Category Archives: Spend Analysis

Robbie and the Coupa Factory, Part II

Oompa Loompa Doom-pa-dee-do
We can’t stop building products for you!
Oompa Loompa Doom-pa-dah-dee
If you are wise you’ll try it tout-de-suite

What do you get when you’re UI obsessed?
Teams of coders who are distressed
Until they reduce the clicks to one or two
That’s what the ‘loompas will do for you.

Coupa is still trying to make the easiest end-to-end e-Procurement platform on the market, and still innovating new releases on a quarterly cycle.

So what’s changed since our last update in July?

  1. A greater focus on the front office.
  2. A stronger focus on supplier support.
  3. Better Inventory Management.
  4. Universal Search.
  5. Transactional Spend Analysis.

A greater focus on the front office.
This shows up in the form of better budget visibility and better contract management. In Coupa, a user can see what the budget impact of a requisition will be before they submit it, not after the fact. This feature is more powerful than it appears to be on the surface. For example, in one large retail client, every department that used Coupa was under budget, while every department that did not use Coupa was over budget. When people see the impact of a purchase before they make it, they are much more frugal.

With respect to contracts, Coupa has set up a “contract dropbox” where all contracts can be uploaded to the system and real-time spend dashboards by contract. Again, this may not sound that important until you realize that without such dashboard, the average user in an organization does not see the importance, and impact, of a contract. When spend quickly adds up, it becomes clear not only which products and suppliers are critical to the organization, but which contracts — and it also becomes a trivial exercise to determine the cost of buying off contract, which is where a lot of the savings leakage occurs in an average organization. The reality is that most savings available to an organization in the majority of non-strategic and non-high dollar categories lie in off-contract spend. In many organizations, just getting the majority of spend on contract can increase savings 50%. (Given that, on average, savings leakage is 40%, and the majority is due to maverick spending, shifting another 30% of spend on-contract where only 60% of spend was on-contract before increases savings opportunities by 50%.) For example, one company saved 120K in one year just be getting bottled water on contract with Staples!

A stronger focus on supplier support.
Suppliers, who are never charged by Coupa (as this greatly increases the odds that they will use the system) will soon be able to invoice their Coupa clients any way that they want to. In addition, a lot of effort has been put into insuring that their UI is as easy to use as the buyer’s UI.

Better inventory management.
Coupa has created a new API for inventory management and the system can automatically determine if the order is for internal inventory or external inventory. In addition, it now supports configurable lists for items bought on a regular schedule, which support par levels and auto-buy calculations based on current inventory to make it simple for a user to do regular re-orders. In addition, the system can auto-generate GL codes based on user, department, and commodity so that the re-order is charged against the right budget and filled by the right contract.

Universal Search.
One thing that Coupa learned is that its average user did not want to leave Coupa and punch-out to a third party site to find a product or service they needed to accomplish their day-to-day job. In response, Coupa now includes punch-out and other external products and services from partner-sites through scraping and auto-loads. In addition, they have integrated back-end reporting that lets Procurement know when prices change.

Transactional Spend Analysis.
They have implemented a basic data analysis tool (GoodData) that lets a user slice and dice spend by contract, commodity, department, and other basic measures so that they can better understand the Spend Under Management through the Coupa System. While not a replacement for a full-fledged Data Analysis Engine, it now has the same power as any package that contains a canned set of spend visibility reports and a basic report building engine, which is impressive for a Procurement platform. No more heavy lifting in Excel for the simple stuff for sure!

Oompa Loompa Doom-pa-dee-do
They can’t stop building products for you!
Oompa Loompa Doom-pa-dee-dar
They have the goal to take your spend far.

Optimizing Your Procurement Technology Investments


This post originally ran on March 24, 2009.

The Sourcing Interests Group recently ran an interesting article on “optimizing your procurement technology investments in 2009”. Although it had some good suggestions, my top five suggestions would be the following:

  1. Get Visibility Into Your Spend (Spend Analysis)
    If you don’t know how much you’re spending on each category, sub-category, product, and service, who you’re spending it on, in what amount, by unit, you need to get this visibility. Get a good spend analysis solution and dive in!
  2. Take Your Strategic Sourcing up a Notch (with e-Sourcing)
    Start with the most attractive savings opportunities that were outlined in step 1. This is your best bet to negotiate big savings in this downturn.
  3. Focus on Contract Compliance (adopt Contract Management)
    You need to enforce hard-won savings by insuring that internal staff and suppliers are compliant with contractual agreements.
  4. Implement e-Procurement
    Done right, this will make it easy for your buyers to buy on contract.
  5. Get a Grip on Global Trade (adopt Trade Visibility solutions)
    Chances are your global sourcing endeavors are needlessly costing you more than you think! As per my recent Illumination on why you need trade visibility, you’re probably paying more than you need to on duty, using costly inefficient processes, paying unnecessary document preparation costs, and making costly errors that are costing you million of dollars a year.

Informationalization Is Important

Simply put, the more informed you are, the better you are going to be able to source and procure. And this recent article over on the HBR blogs on why you need to integrate data into products, or get left behind just scratches the surface.

