Category Archives: CSR

COUPA: Centralized Optimization Underlies Procurement Adoption …

… or at least that’s what it SHOULD stand for. Why? Well, besides the fact that optimization is only one of two advanced sourcing & procurement technologies that have proven to deliver year-over-year cost avoidance (“savings”) of 10% or more (which becomes critical in an inflationary economy because while there are no more savings, negating the need for a 10% increase still allows your organization to maintain costs and outperform your competitors), it’s the only technology that can meet today’s sourcing needs!

COVID finally proved what the doctor and a select few other leading analysts and visionaries have been telling you for over a decade — that your supply chain was overextended and fraught with unnecessary risk and cost (and carbon), and that you needed to start near-sourcing/home-sourcing as soon as possible in order to mitigate risk. Plus, it’s also extremely difficult to comply with human rights acts (which mandate no forced or slave labour in the supply chain), such as the UK Modern Slavery Act, California Supply Chains Act, and the German Supply Chain Act if your supply chain is spread globally and has too many (unnecessary) tiers. (And, to top it off, now you have to track and manage your scope 1, 2, and 3 carbon in a supply chain you can barely manage.)

And, guess what, you can’t solve these problems just with:

  • supplier onboarding tools — you can’t just say “no China suppliers” when you’ve never used suppliers outside of China, the suppliers you have vetted can’t be counted on to deliver 100% of the inventory you need, or they are all clustered in the same province/state in one country
  • third party risk management — and just eliminate any supplier which has a risk score above a threshold, because sometimes that will eliminate all, or all but one, supplier
  • third party carbon calculators — because they are usually based on third party carbon emission data provided by research institutions that simply produce averages for a region / category of products (and might over estimate or under estimate the carbon produced by the entire supply base)
  • or even all three … because you will have to migrate out of China slowly, accept some risk, and work on reducing carbon over time

You can only solve these problems if you can balance all forms of risk vs cost vs carbon. And there’s only one tool that can do this. Strategic Sourcing Decision Optimization (SSDO), and when it comes to this, Coupa has the most powerful platform. Built on TESS 6 — Trade Extensions Strategic Sourcing — that Coupa acquired in 2017, the Coupa Sourcing Optimization (CSO) platform is one of the few platforms in the world that can do this. Plus, it can be pre-configured out-of-the-box for your sourcing professionals with all of the required capabilities and data already integrated*. And it may be alone from this perspective (as the other leading optimization solutions are either integrated with smaller platforms or platforms with less partners). (*The purchase of additional services from Coupa or Partners may be required.)

So why is it one of the few platforms that can do this? We’ll get to that, but first we have to cover what the platform does, and more specifically, what’s new since our last major coverage in 2016 on SI (and in 2018 and 2019 on Spend Matters, where the doctor was part of the entire SM Analyst team that created the 3-part in-depth Coupa review, but, as previously noted, the site migration dropped co-authors for many articles).

As per previous articles over the past fifteen years, you already know that:

So now all we have to focus on are the recent improvements around:

  • “smart scenarios” that can be templated and cross-linked from integrated scenario-aware help-guides
  • “Plain English” constraint creation (that allows average buyers & executives to create advanced scenarios)
  • fact-sheet auto-generation from spreadsheets, API calls, and other third-party data sources;
    including data identification, formula derivation and auto-validation pre-import
  • bid insights
  • risk-aware functionality

“Smart Events”

Optimization events can be created from event templates that can themselves be created from completed events. A template can be populated with as little, or as much as the user wants … all the way from simply defining an RFX Survey, factsheet, and a baseline scenario to a complete copy of the event with “last bid” pricing and definitions of every single scenario created by the buyer. Also, templates can be edited at any time and can define specific baseline pricing, last price paid by procurement, last price in a pre-defined fact-sheet that can sit above the event, and so on. Fixed supplier lists, all qualified suppliers that supply a product, all qualified suppliers in an area, no suppliers (and the user pulls from recommended) and so on. In addition to predefining a suite of scenarios that can be run once all the data is populated, the buyer can also define a suite of default reports to be run, and even emailed out, upon scenario completion. This is in addition to workflow automation that can step the buyer through the RFX, auto-respond to suppliers when responses are incomplete or not acceptable, spreadsheets or documents uploaded with hacked/cracked security, and so on. The Coupa philosophy is that optimization-backed events should be as easy as any other event in the system, and the system can be configured so they literally are.

