Supply Management Technical Difficulty … Part IV.1

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master’s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. We’ll take it area by area in this series. In our first three posts we tackled basic Sourcing, basic Procurement, and Supplier Management and in this post we’re deep diving into Spend Analytics.

In our first three posts, we focussed just on technical challenges, but in this post, in addition to technical challenges, we’re also going to focus on technical stumpers (which shouldn’t be challenges, but for many organizations are) and technical by-gones (which were challenges in days gone by, but are NOT anymore).

Technical By-Gone: Formula-Based Derived Dimensions

In the early days, there weren’t many mathematical libraries, and building a large library, making it efficient, and integrating it with an analytics tool to support derived dimensions and real time reporting was quite a challenge, and typically required a lot of work, and a lot of code optimization that often required a lot of experimentation. But now there are lots of libraries, lots of optimized algorithms, and integration is pretty-straight forward.

Technical By-Gone: Report Builder

This is just a matter of exposing the schema, selecting the dimensions and facts of interest, and feeding it into a report object — which can be built using dozens (and dozens) of standard libraries. And if that’s too hard, there are dozens of applications that can be licensed and integrated that already do all the heavy lifting. In fact, many of your big name S2P suites now offering “analytics” are doing just this.

Technical Stumper: Multi-Schema Support

When you get right down to it, a schema is just a different indexing of data, which is organized into records. This means that all you need to do to support a schema is add an index to a record. This also means that all you need to do to support multiple schemas is to add multiple indexes to a record. This means that by normalizing a database schema into entity tables, relationship tables, and other discrete entities, it’s actually easy to support multiple categorizations for spend analysis including UNSPSC, H(T)S codes, a modified best-practice service provider schema for successful spend analysis, and any other schema needed for organizational reporting.

This says that all you need to support another schema is a set of schema tables that define the schema and a set of relationship tables that relate entities, such as transactions, to their appropriate place in the schema. One can even use general purpose tables that support hierarchies. The point is that there are lots of options and it is NOT hard! Maybe a lot of code (and code optimization), but it is NOT hard.

Technical Stumper: Predictive Analytics

Predictive Analytics sounds challenging, and creating good analytics algorithms takes time, but a number of these have been developed across the areas of analytics that works well, and the only thing they require is good data — since the strength of a good analytics application resides in its ability to collect, cleanse, enhance, and classify data, it shouldn’t be hard to just feed that into a predictive analytics library. But apparently it is. As few vendors offer even basic trend analysis, inventory analysis, etc. Why they don’t implement the best public domain / textbook libraries or implement third part libraries and solutions which have more powerful, and adaptive, algorithms that work better with more data for all of the common areas that prediction has been applied to for at least five years is beyond the doctor. While it’s a challenge to come up with newer, better, algorithms, it’s not hard to use what’s out there, and there is already a lot to start with.

Come back tomorrow as we continue our in-depth discussion of analytics.

Will Coupa Inspire Sourcing?

In our last post we asked whether or not Coupa inspired at Inspire, referencing our post from last week that asked if they would inspire and indicated where inspiration might come from, and determined that, for an average Procurement professional, Coupa most definitely inspired. But it’s Sourcing and Procurement. Did Coupa inspire Sourcing?

The short answer is no (but it’s not the full answer). Sourcing wasn’t really addressed beyond the statement that with the acquisition of Trade Extensions, most likely being (re)named Coupa Sourcing Optimization, Coupa now has the ability to do complex events, as complex as an organization requires. And while this is true, it’s not very inspiring to an organization that might not even know why they truly need advanced sourcing.

But then again, as of now, Coupa does not really understand advanced sourcing. Up until now, for a Coupa customer, sourcing has been very simple RFXs and basic auctions, age old sourcing technology that any strategic buyer would not find very interesting. But, fortunately for us, Coupa readily admits this. And, as of now, have not decided when, or even if, they are going to integrate Trade Extensions or Spend 360 into their core platform. (Their expectation is they will integrate what makes sense at the right time, but recognize that these were Power User Applications acquired primarily to support current, and future, power users.)

This is good news. The main reason every acquisition of a (strategic sourcing decision) optimization company has failed to date is, as pointed out in a previous post, because the acquirer believed they understood the technology, could integrate, and take it further (and immediately preceded to do just that). But, as we pointed out in a previous post, the ultimate procurement application is the exact antithesis of the ultimate sourcing application. For starters, one is no UI and the other is a UI so complex current desktop systems cannot support it yet.

Based on the history of acquisitions of advanced technology in our space, the only chance of success is to allow both of these acquisitions to more or less continue business as usual, independent of Coupa’s primary business, until such time as all parties collectively, and in conjunction with their collective user base, decide what integration makes sense, when, and how. (And, fortunately for us, this is exactly what Coupa plans to do.) Moreover, in most companies, the people that do the complex sourcing are not only a small user base but are not the people who do procurement and requisitioning. As a result, effective integration right now only consists of pushing transactional data to Spend360 for opportunity analysis, kicking off a sourcing event in Trade Extensions, and then pushing a selected award into Coupa for contract creation and tracking.

