Category Archives: Procurement Innovation

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.

Purchase Automation

Today we are going to talk about purchase automation and review how it helped Fluor Hanford transform their sourcing organization, as described in the article “Empowering End Users” in the latest issue of Inside Supply Management.

Fluor Hanford developed a tool that, among other benefits,

  • provided visibility on existing material inventory levels throughout the company,
  • reduced transactional involvement,
  • took greater advantage of the cost and process savings offered by the purchase card system, and
  • drove additional price reduction through supplier integration.

This allowed the organization to reduce redundant buying by about $300,000 in a twelve month period, the average per transaction cost by 68% (to $34 from $106), and convert all sourcing areas to an Electronic Commerce Agreement.

As we discussed last Wednesday, the ultimate innovation in procurement evolution is the purchase order free supply chain, but just like you can’t go from zero to sixty in a sports car, you can’t go from no automation to no purchase orders in a single step, it’s a process, and the real innovation is in continuous process improvement, with streamlined automation the best practice first step.

Innovation Week I Review

This week we discussed five sources of sourcing innovation:

  • Going Green, which can help you reduce costs, increase market share, help the environment, and keep the tree-huggers happy – all at once!,
  • Build-to-Order, which allows you to increase customization, avoid single-sourcing scenarios, and operate using demand-driven best practices,
  • Purchase-Order Free Supply Chains which allows you to decrease processing time and divert resources to more strategic activities, reduce inventory, and avoid stock outs,
  • Procurement Lead Time Optimization to take your Total Value Management sourcing activities to the next level, and
  • Outsourced Innovation that can help you jumpstart your innovation endeavors, manage the process, and even solve challenges that stump your best people.

As time goes on, we will discuss many more. (And fortunately for me, there are many more … otherwise “Sourcing Innovation” would be a very short lived blog!) David and I are planning multiple three-part series on Purchasing Innovation on (WayBackMachine) eSourcing Forum as part of the summer series, so be sure to keep a watchful eye on ESF this summer. I’d also like to point out this week’s article on SupplyManagement.com (WayBackMachine) noting that the message of this year’s CIPS Premier conference was “Innovate or fail“. It quotes Ian Pearson, a futurologist at BT, who indicated in his keynote that “The five-year plan is dead. You need agility because your business will not be the same in five years’ time. If you stay doing what you’re doing for five minutes you go out of business, so you have to adapt and innovate continuously.”

Like my colleagues, I love good stories of innovation from the trenches. If you have an innovation story you’d like to share, feel free to post a comment at any time, or, better yet, e-mail me. Good stories get front and center posts!

Tomorrow we will continue our Problem Solving Series and next week we will discuss some innovative best practices to jump-start your sourcing organization.

 

Purchase-Order Free Supply Chains

No, I haven’t flipped my gourd (or at least I don’t think so, but they say you’ll never know when you finally do). Consider how much time it takes to create and process a purchase order and then multiply this by the number of purchase orders you process in a year. Chances are that if you are a mid-size enterprise or larger, this is a pretty big number, tying up the equivalent of multiple man years that could be better spent on more strategic, less tactical activities. And, as demonstrated in “The Supply Chain Innovator’s Technology Footprint: A Benchmark Report on What Companies Want in Their Next-Generation Supply Chain Solution” by Aberdeen, such a strategy can reduce buyer direct material inventory by 30% while cutting supplier component inventory by 25%.

This can be accomplished by close collaboration with strategic suppliers and contract manufacturers which includes forecast sharing and demand-supply synchronization. In these situations, suppliers manage replenishment according to minimum/maximum targets, as determined by forecasts, contracts, and service level agreements.

Although a significant amount of work may be required up front to identify, implement, and synch the systems and build the proper relationships, this will ultimately be a drop in a bucket compared to how much work you will have had to do if you continue to be driven by paper-based purchase orders in a wired economy.

A Hitchhiker’s Guide to e-Procurement: Wrap Up

Mostly Harmless

Introduction
Requisitions, Part 1
Requisitions, Part 2
Approvals, Part 1
Approvals, Part 2

Purchase Orders, Part 1
Purchase Orders, Part 2
Goods Receipts, Part 1
Goods Receipts, Part 2
Invoices, Part 1

Invoices, Part 2
Reconciliation, Part 1
Reconciliation, Part 2
Payments
Tax Reclamation, Part 1

Tax Reclamation, Part 2
Analysis, Part 1
Analysis, Part 2
Catalogs and Contracts, Part 1
Catalogs and Contracts, Part 2

Costing a Solution
Procurement Models
Sectors
Terminology
Summary