Also, as indicated above, the help guides are smart. When you select a help article on how to do something, it takes you to the right place on the right screen while keeping you in the event. Some products have help guides that are pretty dumb and just take you to the main screen, not to the right field on the right sub-screen, if they even link into the product at all!

“Plain English” Constraint Creation

Even though the vast majority of constraints, mathematically, fall into three/four primary categories — capacity/allocation, risk mitigation, and qualitative — that isn’t obvious to the average buyer without an optimization, analytical, or mathematical background. So Coupa has spent a lot of time working with buyers asking them what they want, listening to their answers and the terminology they use, and created over 100 “plain english” constraint templates that break down into 10 primary categories (allocation, costs, discount, incumbent, numeric limitations, post-processing, redefinition, reject, scenario reference, and collection sheets) as well as a subset of most commonly used constraints gathered into a a “common constraints” collection. For example, the Allocation Category allows for definition “by selection sheet”, “volume”, “alternative cost”, “bid priority”, “fixed divisions”, “favoured/penalized bids”, “incumbent allocations maintained”, etc. Then, when a buyer selects a constraint type, such as “divide allocations”, it will be asked to define the method (%, fixed amount), the division by (supplier, group, geography), and any other conditions (low risk suppliers if by geography). The definition forms are also smart and respond to each, sequential, choice appropriately.

Fantastic Fact Sheets

Fact Sheets can be auto-generated from uploaded spreadsheets (as their platform will automatically detect the data elements (columns), types (text, math, fixed response set, calculation), mappings to internal system / RFX elements), and records — as well as detecting when rows / values are invalid and allow the user to determine what to do when invalid rows/values are detected. Also, if the match is not high certainty, the fact-sheet processor will indicate the user needs to manually define and the user can, of course, override all of the default mappings — and even choose to load only part of the data. These spreadsheets can live in an event or live above the event and be used by multiple events (so that company defined currency conversions, freight quotes for the month, standard warehouse costs, etc. can be used across events).

But even better, Fact Sheets can be configured to automatically pull data in from other modules in the Coupa suite and from APIs the customer has access to, which will pull in up to date information every time they are instantiated.

Bid Insights

Coupa is a big company with a lot of customers and a lot of data. A LOT of data! Not only in terms of prices its customers are paying in their procurement of products and services, but in terms of what suppliers are bidding. This provides huge insight into current marketing pricing in commonly sourced categories, including, and especially, Freight! Starting with freight, Coupa is rolling out a new bid pricing insights for freight where a user can select the source, the destination, the type (frozen/wet/dry/etc), and size (e.g. for ocean freight, the source and destination country, which defaults to container, and the container size/type combo and get the quote range over the past month/quarter/year).

Risk Aware Functionality

The Coupa approach to risk is that you should be risk-aware (to the extent the platform can make you risk aware) with every step you take, so risk data is available across the platform — and all of that risk data can be integrated into an optimization project and scenarios to reject, limit, or balance any risk of interest in the award recommendations.

And when you combine the new capabilities for

  • “smart” events
  • API-enabled fact sheets
  • risk-aware functionality

that’s how Coupa is the first platform that literally can, with some configuration and API integration, allow you to balance third party risk, carbon, and cost simultaneously in your sourcing events — which is where you HAVE to mange risk, carbon, and cost if you want to have any impact at all on your indirect risk, carbon, and cost.

