The industry has been abuzz regarding ORO Labs’ acquisition of ProcureTech 100 this past week. The early results from a poll asking, “As a procurement professional, how interested are you in the ORO Labs purchase of ProcureTech 100 news?” indicate that 46% of respondents are “Not Interested At All.” In comparison, only 26% are “Somewhat Interested.”
Why do you think 72% of all respondents to this point don’t seem to care as much as the industry media?
The answer is 80%.
The generational ProcureTech initiative failure rate is as high as 80% – some put it as high as 88% in the AI era. Based on this statistic, the only people who really seem to care about yet another “industry M&A Blockbuster” are those who benefit from it directly – owners and shareholders.
Let me put an all-encompassing spin on M&A news in our industry: Despite all the ProcureTech available since the 1990s, only 20% of clients have been successful. Think of it like a cookbook for a lousy chef – the same poor ingredients are mixed differently with a few “new” ingredients and published as a new cookbook – in the case of ProcureTech today, we will call it the Agentic AI recipe book.
What do you think the results are likely to be?
How about this: you are considering going to a restaurant where there is only a 20% chance you will be served a good meal. Would you go to that restaurant?
This is the kind of deep dive and focus we should be taking with all ProcureTech M&A news versus the superfluous hyperbole of grand visions and financial “scorecarding” which has nothing to do with practitioner initiative success.
After all, with such a high generational ProcureTech initiative failure rate, who cares about deal dollar size and the strategic directions and aspirations of the combined new enterprise?
In today’s post, rather than focusing on solution features, functions, and benefits or elaborate and somewhat prepared hyperbole FOMO terminology and graphics, I will focus on the first step to establishing your parameters of ProcureTech initiative success.
Based on this pre-sales case study, you can establish set parameters, which you can then take to different ProcureTech solution providers of your choice and ask them to provide an Agent-based development and implementation model outline of how they will enable you to achieve these measurable targets.
Consider this Agent-based model in the context of Dr. Robert Kaplan and Dr. David Norton’s highly successful Balanced Scorecard model but for ProcureTech initiative success.
The results of this ProcureTech balanced scorecard become the basis for the post-implementation case study.
Achieving Targeted Indirect Spending Savings in Cosmetics Manufacturing
MODEL #1
This report estimates the percentage of savings a cosmetics manufacturing company can expect to achieve across various indirect spending categories over a 12-month period. The company has established an ambitious goal of reducing indirect expenditures by $75 million to enhance operational efficiency and improve profit margins in an increasingly competitive market. Indirect spending typically represents 15-27% of revenue in manufacturing companies, making it a significant area for cost optimization. The analysis covers key indirect spending categories including MRO, office supplies, facilities management, IT services, professional services, utilities, logistics, corporate travel, HR benefits, temporary labor, and outsourcing.
Below is the analysis and estimated breakdown.
Assumptions and Methodology
Cosmetics Industry Context: Indirect spend for a cosmetics manufacturer includes non-production costs like MRO (equipment upkeep), IT (systems), and logistics (distribution), distinct from direct costs (e.g., ingredients). The company likely has multiple facilities, a global supply chain, and sustainability priorities (e.g., eco-friendly packaging).
Total Indirect Spend Estimate: Assuming annual revenue of ~$10-12 billion, indirect spend might be 15-25% of revenue (Deloitte benchmark). Using 20% of $11 billion, indirect spend is ~$2.2 billion. A $75 million savings target is ~3.4% of this, aligning with typical procurement savings (3-8% per McKinsey).
Category Distribution: Indirect spend allocation mirrors manufacturing norms, adjusted for cosmetics’ emphasis on production and distribution:
MRO: 15-20%
Office Supplies & Equipment: 5-8%
Facilities Management: 10-15%
IT & Telecom: 15-20%
Professional & Consulting: 10-15%
Utilities & Energy: 5-10%
Logistics & Transportation: 10-15%
Corporate Travel & Events: 5-10%
HR & Employee Benefits: 5-10%
Temp Labor & Outsourcing: 5-10%
Savings Potential: Varies by category—higher in discretionary areas (e.g., travel, consulting) and lower in fixed costs (e.g., utilities). Savings rates (e.g., 5-15%) are applied to ensure the total reaches $75 million.
Estimated Savings Breakdown
Here’s the percentage of the $75 million savings a cosmetics manufacturer could reasonably expect over 12 months in 2025:
MRO (Maintenance, Repair, and Operations): 20% ($15 million)
Spend Estimate: ~$440 million (20% of $2.2 billion), reflecting equipment maintenance needs (e.g., mixers, packaging lines).
