Category Archives: Supplier Management

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.

Good Advice from HBR on Understanding Suppliers in the Solution Economy

HBR recently published a post on understanding customers in the solution economy in which they noted that creating new value will require suppliers to combine their expertise with their understanding of their customers’ business needs. Which is completely true. They also said that this calls for changes in how B2B companies gather customer intelligence. Specifically, they need to

  • Ask different questions, much more often.
  • Observe the customer directly.

And they do. But since, generally speaking, a company that supplies a customer with a product or service outsources the production of that product, or the implementation of that service, to a third party, the company also needs to thoroughly understand its suppliers’ strengths and weaknesses to select the right supplier to manufacture the product or provide the service to the end consumer.

This means that where the suppliers are concerned, it has to:

  • Ask different questions, much more often.
  • Observe the supplier directly.

The questions need to move away from “do you have the facilities to make this product” to “what value-add do you add in the term of usability, reliability, or warranty support that we can use to meet the needs and want of our customers” and the questions have to be asked every time the customer needs change, not just once every three years when the category is resourced. You may not be able to change suppliers or alter the contract, but if you put in continual improvement and collaborative design clauses, you can at least make sure that subsequent iterations improve in the right direction. Similarly, on the service front, the focus should move from “do you provide service X” to “give us examples of how your delivery of service X met the following customer values and led to higher satisfaction ratings”.

Similarly, it’s not enough to just do a plant visit during the supplier qualification phase. There needs to be continual observation and interaction through the full contract life-cycle to make sure that the supplier undertakes continual improvement efforts, that issues are quickly identified and brought to your attention if they can not be quickly resolved, and that the level of professionalism and attention paid to you does not decrease over time as new customers enter the pipeline.

When (Out)Sourcing Goes Wrong

Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement.

Three hundred Pakistani garment workers die in a factory fire. (Source: New York Times) Doors were locked, windows were barred. And the factory had just been inspected by a subcontractor to a certification agency. Lesson here: If you can’t afford to visit the factory you are sourcing from, then no cost savings is sufficient. Do not let other companies do the research for you.


Thanks, Dick, for the valuable lesson here. (Global Supply Training)

Why does everyone look to disqualify when they should be looking to qualify?


Rant on blogger, rant on along
Rant on buddy till the day is through
Rant on brother, sister too
Rant on momma like I asked you to do
And rant on fellow blogger, rant on (Rant On!)
 Disqualified!

Today’s guest post is from William R. Dorn Jr (Bill Dorn), the Vice President of Operations at Source One Management Services, LLC.

In the last year, I’ve been pretty active talking about one of my favourite topics, “What Not To Do” when conducting a strategic sourcing event. I’ve blogged about it on multiple sites, spoken about it on several guest podcasts, have a chapter in our book about it, and Joe Payne and I even lightly discussed the topic on a morning television news show in Arizona (which I doubt more than five people tuned in for). So when the good doctor told me he was inviting guest rants this month, I knew what I was going to scribble about. But then, I started to think about it a bit more. I think I’ve said enough on the topic, and I think there is an even more basic premise that deserves attention. That premise is: Why do people in business look to disqualify something when then should be looking to qualify it?

I’m sure we’ve all heard the following lines come out of our colleague’s mouths before: “We did that before it didn’t work“, “It’s always worked until now; why would we change it“, “Our staff doesn’t adapt well to change“, “Let’s just push this through for now and look at the alternatives another time“, “it wouldn’t work here“, “we’re not ready for that“, “it’s not really practical here“, “we don’t have the time“, “it costs too much“, “it’s not in this year’s budget“, “we’re too busy“, or the one I hate most “our company (or our requirements) is different“.

As consultants, there really is not a day that goes by that we don’t here at least one of these classic lines from one of our clients. As procurement or supply chain professionals, you probably have all heard one of those dreaded deal breakers right when you thought you had a really creative solution, technology, or vendor that could have helped your business.

But, did you realize that a large portion of you are doing exactly the same thing during your sourcing process? You probably aren’t aware you are doing it, as it’s not as direct as the examples above. And in many cases, it’s really not your fault; you’re just following a procedure, policy or e-sourcing software template that was written in stone before your time. What I’m talking about is a sourcing process that looks to disqualify instead of qualify.