It’s not just 80% of cost that is locked in during design, it’s 80% of risk and carbon as well! And in indirect, you can’t do much about that. You can only do something about the next 20% of cost, risk and carbon that is locked in when you cut the contract. (And then, if you’re sourcing direct, before you finalize a design, you can run some optimization scenarios across design alternatives to gauge relative cost, carbon, and risk, and then select the best design for future sourcing.) So by allowing you to bring in all of the relevant data, you can finally get a grip on the risk and carbon associated with a potential award and balance appropriately.

In other words, this is the year for Optimization to take center stage in Coupa, and power the entire Source-to-Contract process. No other solution can balance these competing objectives. Thus, after 25 years, the time for sourcing optimization, which is still the best kept secret (and most powerful technology in S2P), has finally come! (And, it just might be the reason that more users in an organization adopt Coupa.)

Visibility into Vizibl, The Collaboration Platform for True Supplier Innovation

It’s been a decade in the making, especially since it took years for Vizibl (founded in 2013) to find it’s focus, but what was once yet another SRM (Supplier Relationship Management) platform is now a truly leading Supplier Collaboration, Innovation, and Transformation platform.

Starting out with the vision of a better SRM, it took a while for Vizibl to find its niche and double down on it. In fact, it took years of working with clients with highly specific (customization/process) needs for them to realize that they were good at developing for and supporting specific, sometimes, complex processes and years more for them to sit back and identify the commonality, design standard project and service layers, and bring them to market. But they did, and they have, and we will discuss the first major project/service layer they are bringing to market later in this article.

The Vizibl platform has seven main components:

  • Supplier Information Management Foundation
  • Supplier Collaboration Workspace
  • Supplier Innovation Hub
  • Supplier Relationship Management Module
  • Dashboards, Analytics, and Reporting
  • Program Layer: (Foundation for) Specific Development/Improvement Programs that Cross-Cut the Entire Platform
    (built on a virtual platform integration layer)
  • Supplier Sustainability Management

1. The Supplier Information Management Foundation is what you would expect from a leading SRM platform — it can track all of the core data and meta data you would expect on a supplier and can be extended as needed to track all of the data you require across all areas of supplier information, products, risks, compliance requirements, performance requirements, contracts, projects, initiatives, and activities you wish to manage.

Supplier Onboarding is straight forward as it’s quick and simple to create a new company record to begin the process, with only minimal data needed. New suppliers can be onboarded as standalone, children of an existing company, or related entities. The platform can maintain complex supplier tree relationships and the tree can be visualized along with a roll up of relevant metrics, project counts, and appropriate relationship data.

2. The Supplier Collaboration workspace is where the buyer can communicate with the supplier, spin off action plans and initiatives, store ideas and plans, pull in and push out data as needed, and put thought into action.

3. The Supplier Innovation Hub is where the core of the magic happens. This is where challenges can be issued, goals set, and projects planned. It’s where projects are defined to increase supplier performance, improve product designs or manufacturing, increase sustainability, or decrease CO2/GHG emissions.

Projects have activities (or tasks), roadmaps that link them together, objectives (outcomes), value tracking metrics, integrated communications, and teams.

4. The Supplier Relationship Management Module is the glue that holds it all together. In addition to integrating all of the pieces, it also supports the creation of basic supplier action/account plans, the definition of strategic objectives, and integrated overview dashboards. It also allows for the definition of supplier teams (that it calls circles) that represent the different teams the organization will be working with, the management teams, and boards of relevance.

5. The Dashboards, Analytics, and Reporting capability is used to summarize and display the various types of data, metrics, and indicators tracked by the platform. These dashboards cannot only roll up metrics across the platform, but can also roll up metrics in, and across, projects by stages, as well as break them down by regions or supplier trees.

6. The Supplier Sustainability Management module is one of their latest modules focussed on tracking and managing an organization’s sustainability initiatives. It can track all of the emissions for each supplier, those that are reporting, the associated spend, and any other GHG data of relevance to the organization. It can also track all of the data associated with ESG surveys requested by the organization, which can be custom created and as broad or deep as required.

