSource: Out of scope
Cross-cutting analytics, risk and governance · Stage 3: Source
ESG, sustainability and supplier diversity
Supplier-level sustainability ratings, Scope 3 and carbon, provenance and EUDR, diversity certification. About the supplier and the supply chain rather than the material in the part (that is PPAP and material declarations, D-W12). Sustainability ratings and audits, Scope 3 reporting, provenance and deforestation regulation readiness, diversity and inclusion certification. The manifesto argues these should be decision inputs from the start, not afterthoughts.
- Collect ratings and audits
- Report Scope 3 and carbon by supplier and category
- Track provenance and regulatory readiness (EUDR)
- Certify and report supplier diversity
Typical incumbent: Annual questionnaires
LightSource: Out of scope
Lifecycle · Stage 4: Contract and award
Contract management
Contract lifecycle management: authoring, redlining, obligations, renewals; for direct, the LTAs that carry volumes and formulas. CLM covers authoring from templates, redlining, approvals, signature, obligation tracking and renewals. In direct the key artifacts are long-term agreements and nomination letters carrying volume commitments, index clauses and tooling terms; variance detection against those terms is how contracts connect to price compliance.
- Author and redline agreements
- Track obligations and renewals
- Store LTAs, nomination letters and pricing clauses
- Detect variance against agreed terms
Typical incumbent: Shared drives and legal inboxes
LightSource: Core
Cross-cutting analytics, risk and governance · Stage 4: Contract and award
Master data management
Item and supplier master data: golden records, deduplication, hierarchies, classification. Direct depends on it for part numbers and revisions; indirect for vendor records. The manifesto's Wave 5 instruction is to build the data foundation first, then layer automation and agents on top.
- Govern item and supplier golden records
- Deduplicate and merge
- Maintain hierarchies and classifications
- Sync across PLM, S2S, ERP
Typical incumbent: ERP master data teams
LightSource: Integrates
Lifecycle · Stage 5: Industrialize
Supplier onboarding and information management
Getting suppliers into the system: registration, qualification, certificates, banking and tax data, vendor master. Every supplier is onboarded once and maintained forever. Registration, qualification questionnaires, certificates and insurance, banking and tax verification, and vendor master creation in the ERP. Placed at Industrialize because onboarding follows award.
- Register and qualify suppliers
- Collect certificates, insurance, banking and tax data
- Create and maintain vendor master records
- Re-verify periodically and on change
Typical incumbent: Email and PDF forms
LightSource: Partial
Lifecycle · Stage 6: Ramp and launch
Supplier collaboration portals
One front door for suppliers: specs and quotes in, status updates and risk flags back. Supplier networks exist on both sides: indirect for POs and invoices, direct for specs, quotes, APQP status, releases and risk flags. The manifesto's version adds AI agents that nudge and collect data even when suppliers do not log in.
- Publish specs, RFQs, POs and releases to suppliers
- Receive quotes, acknowledgements, ASNs, APQP artifacts
- Collect status updates and risk flags
- Nudge suppliers through agents when data is late
Typical incumbent: Email
LightSource: Core
Lifecycle · Stage 7: Scale and sustain
SRM and supplier performance
Relationship management and scorecards: quality, delivery, responsiveness, development plans. Supplier relationship management and performance management are bought and run together: segmentation, executive reviews, scorecards on quality, delivery and responsiveness, development plans and continuous-improvement initiatives.
- Segment suppliers and set relationship cadence
- Publish scorecards: quality (PPM), delivery (OTD), responsiveness
- Run performance reviews and development plans
- Host cost and quality improvement initiatives
Typical incumbent: Quarterly slide decks
LightSource: Core
Lifecycle · Stage 8: Order and pay
Invoice, AP automation and payments
Invoice capture, three-way match, approvals, payment, supply chain finance. Invoices for direct and indirect flow through the same AP process, so this is shared. Capture, three-way match against PO and receipt, approvals, payment execution, and financing options such as dynamic discounting and supply chain finance.
- Capture and match invoices
- Route exceptions
- Execute payments
- Offer early payment and supply chain finance
Typical incumbent: ERP AP plus scanning
LightSource: Integrates
Indirect
Workflow · Stage 1: Define and intake
Intake and orchestration
The front door for business stakeholders: submit a request, track the ticket, route it to the right team. Wave 4 in the manifesto's history. Intake portals and orchestration layers give indirect procurement a front door: 'I need a laptop', 'I need an agency'. Routing sends the ticket to procurement, IT, legal or security with approvals along the way. Elegant for laptops; you cannot orchestrate a vehicle program through a help desk, which is why direct's intake is the engineering release (D-W1, D-W2).
- Capture requests through guided forms
- Route to procurement, IT, legal, security, finance
- Run approvals and policy checks
- Track status and SLAs
- Hand off to sourcing or buying channels
Typical incumbent: Email and ticketing tools
LightSource: Out of scope
Category-specific systems · Stage 1: Define and intake
Services procurement and contingent workforce
Vendor management systems for contingent labor, statement-of-work management, services sourcing. Usually the largest single indirect category at a large enterprise, with its own vendor class: VMS for contingent workers, SOW management for project services, and services sourcing platforms.
