Monthly Archives: July 2006

Procurement Independence at the Coupa Cabana Cafe

This month, Dave Stephens of Procurement Central (WayBackMachine) will formally launch Coupa eProcurement, an open source offering with the ambitious goal of becoming the first self-service buying tool that employees actually want to use. Besides eliminating manual processes (and you should know by now that I believe in purchasing automation with the eventual goal of completely eliminating purchase orders), Coupa eProcurement claims to enable better buying decisions, easily support special requests, create and manage content, and spread the word on “how to buy”.

Now I’m as skeptical as Jason Busch of SpendMatters and Doug Hudgeon  of Vendor Management (Renamed Contract Capital Management, archived on the WayBackMachine), but I have to admit that I’d like to “… Imagine a world where it’s easier to follow the rules than to break them. Imagine receiving accolades for providing users with an easy system for what should be an easy process: buying what they need, when they need it. Imaging deploying … a complete requisition to order system with best-in-class usability and collaboration features …“.

Now, I was lucky enough to get a webex preview of this system last Tuesday and would like to say that it is looking really good. A web-based solution, your buyers can open their browser and log in to a procurement portal customized to their needs.

On the main page, besides your usual main bar, news section, and intranet document access, you have an RSS-based news feed which is always automatically up-to-date, a one-stop google-style search-box that you can use to search for information and items in your approved purchase catalog, and an ask-an-expert question box that will submit questions to an in-house expert. Once answered, these best practices will be institutionalized in a dynamically evolving FAQ. In addition, instead of forcing a rigid organizational structure on your best practices and policies documents, news items, and catalog items, it offers the concept of a self-updating “tag cloud” that shows users what index terms are currently in common use and allows them to evolve the indexing methodology to what they feel comfortable, and productive, with as a team.

Furthermore, it also integrates one of the easiest-to-use shopping-cart based requisitioning systems that I’ve ever seen. (And I’ve designed a few slick offerings myself as a former e-commerce developer.) It’s easier then amazon’s “one-click”, since that’s only one-click after you’ve made multiple clicks through the site trying to fill your cart and only one click if you use all default buying options. Coupa’s offering lets you find an offering, add it to your requisition cart, and then add items to the cart in the cart screen based on integrated smart drop-downs and editable smart-search fields – it’s as easy as filling out a line on a purchase order. If you know what you need, you can go right to the cart, define what you want in the cart, have the line items appear, click “requisition” and off shoots an e-mail to your supervisor indicating an order is waiting for her approval.

Now you’re probably thinking … “If it’s that easy for a user, I bet it’s an administrative nightmare to keep it running”. Well, although Dave hasn’t released any details to me on the technology stack yet and I don’t know how hard it will be to install, I can say that keeping it up to date is pretty simple. Adding your catalog of approved items is as simple as sucking in a well formatted file or integrating with a PIM (Product Information Management) exchange on a push/pull model. Adding policy documents or news items is a snap. And approvals, nicely summarized on clear and crisp screens, are as easy as a mouse click.

The only thing that bothered me slightly was the fact that there is no separation between “catalog” and “contract”. However, from a procure-to-pay point of view, this is a brilliant idea (as long as you associate expiry dates with the catalog items). After all, you should not have items in your system that are not under contract or not approved for purchase, so the separation of these concepts would only add complexity to what would otherwise be a simple system (again, providing catalog items have an expiry date associated with your contracts and these catalog items disappear if those contracts do not get renewed).

Now, add all this to the fact that Coupa intends the total cost of system ownership to be 2x to 3x less then the cost of ownership of the typical e-procurement offerings from SAP and Oracle, and Coupa starts looking very attractive.

However, I have to agree with Doug and say that “ Dave’s chance of success depends entirely on the shape of his target market. If he goes after the most demanding customers in the spend management market with a version 1.0 system then he will have a long slog in front of him … ” but if he instead focuses on “ ‘overshot’ customers who do not require all of the features of the current suite of products or to non-customers who are excluded from the current suite of products for reasons of price or complexity … “, I think he has a great chance, especially if he focuses on the benefits a customer can receive by pairing his tactical e-Procurement offering up with affordable on-demand e-Sourcing suites like Iasta’s SmartSource suite (with release 7.0 slated for this summer) that covers the strategic aspects of the procurement function. After all, low cost on-demand sourcing software plus low cost procurement software (which can be hosted on-demand as well) equals a full Total Value Management e-Solution (on-demand) at a low cost, and this is a powerful proposition for small to mid-market firms that really need a world-class solution but can’t afford an IBM, Ariba, Emptoris, Oracle, or SAP to make it happen.

Supplier Enablement

Last month, the ISM awarded a number of individuals and organizations the R. Gene Richter Award for Leadership and Innovation in Supply Management. The recipients were primarily organizations that had demonstrated massive improvements in their sourcing and procurement functions which came about through concentrated improvement efforts. These improvements were the direct result of the adoption and consistent implementation of best practices across the sourcing and procurement functions in the organization. This week we are discussing the best practices that helped one or more of the recipients transform their organizations and win these coveted awards.

Today we are going to discuss how supplier enablement can significantly enhance your sourcing function, as it did for Rockwell Collins, as described in the article “The Next Step” in the latest issue of Inside Supply Management.

In 2005, Rockwell Collins launched an eRFQ/APO (electronic Request For Quote / Automated Purchase Order) system that extended the initial supplier portal that it released in 2003, SupplyCollins.com. This site is the primary communication tool between Rockwell Collins and its suppliers, providing a single process and methodology of doing business that is understood by all parties involved.