7A. The Program Layer is the toolkit that they use to build custom cross-platform program management capability that allows an organization to tackle new, and possibly exciting, initiatives that can transform their operations, product, and / or supply chains. Programs consist of suppliers, goals and targets, indicator metrics, associated data and reporting, summary dashboards, and scores.

7B: Decarbonization as a service is the first offering from Vizibl built on the program layer that integrates all of the platform capabilities to track scope 3 carbon across the supply chain by extending the sustainability management module to focus on the import and calculation of carbon emissions by supplier over time as well as best practices and learnings that can be shared with a supplier to help them reduce their emissions through leaner production, cleaner energy sources, new production processes, etc.

When it comes to the administration of the Vizibl platform, an administrator can configure, more-or-less, everything. First of all, they can configure the organizational tree as needed to match their organizational structure and include subsidiaries and use a variable number of levels for each organizational branch. So, the organization can have the global holding company; American, European and Asian holding company subsidiaries; individual (holding) companies for each country it operates in; and, if necessary, breakdown into individual locations or divisions if needed for management purposes. You can have five levels in Asia, four levels in Europe, and three levels in the Americas if that’s what’s necessary to exactly match the organizational structure. And of course, each company node in the organizational tree can have its unique settings, inheriting from the node above anything that does not need to be changed.

Similarly, because a company is a company in the system, full supplier organizational structures can also be modelled according to their company structure and modelled down to the individual (factory) location. This is particularly important since a diversity initiative may be global but improvement efforts might be restricted to one factory producing one particularly unique component for one product line.

Then, the organization can configure, for that company:

Account Plans
for each supplier, the company can define the strategic objectives, guiding principles, and target behaviours; these can be defined from scratch or added from a common library
Data Imports
to define regular / repeating file-based imports
Initiatives & Opportunities
the overarching initiatives and/or opportunities being sought, the plans and project stages, questionnaires, suppliers, etc.; the form builder is section based, supports all standard HTML objects, and all of the (numeric) data collected can be subjected to metrics and rules (to map to binary/integer) which can be defined on multiple choices
Performance
allows a user to define the performance metrics / KPIs, organized into categories, that are to be tracked, define what levels they are tracked at / rolled up to, and even customize the metric calculation in individual nodes
Permissions
define the user permissions (by role)
Projects
centralizes the organizational projects
Relationships
define the supplier relationships by mapping the supplier to the specific nodes in the organizational structure where the relationship exists as well as the segment (division/category) they are servicing
Reports
define and customize the reports
Statuses
define the project states for initiatives and opportunities, rejections, suppliers, etc. as needed to match the organizational process; can start with defaults
Surveys
encapsulates all of the surveys that can be reused across initiatives and opportunities
Tags
custom tags for tagging initiatives, opportunities, suppliers, etc. for quick search & filter
User Management
define the organizational users
Value Trackers
defines, and centralizes, the metrics that will be used in the innovations, opportunities, and performance tracking

In summary, the administration is very powerful … in fact, it’s one of the few solutions where the organizational structure for all companies (buying and supplying organizations) is extensively customizable, where initiatives can be tailored to the subset of relevant relationships and locations, where the inheritance for an initiative can be customized, and where you fully customize and localize all supplier interactions to just the organizations and teams that you need.

This is the first aspect of Vizibl that truly makes it stand out. The degree of customization of initiatives only to the relationships of relevance, teams of relevance, with metrics of relevance is far beyond what most of the traditional “Relationship” solutions actually offer.

The second aspect of Vizibl that makes it stand out is the new program layer they’ve built to support the creation of programs that tie together all of the relevant SXM capabilities needed to completely manage an organizational initiative across the supply base. In many platforms, the organization needs to manage the surveys, performance metrics, reports, projects, collaborations separately across the different modules of the platform that were built up over time.