Let’s really look at your sourcing process, whether it’s the Supplier Discovery, RFI/RFQ/RFX/Reverse Auction, or whatever you call it. Does it have questions that really serve any purpose other than to disqualify? Why are those questions included? Chances are, they are simply there to help take a long list of potential suppliers down to a really short list, in order to make the review, selection and award process easier and quicker. Well, we all know that easier and quicker is not always better, but this often gets ignored when it comes to doing work. Here are just some examples of what I’m referring to:

  • Is your company ISO certified? Questions like these (the hard YES/NO), especially used in conjunction with automated rating and scorecarding tools in e-sourcing systems are a huge pet peeve of mine. First off, is the ISO certification even relevant to what’s being sourced? In most cases, it’s not. Secondly, it leaves no margin for answer. What if you are going through the process but will not be certified until next month? What if you are not ISO certified, but are certified by a similar industry specific association, like QS? “Well, we didn’t ask that. You’re disqualified.”
  • We recently responded to a large RFP that had a short deadline. One of the requirements of the RFP was that the response was received electronically and in hard copy, no later than 2:00 PM on a certain date. The company we responded to acknowledged receipt of the submission, but FedEx was actually late in delivery of the hard copy, 2:37 PM to be precise. The prospect promptly rejected the delivery and entirely disqualified us from the bid, even though they already held the electronic copy. They never even opened the bid. We’re not the only ones either; I talked to others who responded that had the same thing happen, all because of a storm that delayed FedEx by a few minutes. In this case, a ridiculous policy had a company throwing away potentially the best possible suppliers without even reviewing their submissions. In other words, “Oh, you’re human and a small mistake happened? You’re disqualified.”
  • We frequently see RFPs that have a “deadline” for submitting questions. Many of those companies refuse to answer any new question you may have after that deadline date. What does that lead to? Well, it forces suppliers to guess at what they THINK you may need, often missing the mark and often submitting a proposal that doesn’t really address the buyer’s needs appropriately. It’s not that they couldn’t support your need; they just simply misinterpreted your requirements and did not have a fair opportunity to present a proper solution. “You couldn’t read our minds, You’re disqualified.”
  • Do you have on office within 25 miles of our location? Well, no, we don’t but the work is being done remotely, so that should not have any impact on our level of service or price … “Too bad, You’re disqualified.”
  • Here’s a 43 page RFP where every answer is a long-form answer and half of the questions don’t apply to this initiative. You have until Friday at 5 to answer it. “That’s not enough time? You’re disqualified.”
  • You must agree upfront that you will use my procure-to-pay punch-out catalog ordering system. Oh, and the software company that runs it gets a piece of every single transaction. But I still want the best possible price. You want more information or are concerned about digging into your margins? “I don’t understand why you could give me a better price if you didn’t have to pay an intermediary too. You’re disqualified.”
  • We’ve got this great opportunity to ask questions for you. We call it a bidder’s conference. You’ll sit around a table with your competitors and must introduce yourself so that everyone knows who they are competing with. “What do you mean you are uncomfortable doing that? That’s what I want. You’re disqualified.” (This is providing that they don’t drop out themselves as most suppliers do after they have to sit through a circus like a bidder’s conference).
  • “Do you have substantial experience supplying the nano-microorganism plating industry? Provide me with 5 references. You sell office supplies? I don’t see how that is relevant to the question. Do you supply other nano-microorganism plating companies or not? No? You’re disqualified.”

I could go on and on with dozens of examples of poorly written questions or poor methodologies that serve absolutely no purpose other than to disqualify, but I’m already over the doctor’s budgeted word count (I hope he doesn’t disqualify my post for it).*

Now, I’m not saying that some questions and some responses shouldn’t be grounds for immediate dismissal, and I understand that you have to find an appropriate balance of how many suppliers you can review for a spend category, but sourcing and procurement folks really should take a hard look at their processes and really look at themselves to see if they are just as guilty as the naysayers throwing around clichéd business brush-offs like the ones I wrote about above. Are you really offering a warm invitation to suppliers to help improve your business, or are you just schlepping through a dreaded process just to tell your bosses that you “went to market”?

Thanks, Bill! You’re really helping me with my point that many RFX processes are not implemented correctly, especially in technology acquisition at large companies!

*To be precise, Bill is over my suggested word count, which I’m happy to ignore as long as the rant is raving and engaging!