As long as Coupa takes advantage of the new Trade Extensions 6 capabilities to define workflows and UX that are easy to use and consistent with what a Coupa power user might define, then they can create a transition for their more advanced organizations into true sourcing, and, more importantly, the Trade Extensions 6 platform can offer a path for those customers that need a more modern Procurement application. And letting each unit do what it does best will insure that, for the first time in the history of acquisitions of advanced sourcing technologies, all parties will actually thrive.

In other words, by saying and doing essentially nothing at this point with respect to their recent advanced sourcing acquisitions, Coupa is actually doing the best they could actually do because it’s going to take them a while to figure out what they got, what they can do, and how all of these units will work together. As far as the doctor knows, they haven’t even hired a translator yet who speaks advanced optimization, machine learning, econometrics (and risk), and truly simplistic Procurement and can teach all parties a common language. So, even though they’ve historically advanced as fast as possible in Procurement, the fastest way for them to advance beyond is to actually slam on the breaks and start again in first gear. If they do this and maintain this philosophy, at a future Inspire, they will finally inspire sourcing in a way that their Source-to-Pay brethren have not.

Did Coupa Inspire?

Last week we asked if Coupa would inspire at Inspire, especially given that most big companies, especially in the Procurement arena, have not given us much to be inspired about as of late. In fact, most announcements in the Procurement Arena have consisted of new UIs, name changes, and acquisitions — none of which does anything for the end user who needs to do a job day-in-and-day-out and spends much of it fighting with an outdated processes implemented by an even more outdated technology causing them to go prematurely bald as they rip out their follicles one by one.

We said that in this day and age you don’t get inspired unless the technology brings value and a technology doesn’t bring value unless it offers something more than the same-old same-old which could include an inclusive design (that also provides functionality needed by suppliers to serve buyers), a multi-functional application (that supports the organizational stakeholders that Procurement must serve), or a better user experience (which is not just a fancy-smancy UI).

So, to this end, did Coupa Inspire?

Inclusive Design?

Definitely. In this release they’ve made it easier for suppliers and service providers to acknowledge POs, flip to invoices, enter timesheets upon services completion, and respond to buyers. The suppliers can determine whether or not they want dynamic discounting, and what terms they will accept (and not need to opt in to or opt out from buyer offers one-by-one). They can maintain their catalogs and use the collaboration tools. With Coupa’s new release, it’s a more inclusive design.

Multi-Functional Application?

With InvoicePay integration, AP can now pay suppliers in 31 countries and know they are being fully compliant with local regulations. Their inventory functionality makes it easy for office managers responsible for indirect inventory. Their single data store gives Finance visibility into all spend under management. And their new risk scoring functionality gives buyers visibility into potential risky transactions that are being directed at potentially risky suppliers. It certainly is becoming multi-functional.

User Experience?

Coupa has figured out the most important feature of a Procurement UI, and that is, simply put, no UI. Procurement is a tactical function that is focussed entirely on servicing a need in the most efficient and effective manner possible. A user shouldn’t see any more than they need to see, do any more than they need to do, and, most importantly if they don’t need to see or do anything, they shouldn’t need to see or do anything at all. If all that is required is an approval for a requisition that completely satisfies all the requirements, and the approval is only required because the total amount exceeds an amount where all requisitions must be approved, then if the approver is aware the approval request is coming, is aware of what it’s for, and has given verbal approval already, then all she should need to do is press a button in the approval request email or send a yes response to an SMS — no application entry needed. In Coupa, she can do that, and a number of other processes have been simplified as well.

So, did Coupa inspire?

For an average Procurement professional, most definitely yes!

But what about a sophisticated sourcing professional, who has to do demand consolidation, new supplier identification and strategic supplier management, complex negotiation, and sophisticated contract creation? Well, that all depends on their read of what Coupa’s acquisitions mean … come back tomorrow.

Supply Management Technical Difficulty … Part III

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master’s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. Having covered basic sourcing and basic procurement it’s time to move on to Supplier Management.

But first, what is Supplier Management? Supplier Management, depending on the vendor, is defined as the provision of Supplier Information Management, Supplier Performance Management, and/or Supplier Relationship Management. The question is, do either of these areas contain any technical difficulty.

Supplier Information Management

Technical Challenge: NONE

Let’s face it, supplier information management is just data in, data out. Collect the data, push it in the database, run a report, pull it out. It’s just a database with a pre-defined schema and some fancy, optimized, UI for getting the right data to push in and pull out.

Supplier Performance Management

Technical Challenge: NONE

Supplier performance management is two part — performance tracking, done with software, and performance improvement initiatives, identified and managed by humans. The latter can be complex, but since this series is focussed on technical complexity, we will ignore this aspect. As for performance tracking, this is just tracking computed metrics over time. Essentially information management, but focussed on collected performance data and metrics.