Savings Potential: 5-10% via automation and strategic sourcing.
Reason: High spend and supplier diversity offer substantial savings, critical for production uptime.
Office Supplies and Equipment: 5% ($3.75 million)
Spend Estimate: ~$110 million (5% of indirect spend), for office needs across sites.
Savings Potential: 10-15% through bulk buys and digitization.
Reason: Small category with easy savings, though less impactful for manufacturing.
Facilities Management: 10% ($7.5 million)
Spend Estimate: ~$330 million (15% of indirect spend), for facility upkeep and services.
Savings Potential: 5-8% via contract optimization.
Reason: Moderate savings from standardizing services, limited by fixed costs.
IT & Telecommunications: 15% ($11.25 million)
Spend Estimate: ~$440 million (20% of indirect spend), for software, hardware, and telecom.
Savings Potential: 5-10% through cloud adoption and vendor consolidation.
Reason: High spend due to tech reliance (e.g., e-commerce) makes this a key savings area.
Professional and Consulting Services: 15% ($11.25 million)
Spend Estimate: ~$220 million (10% of indirect spend), for legal, marketing, and strategy consultants.
Savings Potential: 10-20% by reducing external reliance or negotiating rates.
Reason: Discretionary nature offers high savings, especially amid cost pressures.
Utilities and Energy: 5% ($3.75 million)
Spend Estimate: ~$110 million (5% of indirect spend), for power and water.
Savings Potential: 3-5% via energy efficiency (e.g., sustainability initiatives).
Reason: Fixed costs cap savings, but green goals provide modest gains.
Logistics & Transportation: 10% ($7.5 million)
Spend Estimate: ~$330 million (15% of indirect spend), for shipping supplies and goods.
Savings Potential: 5-10% through route optimization and carrier deals.
Reason: Significant spend due to global distribution, with moderate savings potential.
Corporate Travel and Events: 10% ($7.5 million)
Spend Estimate: ~$110 million (5% of indirect spend), for travel and marketing events.
Savings Potential: 15-25% by cutting non-essential travel and virtualizing events.
Reason: High savings from discretionary spend, reflecting post-COVID trends.
Human Resources & Employee Benefits: 5% ($3.75 million)
Spend Estimate: ~$110 million (5% of indirect spend), for benefits and training.
Savings Potential: 3-5% via process streamlining.
Reason: Limited savings due to fixed benefits, though automation helps slightly.
Temporary Labor & Outsourcing: 5% ($3.75 million)
Spend Estimate: ~$110 million (5% of indirect spend), for seasonal or project staff.
Savings Potential: 5-10% by optimizing contracts.
Reason: Moderate savings from rate negotiations, though usage may be modest.
Final Allocation
Category
Estimated Savings ($M)
Percentage of $75M
MRO
$15
20%
Office Supplies & Equipment
$3.75
5%
Facilities Management
$7.5
10%
IT & Telecommunications
$11.25
15%
Professional & Consulting
$11.25
15%
Utilities & Energy
$3.75
5%
Logistics & Transportation
$7.5
10%
Corporate Travel & Events
$7.5
10%
HR & Employee Benefits
$3.75
5%
Temp Labor & Outsourcing
$3.75
5%
Total
$75
100%
Rationale for Distribution
Highest Savings (MRO, IT, Professional Services): These represent 50% ($37.5 million) due to high spend and optimization potential via automation or discretionary cuts—core to cosmetics manufacturing efficiency.
Moderate Savings (Facilities, Logistics, Travel): Contribute 30% ($22.5 million) from significant spend but moderate savings rates, reflecting operational necessity and flexibility.
Lowest Savings (Office, Utilities, HR, Temp Labor): Account for 20% ($15 million) due to smaller spend or limited savings potential, typical for fixed or low-volume categories.
Cosmetics Nuance: Emphasis on MRO and logistics reflects production and distribution priorities, while sustainability boosts utilities’ modest contribution.
Conclusion
A cosmetics manufacturing company can reasonably expect to achieve its $75 million indirect spend savings target over 12 months in 2025 with this breakdown: 20% from MRO, 15% each from IT & Telecom and Professional Services, 10% each from Facilities Management, Logistics, and Travel, and 5% each from Office Supplies, Utilities, HR, and Temp Labor & Outsourcing. This reflects industry norms, the company’s likely operational profile, and achievable savings rates, providing a balanced and realistic allocation. Actual outcomes would depend on specific spend data and procurement execution, but this offers a solid estimate.