The (Board) Gamer’s Guide to Supply Management Part VI: Zombie Dice, Tsuro, and Get Bit!

I’m enraptured to continue this one-of-a-kind summer series that will help you whether you are just interested in finding out about this new and exciting career opportunity, or ready to take your Supply Management career to the next level. Not only is it significantly more fun than counting grains of sand for an hourglass, but when you can grasp a lot of the basic concepts by playing the right mix of strategic (and sometimes tactical) board games with your friends, it’s three blasts squared.

I know we still have to tackle the economic games, like Puerto Rico and Dominion, but we’re gong to continue to make use of the fact that, thanks to the unequaled generosity of Wil Wheaton (@wilw) and Geek & Sundry, we have yet another marvelous TableTop episode where Wil introduces us to yet another great game — or, in this case, three great games. Until the tap runs dry, we are going to collect every precious drop of water that Wil is directing our way.

Wil gives us a very succinct introduction to each of the three games covered in TableTop Episode 3, starting with

Zombie Dice

is a press-your-luck dice game. We are all zombies trying to fill our undead bellies with delicious, delicious brains. On every turn, we will draw three dice from the cup. Each die represents a human survivor or, as we call them, lunch. We roll the dice. We then keep all of the brains and all of the shots to the face. Now we have a choice to make. We can stop, and score the brains, or we can press our luck. There’s one special die. It’s this guy, he’s the runner. If we choose to roll again, we have to include him in the three dice total because we haven’t caught him yet. You keep rolling until you are shot in the face three times or you choose to stop and score all of the brains in front of you. The first player to score thirteen or more brains wins.

Zombie Dice is a great game because it helps you understand the Wall Street mentality which, inevitably, leads to financial market meltdowns when left unchecked — just like the subprime mortgage crisis, the dot-com bubble, the speculative currency crises in Asia, Mexico, and Europe in the 1990s, the savings and loans crisis, the oil crisis, the crash of 1929, the shanghai rubber stock market crisis, the rail road panic of 1893, the gurney crisis, the danish state bankruptcy, the south sea bubble and the mississippi bubble, and the tulip mania. While financial market meltdowns are not a new phenomenon, thanks to the internet and the interconnectedness of the global financial markets, they are occurring more and more and will continue to do so as long as the unlimited risk mentality of Wall Street goes unchecked.

It’s critical that you understand this mentality, and the risks associated with it, because the more you try to limit your risk by playing the currency markets, the hedge funds, or even asset-based investments (like gold), the more types of risk you are actually opening yourself up to. If you don’t know what you’re doing, you’ll end up rolling red die after red die, which triples your chance of getting shot in the face.

In addition, what makes Zombie Dice truly great is that it also teaches us about the unpredictability of risk. You never know when you are going to get shot in the face with a supply disruption due to a natural disaster, a civil disturbance, or a quickly enacted political trade barrier, or how much damage it’s going to do. Supply Management is full of risk, and every time you place an overseas order, you could be rolling the dice.

Tsuro

is a path finding, tile laying game. We are flying dragons. On every turn, we will play a tile on the board. Every dragon touching that tile has to follow the path it makes to completion. … If you fly off the board, you are eliminated. If you crash into another dragon, you are eliminated.

This is a cool game because it forces you to think strategically, which is important in markets where demand exceeds supply and you have to outmaneuver your competition to insure that you always get what you need, and keep your organization on the board. It teaches you that you not only need to think about what you need, but if you are in a market where demand exceeds supply, what your competition needs so that you can lock up supply first.

Get Bit

is a bluffing game, designed by my friend Dave Chalker. We are all robots out for a leisurely swim in shark-infested waters. Each turn, to figure out which one of us is swimming the fastest, we will play a card from our hand, numbered one through five. The fastest number goes to the front of the line, and the slowest number will go to the back of the line. The robot who is closer to the shark gets bit. We each have four limbs. So if you are bitten four times, you become Anchor Bot 9000 and spend the rest of your days on the bottom of the sea.

This is a good companion game to Tsuro because, like Tsuro, it forces you to think strategically, but has the added advantage that it demonstrates what happens if your competition mirrors your movements — you both stand still while the other competitors in the market swim past you. You not only have to outmaneuver your competition in this space, you have to prevent them from blocking you.