Supplier Relationship Management

Technical Challenge: NONE

Supplier relationship management is all about managing the relationship. It’s usually done with collaboration (and collaboration software is not technically challenging), development management (lean, six sigma, and other programs), and innovation management (goal definition, initiative tracking, and workflow). All human challenges, not technical challenges.

But does this mean there are no challenges? Depends whether you are using old definitions or new definitions. A new definition goes beyond the basics and looks to software to guide the future of Supplier Management. And that’s where the challenges come in.

Technical Challenge: Predictive Analytics

Inventory levels, sales, and costs are relatively easy to predict with high accuracy with enough data using a suite of trend algorithms. They’re not always right, but they’re right more often than human “gut” (unless you happen to have a true expert who’s top of her league and been doing it for 20 years, and those are very rare) and that’s all we can expect.

But predicting a market trend is different than predicting supplier performance as performance shifts can result from a variety of factors that include, but aren’t limited to, worker problems (such as union strikes), financial problems (which can happen overnight as the result of a massive launch failure, loss, etc.), raw material shortages (as the result of a mine failure, etc.) and so on.

Thus, predicting future performance requires not only tracking performance, but also external market indicators of a financial, regulatory, and incident nature. The latter is particularly tricky as incidents are the result of events that can often only be detected by monitoring news feeds and applying semantic algorithms to the data to identify incidents that can affect future performance. Then, all of this data needs to be integrated to paint a picture that can more accurately predict performance than the predictions made from just monitoring internal data sources.

In other words, if all you are being sold is a data collection and monitoring tool, it’s not particularly challenging to build (and a business process management / workflow configurator tool could probably be used to build a prototype with your custom requirements in a week), but if it’s a true, modern, performance management solution with integrated predicted analytics to help you identify those relationships at risk, that’s a completely different story.

Next Up: Analytics!

Supply Management Technical Difficulty … Part II

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master‘s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. We’ll take it area by area in this series. In our first post we tackled standard e-Sourcing, and in this post we’re tackling standard e-procurement.

Requisition, Approval, and Purchase Order Management

Technical Challenge: NOTHING

There’s nothing challenging about creating a requisition, placing it in a, possibly bifurcating and reconnecting, approval stream, getting approvals, and flipping it into a purchase order. It’s literally just adding lines and data to a form, like building a survey or RFX, recording approvals, and generating a purchase order in an appropriate distribution format when the necessary (final) approval(s) have been generated.

Invoice Management

Technical Challenge 1: Automated Error Correction

It’s easy to create and distribute an invoice. It’s easy to run a set of verification rules to verify completeness and correctness and then reject an invoice if data is missing, incomplete, or invalid. It’s harder to determine when data is missing (such as codes, skus, etc.) what that data should be, harder still to figure out which data is likely correct when there is a mismatch between fields that should align, and even harder when data is incomplete and suggests multiple possibilities. The goal should be to not only determine when there are issues with an invoice and flip it back to a supplier for correction (to reduce the number of invoices that need to be manually reviewed and approved) from an average of 15%+ to 1.5%+, but to indicate what the acceptable corrections are / should be so that the supplier can accept and the invoice can be automatically accepted and processed on re-submit. This requires strong AR (Automated Reasoning) technology and it is not easy to not only identify 90% + of the bad data, but 90% + of the correct data to replace the bad / non-existent data with.

Payment Management

Technical Challenge: Working Capital Optimization with Multiple Options

While ACH integration can be a challenge because of the security requirements, it’s not that difficult (as the banks / payment providers did the challenging task of implementing the encryption, secure networks, etc.) and the vendor just needs to plug in, it’s just coding hoops and a well understood process. The challenge is how to optimize the payment schedule against net terms (to prevent penalties), early payment discount options (when it is cheaper to take the discount offered even if the organization has to pay interest at their preferred credit rate), co-factoring (where the organization helps the supplier factor the invoice and agrees to take an early payment cut to cover some of the supplier’s cost of factoring), and investment opportunities to make sure the organization has the cash on hand it needs while minimizing its supply management costs.

Taxation Management

Technical Challenge: NOTHING

While it’s the ultimate pain-in-the-backside to keep up with all of the requirements associated with tax-tracking across multi-level jurisdictions when taxes can be applied at the union, country, state, and city level, especially when the amounts, collection rules, and submission rules are always changing, it’s just data tracking. Nothing more.

IN SUMMARY

With the exception of automated error identification and automated corrective suggestions and of working capital optimization, as with basic e-Sourcing, basic e-Procurement is pretty much common fare today that can be bought off the shelf from dozens (and dozens) of providers, but, as you can see, it’s not all equal. Any provider with AR capabilities for advanced invoice processing and working capital optimization capabilities is leagues ahead of anyone else.

And, as per part I, in this series we’re not discussing the User Experience. While a good User Experience, while not always challenging to code, can be challenging to define, it doesn’t define Technical Difficulty on its own.

Next Up: Supplier Management!