MODEL #2
Total Estimated Savings
Total Potential Savings: $7 million to $12.5 million.
To achieve a targeted $75 million in savings, the company would need to significantly optimize these categories beyond typical industry benchmarks or explore additional areas for cost reduction. This could involve more aggressive supplier consolidation, advanced digital procurement tools, or strategic renegotiation of contracts across multiple categories.
Key Strategies for Achieving Higher Savings
Digitalization and Automation: Implementing digital procurement tools can streamline processes and reduce administrative costs.
Supplier Consolidation: Reducing the number of suppliers can lead to better negotiating power and cost savings.
Strategic Sourcing: Conducting thorough spend analyses and strategic sourcing initiatives can uncover additional savings opportunities.
Contract Management: Ensuring that all contracts are up-to-date and optimized can prevent unnecessary expenses.
Overall, while these estimates provide a starting point, achieving significant savings will require a comprehensive approach that includes both tactical and strategic initiatives across all indirect spend categories.
MODEL #3
A cosmetic company’s targeted $75 million savings in indirect spend is achievable through the strategic initiatives outlined across the ten key categories. The most significant savings opportunities exist in MRO, Facilities Management, Utilities, and Logistics, which together represent approximately 45-60% of the total savings target. Categories with moderate savings potential, including Office Supplies, IT, Professional Services, Travel, HR, and Temporary Labor, will contribute the remaining 40-55% of the target.
Success will depend on disciplined implementation, clear accountability, and ongoing measurement of savings initiatives. By leveraging technology, optimizing processes, and strategically managing supplier relationships, a cosmetics company is well-positioned to achieve its ambitious cost reduction goals while maintaining operational excellence.
MODEL #4
Summary
High-impact categories (MRO, IT, Travel, Facilities, Logistics, Outsourcing): ~70% of total savings.
Lower-impact categories (Office Supplies, HR, Consulting): ~30% of total savings.
This report provides a detailed and comparative analysis using Jon Hansen’s 1998 to 2025 Solution Assessment Tool, the Relational Acquisition Model (RAM).
The focus is on the evolution of AI models in terms of their AI-driven, agent-based approaches in MRO (and Indirect) procurement and their relevance in today’s advanced ProcureTech landscape.
As organizations increasingly seek intelligent, adaptive procurement solutions in an era of digital transformation, understanding the progression of the RAM model framework offers valuable insights into the current and future direction of procurement technology and its likelihood of success in delivering the anticipated outcomes.
The RAM Solution Assessment Tool charts the transition from early AI implementation to sophisticated generative AI integration. The 2025 version of the assessment model represents a significant advancement in procurement methodology that continues to shape industry standards.
Procurement Insights
What Is A Pre AND Post-Implementation Case Study: Here Is One For the Cosmetics Industry
Posted on March 23, 2025
0
The industry has been abuzz regarding ORO Labs’ acquisition of ProcureTech 100 this past week. The early results from a poll asking, “As a procurement professional, how interested are you in the ORO Labs purchase of ProcureTech 100 news?” indicate that 46% of respondents are “Not Interested At All.” In comparison, only 26% are “Somewhat Interested.”
Why do you think 72% of all respondents to this point don’t seem to care as much as the industry media?
The answer is 80%.
The generational ProcureTech initiative failure rate is as high as 80% – some put it as high as 88% in the AI era. Based on this statistic, the only people who really seem to care about yet another “industry M&A Blockbuster” are those who benefit from it directly – owners and shareholders.
Let me put an all-encompassing spin on M&A news in our industry: Despite all the ProcureTech available since the 1990s, only 20% of clients have been successful. Think of it like a cookbook for a lousy chef – the same poor ingredients are mixed differently with a few “new” ingredients and published as a new cookbook – in the case of ProcureTech today, we will call it the Agentic AI recipe book.
What do you think the results are likely to be?
How about this: you are considering going to a restaurant where there is only a 20% chance you will be served a good meal. Would you go to that restaurant?
A More “Balanced” Approach
David Loseby MCIOB Chtr’d FAPM FCMI FCIPS Chtr’d FRSA MIoD FICW, great additions to the list!
This is the kind of deep dive and focus we should be taking with all ProcureTech M&A news versus the superfluous hyperbole of grand visions and financial “scorecarding” which has nothing to do with practitioner initiative success.