- Requisition and onboard contingent workers
- Manage SOWs, milestones and rate cards
- Track time, spend and compliance
Typical incumbent: Staffing agencies and email
LightSource: Out of scope
Workflow · Stage 2: Discover suppliers
GPOs and buying consortia
Group purchasing organizations and consortia with pre-negotiated indirect agreements. Spencer's call: GPOs are more often indirect. They aggregate demand across members to pre-negotiate office, MRO, facilities, travel and healthcare supply categories. Parts marketplaces (B-L3) are the direct analog and sit in Both.
- Join and manage GPO agreements
- Route eligible categories to GPO contracts
- Compare GPO pricing to sourced pricing
Typical incumbent: Direct negotiation
LightSource: Out of scope
Category-specific systems · Stage 2: Discover suppliers
SaaS and software spend management
Discovery of software in use, license optimization, renewal negotiation, shadow IT. Software has become one of the fastest-growing indirect categories and has its own tooling for discovering what is in use, right-sizing seats, and negotiating renewals.
- Discover applications and spend
- Optimize licenses and seats
- Benchmark and negotiate renewals
- Govern shadow IT
Typical incumbent: Expense reports and IT spreadsheets
LightSource: Out of scope
Workflow · Stage 3: Source
Indirect RFx and e-auctions
Structured RFI, RFP, RFQ events and reverse auctions; three bids and a buy. Indirect sourcing runs on structured events with weighted scoring and, for tactical categories, reverse auctions. The manifesto's Wave 2 covers the e-auction boom and its limits: first-round savings, then suppliers building in risk premiums or refusing to play.
- Run RFI, RFP, RFQ with weighted scoring
- Run reverse auctions in tactical categories
- Three bids and a buy for mid-size purchases
- Award and hand off to contract
Typical incumbent: Email and Excel
LightSource: Out of scope
Category-specific systems · Stage 3: Source
T&E, cards and expense
Travel booking, corporate and virtual cards, expense reporting and policy. The category procurement software was born in: travel and expense. Booking tools, corporate and virtual cards, expense capture and policy enforcement, now converging with spend management platforms.
- Book travel within policy
- Issue and control cards
- Capture and approve expenses
- Reconcile to GL
Typical incumbent: Receipts and spreadsheets
LightSource: Out of scope
Workflow · Stage 4: Contract and award
Tail-spend management
The long tail of small, infrequent purchases: spot buys, tactical sourcing desks, managed tail programs. The countless small-dollar purchases scattered across a company: the one-off catering order, a few conference passes, office supplies on a card. Historically low visibility and low governance; the first place procurement software set up shop because chaos was easy to order.
- Route small purchases to spot-buy desks or automated quoting
- Consolidate tail suppliers
- Push tail into catalogs, cards or marketplaces
- Report tail spend and compliance
Typical incumbent: Credit cards and expense reports
LightSource: Out of scope
Category-specific systems · Stage 4: Contract and award
MRO
Maintenance, repair and operations supplies: storeroom management, integrated supply, CMMS-linked buying. Labeled plant-adjacent. MRO behaves like indirect (catalogs, punchouts, P2P) but lives in the factory, and manufacturers often expect a direct-materials vendor to at least have a position on it.
- Manage storerooms and min/max
- Run integrated supply programs
- Buy through catalogs and CMMS-generated requisitions
- Standardize and consolidate parts
Typical incumbent: Storeroom spreadsheets and distributor portals
LightSource: Out of scope
Category-specific systems · Stage 5: Industrialize
Strategic indirect
Indirect categories large enough to behave like direct: logistics lanes, packaging, facilities across many sites. The manifesto's argument: $200M in global logistics, $50M in packaging or facilities across hundreds of sites deserve the spec-to-scale discipline. The 'spec' is a book of business (lanes, SLAs, volumes) or a dieline and substrate; supplier input, cost drivers and award models can be structured the same way.
- Define the book of business or spec
- Run structured bids with cost drivers
- Model award scenarios
- Manage rate compliance at scale
Typical incumbent: Category-specific bid sheets
LightSource: Core
Workflow · Stage 7: Scale and sustain
Renewals and vendor consolidation
Indirect's version of scale and sustain: renewal calendars, auto-renew prevention, consolidation, contract compliance. Indirect does not industrialize or ramp, but it does have sustain work. Renewal management (especially SaaS), vendor consolidation across duplicates, and compliance to contracted rates are where intake and SaaS-management tools compete.
- Maintain renewal calendars and lead times
- Prevent auto-renewals and renegotiate
- Consolidate duplicate vendors
- Audit compliance to contracted rates
Typical incumbent: Calendar reminders
LightSource: Out of scope
Workflow · Stage 8: Order and pay
Requisition to PO, catalogs and punchouts
Guided buying, requisition and approval, hosted catalogs and punchouts, PO issuance. The front end of P2P. Requesters buy from hosted catalogs or punch out to supplier sites (cXML, OCI), requisitions route for approval, and a PO is issued. Catalogs live here rather than at Contract because they are the channel P2P runs on, even though they are configured when contracts are signed.
- Maintain catalogs and punchout connections
- Guide requesters to preferred channels
- Route requisitions for approval
- Issue POs and confirm receipt
Typical incumbent: ERP requisitioning
LightSource: Out of scope