The system also supports Total Cost of Ownership (TCO) analysis, that allows the system to automatically select the winners of the eRFQ and generate APOs when the response deadline occurs. The system automates tactical pieces of procurement and frees up Rockwell Collin’s staff to concentrate on strategic issues and spend more time working with engineering and supply.

The system provided the following benefits to Rockwell Collins:

  • the volume of automated transactions has increased to 70%,
  • nearly 90% of direct materials are purchased through the system,
  • supplier visits have increased eightfold in a 2 year period, from 5,000 in January 2004 to 40,000 in January 2006,
  • over 1,400 suppliers use the system, and
  • the application has generated more than 70,000 eRFQs and more than 50,000 purchase orders.

Problem Solving Series III: Find the Root Cause

This is the third post in a series of posts designed to introduce you to problem solving strategies that you can use to attack your sourcing and supply chain problems. Last Sunday we discussed three strategies that you could use to help you simplify the task, which is often the best methodology you can use when trying to formulate a difficult problem. Today we are going to discuss five strategies for identifying the root cause of a problem, which is one of the keys to model construction, the third step of the operations research modeling process.

( 1 ) Define before and after

Problems arise as the effect of an observable action and are easily identifiable by their after effects.

First example: your need to reduce spend on a core category.
Why? The procurement plan that was implemented was inappropriate for the category.
Effect: your spend for the period was higher then it should have been since not all expected savings were captured.
Fix: Find a way to improve the process so that all negotiated and identified savings materialize.

Second example: you use too many suppliers for basic commodities.
Why? A proper supply base was not designed up front.
Effect: you are using dozens of suppliers where only three or four would do.
Fix: put a plan in place that identifies preferred suppliers, contracts at best rates, and make sure mechanisms exist to enforce it.

( 2 ) Organize information into a table, chart, or list and look for patterns

For example, lets say total cost of ownership on one commodity in a category is calculated as significantly higher per unit then it should be. Create a table that breaks out the cost components and compares them, as percentages of unit spend, to the other commodities in the category. If, for example, the average freight on the other commodities is 10% and you see freight for this commodity is 15%, chances are this is (one of) your cause(s). Without this comparison, you might not be able to easily identify where the excess spend is.

( 3 ) Try to make the problem worse

This might sound ridiculous, but it will help you validate that you understand the problem. Let’s say your purchase order process is taking too long. If you fully understand the process, you should be able to add an extra step that lengthens the process by a predictable amount. Then you can be sure you understand the process appropriately and that the technology you ultimately select to automate it will be the right one.

( 4 ) Compare situations without the problem

For example, let’s say one supplier is consistently late with shipments. To try and understand why, look at suppliers who are consistently on time. Are communications being handled the same? Are they using the same systems or different systems? Is it potentially a problem with the 3rd party carrier?

( 5 ) Consider multiple causes and interactions

Not all problems will have a single cause and a single solution. In the case of our consistently late supplier, it might be due to delays in supplier acknowledgement and delays in third party carrier deliveries. Look for all potential sources to make sure your fix is the best one.

Next Sunday we will discuss some strategies that will help you in the fourth step of the operations research modeling process, finding a solution.

It’s Canada Day!

It’s Canada Day

I suspect that my readers today will not be Canadian, so I thought I’d mention it to those of you who do read today [even though I suspect that there will be very few of you today since those of you who found this blog would likely have done so by way of SpendMatters or e-Sourcing Forum, maintained by my southern neighbors in the United States of America where tradition demands that if a major holiday falls on a Tuesday you take Monday off and start partying the Friday before (I know, I lived among you for over 3.5 years and still spend most of my time working with you)].

Now, I know that we sometimes appear as just a blip to our southern neighbors from an economic perspective, since the GDP and population of California are about equal to our own, but we are the world’s second largest country by area (and our Ontario can hold Texas three times with room to spare) and the world’s major peacekeeping force in war time. (We may not always be the first to back up our southern neighbors in their rush to march off to war, but we are usually the first there to help rebuild and keep the peace when the battles are over.)

And even though we are sometimes seen as part of the British Commonwealth, we are completely independent, having severed the last of the symbolic ties back in 1982 with the Canada Act (as part of a lengthy peaceful process that started back with Confederation in 1867, when we first gained independence).

Up here in Canada we have ten provinces and three territories. The province I currently reside in is Nova Scotia and the city where I live is part of the Halifax Regional Municipality, which was formed back on April 01, 1996 (even though some residents thought it was a joke at the time) when four converging cities, including two cities on either side of the main harbour, joined to form the largest city in the Atlantic provinces (which also consist of New Brunswick, Prince Edward Island, and Newfoundland, a continuing foundation of our Canadian Comedy).

For more information on Canada, check out the Wikipedia page, and for more information on the origins of Canada day, see our government page. Although we did not celebrate this day much in our early history, when ties with Britain were still strong, it’s a very big celebration these days, especially on Parliament Hill in Ottawa, Ontario, our nation’s capital. To see what we are up to, check out the NCC site.

On an unrelated note, Saturday posts are going to disappear for most of the summer. If I have something pressing, I’ll post, otherwise, since I’m covering weekends over at e-Sourcing Forum until the fall, I’ll be taking this day off from Sourcing Innovation.

So, happy Canada day and remember … if you’re American, it’s a great excuse to party early!