After all, with such a high generational ProcureTech initiative failure rate, who cares about deal dollar size and the strategic directions and aspirations of the combined new enterprise?
In today’s post, rather than focusing on solution features, functions, and benefits or elaborate and somewhat prepared hyperbole FOMO terminology and graphics, I will focus on the first step to establishing your parameters of ProcureTech initiative success.
Based on this pre-sales case study, you can establish set parameters, which you can then take to different ProcureTech solution providers of your choice and ask them to provide an Agent-based development and implementation model outline of how they will enable you to achieve these measurable targets.
Consider this Agent-based model in the context of Dr. Robert Kaplan and Dr. David Norton’s highly successful Balanced Scorecard model but for ProcureTech initiative success.
The results of this ProcureTech balanced scorecard become the basis for the post-implementation case study.
Achieving Targeted Indirect Spending Savings in Cosmetics Manufacturing
MODEL #1
This report estimates the percentage of savings a cosmetics manufacturing company can expect to achieve across various indirect spending categories over a 12-month period. The company has established an ambitious goal of reducing indirect expenditures by $75 million to enhance operational efficiency and improve profit margins in an increasingly competitive market. Indirect spending typically represents 15-27% of revenue in manufacturing companies, making it a significant area for cost optimization. The analysis covers key indirect spending categories including MRO, office supplies, facilities management, IT services, professional services, utilities, logistics, corporate travel, HR benefits, temporary labor, and outsourcing.
Below is the analysis and estimated breakdown.
Assumptions and Methodology
Estimated Savings Breakdown
Here’s the percentage of the $75 million savings a cosmetics manufacturer could reasonably expect over 12 months in 2025:
Final Allocation
Rationale for Distribution
Conclusion
A cosmetics manufacturing company can reasonably expect to achieve its $75 million indirect spend savings target over 12 months in 2025 with this breakdown: 20% from MRO, 15% each from IT & Telecom and Professional Services, 10% each from Facilities Management, Logistics, and Travel, and 5% each from Office Supplies, Utilities, HR, and Temp Labor & Outsourcing. This reflects industry norms, the company’s likely operational profile, and achievable savings rates, providing a balanced and realistic allocation. Actual outcomes would depend on specific spend data and procurement execution, but this offers a solid estimate.
MODEL #2
Total Estimated Savings
To achieve a targeted $75 million in savings, the company would need to significantly optimize these categories beyond typical industry benchmarks or explore additional areas for cost reduction. This could involve more aggressive supplier consolidation, advanced digital procurement tools, or strategic renegotiation of contracts across multiple categories.
Key Strategies for Achieving Higher Savings
Overall, while these estimates provide a starting point, achieving significant savings will require a comprehensive approach that includes both tactical and strategic initiatives across all indirect spend categories.
MODEL #3
A cosmetic company’s targeted $75 million savings in indirect spend is achievable through the strategic initiatives outlined across the ten key categories. The most significant savings opportunities exist in MRO, Facilities Management, Utilities, and Logistics, which together represent approximately 45-60% of the total savings target. Categories with moderate savings potential, including Office Supplies, IT, Professional Services, Travel, HR, and Temporary Labor, will contribute the remaining 40-55% of the target.
Success will depend on disciplined implementation, clear accountability, and ongoing measurement of savings initiatives. By leveraging technology, optimizing processes, and strategically managing supplier relationships, a cosmetics company is well-positioned to achieve its ambitious cost reduction goals while maintaining operational excellence.
MODEL #4
Summary
The RAM Assessment Model
This report provides a detailed and comparative analysis using Jon Hansen’s 1998 to 2025 Solution Assessment Tool, the Relational Acquisition Model (RAM).
The focus is on the evolution of AI models in terms of their AI-driven, agent-based approaches in MRO (and Indirect) procurement and their relevance in today’s advanced ProcureTech landscape.
As organizations increasingly seek intelligent, adaptive procurement solutions in an era of digital transformation, understanding the progression of the RAM model framework offers valuable insights into the current and future direction of procurement technology and its likelihood of success in delivering the anticipated outcomes.
The RAM Solution Assessment Tool charts the transition from early AI implementation to sophisticated generative AI integration. The 2025 version of the assessment model represents a significant advancement in procurement methodology that continues to shape industry standards.
Author’s Procurement & Technology Background
Link 1 – https://procureinsights.com/procurement-technology-background/
Link 2 – https://procureinsights.com/seminars-and-conferences-with-jon-hansen/
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