As the post notes, virtually every product and service can be made more valuable through informationalization. The GPS example provided is classic. Turn-by-turn directions make the car more valuable as the driver can keep his eyes on the road, get to his destination faster, and, during delivery, avoid left turns that just lead to extended idling at busy intersections. And, as predicted by Stewart Taggert, half of the value in the delivery of a shipping container from halfway around the world would be in the data associated with the container. Good information allows you to calculate in-transit time, and associated costs, loading and unloading costs, storage costs, insurance costs (as you can appropriately determine the chance of accidental loss or theft), etc.

But the best example of the value of informationalization is how it allows you to optimize your sourcing decisions. The more you know about your product options, shipping options, associated costs, and the inherent value of each product versus your other options, the more accurately you can model your options. The more accurately you can model your options, the better chance you have of determining the solution with the lowest cost, the lowest risk, the highest value, and the best value (defined as risk reduction, profit generation capability, etc — whatever makes sense) to cost ratio. And this is how leading Supply Management organizations can save 12%, on average, off-the-top in an optimization-enabled sourcing event — and even more if they collaboratively work with their peers to identify all of the options that may be available and all of the associated tradeoffs. As pointed out in SI’s recent paper on “Top Ten Technologies for Supply Management Savings Today”, integrated, collaborative sourcing can often identify savings opportunities of up to 30% or 40% on categories that were exhaustively combed for savings in the past.

Plus, good information allows your organization to:

  1. constantly improve products and services by way of the fact that you are able to
  2. collect more relevant, timely, accurate, detailed, and integrated data.

And when you have relevant, timely, accurate, detailed, and integrated data, you can take out your best-of-breed data analysis tool, use the tips and tricks SI outlined in it’s free e-book (co-authored by Bernard Gunther of Lexington Analytics, now a division of Opera Solutions) on Spend Visibility: An Implementation Guide, and extract even more value for the organization by optimizing not just Supply Management spend, but utilization, service, warranties, Marketing & Legal spend, and every other product and service activity that burns capital and/or creates organizational value.

The Insightful e-book Spend Visibility: An Implementation Guide is still FREE!

That’s right, this illuminating e-book, co-authored by the doctor and Bernard Gunther of Lexington Analytics, now a division of Opera Solutions, which has already been downloaded over 2,450 times, is still completely and totally FREE.

This e-book, which is a rare medium well-dome, really is the definitive book on next level spend analysis performance. It’s one of the first books to not only get to the science of spend analysis, as compared to the elusive art, but to also provide you a detailed 10-step process that you can use to implement spend analysis in your organization and get real, repeatable, results — starting from your first project. And the numerous examples, backed up by 78 figures, really go the extra mile to making theory reality. There’s a reason it has been called one of the most comprehensive step-by-step resource guides I have seen for this industry and a reason the downloads keep going and going like the energizer bunny. It was written to help an average sourcing analyst get results, and that’s exactly what it does.

So if you still haven’t downloaded your FREE copy of Spend Visibility: An Implementation Guide, do so today!

Good Data Will Not Guarantee Good Decisions

It was great to see this recent article in the Harvard Business Review on how “Good Data Won’t Guarantee Good Decisions” now that we are in the age of “Big Data” (which, in business, is Bullshit in Guise) and everyone is diving into their OLAP and reporting tools without even a clue as to what they are (or should be) looking for. There’s data. There’s information. There’s knowledge. There’s the intelligence required to understand it. And then there’s the wisdom to choose the right course of action.

As the authors state, investments in analytics can be useless, even harmful, unless employees can incorporate that data into complex decision making.

In the article, the authors summarized the result of a study by the Corporate Executive Board that evaluated 5,000 employees at 22 global companies. The study separated the employees into three groups:

  • Unquestioning Empiricists
    who trust analysis over judgment
  • Visceral Decision Makers
    that go exclusively with their gut and
  • Informed Skeptics
    who effectively balance judgment and analysis with their strong analytic skills and willingness to listen to others’ opinions but dissent.

Only the latter group are equipped to make good decisions, and, not unexpectedly, only 38% of employees and 50% of senior managers fall into this group.

And when you consider that their analysis also found that the functions where the employees had the highest average scores performed 24% better than other functions across a wide range of metrics (including effectiveness, productivity, employee engagement, and market-share growth), this is not a good thing.

Why is this the case? The researchers identified the following four problems that prevent organizations from realizing better returns on their data investment:

  • analytic skills are concentrated in too few employees
    just because you have a few experts doesn’t mean that the analytics skills will trickle down
  • IT spends too much time on “T” and not enough on “I”
    IT is used to working with functions where business needs are clearly defined, stable, and relatively consistent … when the needs become less defined, IT becomes less able to support them
  • reliable information is hard to locate
    many organizations lack a coherent, accessible structure for the data they’ve collected; the authors found in their survey that fewer than 44% of employees say they know where to find the information they need for their day-to-day work
  • business executives don’t manage information well
    (at least when compared to capital and brand) — they focus on more physical or traditional assets

While not addressed, and possibly not covered, by the study, I’d also add the following to the list:

  • No Good Roadmaps Exist
    Analytics skills are not enough — a guide on how to find the needle in the haystack is also required; take Spend Analysis for example … how many practical guides exist? (At least one.)
  • Lack of EQ
    as an employee needs to not only understand where to look, but when something is worthwhile to chase and when it’s not as there is a need to understand the business impact of what the data might be suggesting which requires understanding the business needs as well as the data

So what can an organization do to get more informed skeptics?