The third aspect of Vizibl that makes it stand out is the new Decarbonation-as-a-Service offering built on this program layer that integrates all of the platform capabilities to track carbon down to scope 3 across the supply chain, provide insight into best practices and learnings to reduce emissions, allow for the creation of projects and initiatives to tackle the opportunities, track improvement over time, and essentially turn measurement into action into improvement. Carbon calculators are a dime-a-dozen from everyone and their dog, and can be built in 15 minutes in any good modern (spend) analytics platform, but few platforms do real monitoring, few platforms allow for the creation of supplier development projects, and fewer still provide real insight into what can be done to get results.

In other words, if you really care about the “R” in Supplier Relationship Management, and truly want to manage that relationship for true supplier development and improvement, you should definitely make sure Vizibl is on your short-list.

Need Some Procurement Principles? Balfour Beatty Published a Great Starting Point.

Google sometimes digs up the strangest things when you ask for Procurement News. One thing it recently dug up was the Balfour Beatty “Procurement Strategy” page, which wasn’t so much a strategy, but a set of principles that every organization should subscribe to. (Regardless of what industry they are in.)

So, if you’re wondering what principles you should adopt before you set your Procurement organization strategy, you can start with these seven principles:

  1. Become the customer of choice
  2. Ensure that we have the right, skilled people for the job, a strong talent pipeline and that we provide an environment where they excel
  3. Put in place processes that work, are compliant and transparent, making the best use of technology to deliver for our business and for our supply chain partners
  4. Mitigate and manage risk through early and closer integration with our supply chain partners
  5. Work together to identify market risks and forecasts
  6. Keep safety and wellbeing at the forefront of all that we do
  7. Prompt Payment for Suppliers

The great thing is they will lead to a great strategy as:

  • it covers talent, technology, and process transformation
  • it places importance on the supplier, the relationship, and the supplier sustainability
  • it covers CSR (corporate social responsibility)
  • it covers risk

In fact, the only principle that is missing is Sustainability, so if you add this eight principle

  1. Embrace sustainability in all that we do

We’re pretty sure that if you were to start here, you won’t go too far astray in the creation of your Procurement Strategy.

Will a Circular Economy Work with Leakage?

Sustainability is one of the big buzzwords, and the biggest verbal pushes, in today’s Procurement. (In practicality, most organizations won’t put their money where their mouth is and if the more sustainable solution is more than a point or two more cost-wise, environmentally damaging sweat-shop production, here we come!) We need to get there, because only an idiot would deny global warming (the last 13 years have seen 10 of the hottest year on record), and no one can deny the correlation between carbon emission, atmospheric carbon increase, and global warming. (You can argue just how much is due to carbon emission and how much due to other factors, many of which are indirectly caused by warming, but not that carbon is a problem.) Thus, even though we don’t know how much carbon reduction will help, we know it will, so we need to get there.

One big way to reduce carbon is to reduce production, which can done by reducing waste, which can be done through more refurbishment, repair, re-use, recycling, and reclamation — which are all part of the circular economy. Which is where we really need to get to (because waste is a problem — in addition to overflowing landfills that can pollute nearby water suppliers and make nearby land unfarmable, and even uninhabitable, think of the great pacific garbage patch and the containers of e-waste being sent to India, which has been a problem for well over a decade, see this 2010 article on the Times of India, and you start to get a grip on the magnitude of the problem).

But how efficient does the circular economy have to be to be effective? Theoretically, anything more that we do is one step better than what we are doing today, but, given that most products weren’t designed for recycle and reclamation, technologies for recycling and reclamation are immature and possibly carbon/generating themselves (especially if the answer is extract what we can, bury or burn the rest), and that there are breaks in the chain, is this leading to new waste that could possibly offset (or exceed) the expected (carbon) savings?

It’s a question Karolina Safarzynska, Lorenzo Di Domenico, and Marco Raberto recently tackled in an open-access paper on how the leakage effect may undermine the circular economy efforts available on nature.com. In the paper, the authors examine the impact of the circular economy on global resource extraction by way of an input-output analysis using an agent-based model of the capital sector. Through a detailed analysis they find that an appropriately structured circular economy economy can significantly reduce the extraction of iron, aluminum, and nonferrous metals if
implemented globally but the leakage effect may also cause some metal-intensive industries to relocate outside the EU, offsetting the circular economy efforts because an overlooked requirement for the circular economy is not just a reduction of waste, but a reduction of transport as transportation (air, rail, truck, and ship) contributes a significant amount of global carbon. In fact, if you go to Our World in Data, in the United States, the transportation sector accounts, like the energy (electricity and heat) sector, for approximately 30% of transportation emissions. The statistics right now are similar for the EU (24% for transportation and 28% for energy). So, if all of a sudden products need to be shipped halfway around the world to be recycled and reclaimed and the core materials shipped back, transportation-based emissions would increase significantly and possibly even overtake the extraction and raw material processing emissions!

In all fairness, we should note that the paper is pretty technical and metric heavy, and this is a bit of a simplification, but it’s the core idea we need to be aware of. It’s not an improvement if the carbon you take out of one segment is exceeded by changes in another. Just like we need to home/near-source for anything we can grow/mine/make at/near home, we also need to home/near reduce/reuse/refurbish/remanufacture/recycle whatever we can. It might be that the rare earths can only be mined in certain areas, but that doesn’t mean they have to be reclaimed and re-used there.

How Do You Sustain Sustainability When True Value is Long Term …

… and the brunt of the cost is short term?

AlixPartners recently published an article over on Mondaq on how The Fourth Dimension In Strategic Sourcing, Sustainability, Can Drive Value which caught our attention because Sustainability can drive value, but most organizations under cost pressures, which are rampant in our current inflationary economy, don’t choose the sustainable option as it’s typically a higher expense in the short-term.

Moreover, the big value is investing in suppliers that invest in new technologies that will be more sustainable in the long run. However, due to the cost of implementing these new technologies, the up-front costs are higher as the suppliers have to stay in business until the new technologies start to deliver returns. For example, the following are major improvements to sustainability:

  • suppliers utilizing, investing in, or building their own renewable energy grids (solar, wind) to avoid using the energy produced by the local coal/oil burning plants
  • suppliers re-designing production lines and methods to minimize waste (through cutting of metal, processing of food, etc.) and to ensure any waste they create can be used as an input to another production line (melting and re-fab of metal scraps, animal feed, etc.)
  • suppliers investing in their own water purification technology to re-use water in the manufacturing process
  • suppliers investing in product redesign research to minimize use of scarce rare earth minerals/metals and to increase use of reclaimed minerals/metals
  • suppliers investing in reclamation technology to maximize recycling of products created with metals/minerals

… and the following, highlighted in the article, are minor improvements …

  • sustainable supplier selection as everyone is going to try and secure the most sustainable supplier of the lowest cost suppliers, leaving less sustainable suppliers or more sustainable suppliers at a higher cost that the CFO/CEO will not let Procurement pay for the majority of organizations (the small, sustainable, suppliers cannot massively scale overnight)
  • eco-friendly packaging and waste reduction as this is not new and many organizations are already be doing this to the extent eco-friendly packaging is available
  • energy-efficient products and services as this is not new either and as companies replace end-of-life products, they have been choosing more energy efficient products for a while now with the increase in energy prices over the last five to ten years, and the truth is that this is usually a small dent on their total energy footprint
  • carbon footprint reduction as that is the goal, not a specific action that can reduce carbon footprint, and. most importantly, significant reduction requires significant investment (reducing travel and forcing the CEO to give up the private jet and fly first class only goes so far)
  • collaboration and reporting because while you need to understand your footprint, and sometimes shaming goes further than incentivizeation, reporting doesn’t actually increase sustainability unless action is taken …

IF PE firms, with billion dollar funds, won’t actually invest in supply chain (which includes sustainability) improvements, because you typically don’t realize the bulk of the value until you (significantly) pass the five (5) year mark, how can you expect short-term thinking CEOs and CFOs, trying to impress Wall Street or attract PE funding, to actually put their money with their big mouths are and invest in true sustainability?

If you have answers, we’d love to hear them — comment on the LinkedIn post.