The Strategic Sourcing Category

Getting the Most from Sourcing Optimization (Part 1): Lessons From Leaders [PRO]

Global Risk Management Solutions (GRMS)

The combination of Trade Extensions and Coupa may seem a curious one for those unfamiliar with either organization, and may even raise questions for those who know both. As Trade Extensions’ recent customer event showed (see our live coverage here, here and here), the sourcing optimization specialist and its customers continue to push the limits of what is possible with e-sourcing. In contrast, procurement organizations that gravitate to Coupa — even highly sophisticated ones — tend to do so because they want to avoid complexity for their users and make the transactional buying process as simple as possible, all the while guiding users to make the best decisions for the business.

This two-part PRO research note provides additional perspective from Trade Extensions’ customer event on how this spectrum of complexity and simplicity may not be incongruous in the future; rather, sourcing optimization could serve as a better mousetrap to identify complexity, deconstruct it and ultimately redefine procurement’s role in the business by changing how the function is conceived. But before that can happen, there’s a more important topic address: the fact that most firms using Trade Extensions (and other sourcing optimization technologies) have only begun to scratch the surface of embracing complexity — let alone containing, controlling, distilling and simplifying it.

Part 1 of this series explores how an organization can get the most from sourcing optimization once it has signed up for it, which is easier said than done. We explore three areas: selecting the right users and training them effectively to use optimization, leveraging a center of excellence (CoE) to scale efforts and thinking big (i.e., beyond category-driven events alone). Spend Matters would like to thank all of the conference attendees and Trade Extensions for sharing these ideas.

Trade Extensions Dispatch: Templates on Sourcing Steroids or Just An “App” By Another Name?

Trade Extensions co-founder Dr. Arne Andersson just previewed the next release of the Trade Extensions platform (TESS 6.0) this afternoon at the Trade Extensions U.S. customer event in Atlanta. TESS 6.0 (coming this spring or early summer) marks a giant step forward. The entire user experience is transformed. More on this from us later, but one aspect of the new release is “apps.” These are essentially templates on steroids. Yet they’re simple and powerful at the same time.

Trade Extensions Dispatch: Is The Supply Chain Ready to Be Defined by Sourcing?

trade

Trade Extensions sells the most advanced sourcing optimization technology that Spend Matters has encountered on the market today (read our research, linked below, if you want to understand why). It’s capable of tackling extremely complex multitier sourcing challenges. This is one of the reasons Coupa is buying it. Yet today, most customers are just scratching the surface of what the tool can enable in the majority of their sourcing events (if not all).

Trade Extensions: Redefining E-Sourcing (Coupa and Beyond)

There are only a few events left that focus primarily on strategic sourcing over broader procurement topics. And there are fewer still at which you can learn something new in every presentation. Trade Extensions customer events have always done just that. The Spend Matters team has attended half a dozen or more of these events over the years. Earlier today I continued the tradition, touching down in Atlanta to attend “Redefining E-Sourcing,” Trade Extensions’ U.S. customer event, which so far has lived up to its name, albeit with a current chapter in the history of the provider's story coming to an end with its acquisition by Coupa -- and a new one about to begin.

Trade Extensions and Coupa Acquisition Analysis: Customer and Partner Recommendations [PRO]

Tradeshift Baiwang

This Spend Matters PRO brief, part of a series analyzing Coupa’s acquisition of Trade Extensions (see also here and here), provides recommendations for Trade Extensions and Coupa customers and partners surrounding the acquisition. 

Spend Matters has spoken or met with many of Trade Extensions’ largest customers in recent years (most of which prefer to remain unnamed) and the most advanced organizations view it as the tool that affords the highest degrees of competitive advantage across the procurement technology spectrum relative to peers in as much as how it is used than what it has the potential to do. This is key. In fact, there are material levels of diversity among Trade Extensions users even in the same industry. Many customers expose some parts of Trade Extensions’ potential yet could get away with another optimization solution for at least some of their events, if not all. Yet best-in-class procurement organizations unleash its full potential to drive competitive sourcing and supply chain advantage.

Whether you view Trade Extensions and sourcing optimization at this level or more tactically, this Spend Matters PRO brief provides insight and recommendations into the combination of the two providers. It is divided into three sections: Trade Extensions customer recommendations, Coupa customer recommendations and partner recommendations.

Coupa to Acquire Trade Extensions: Solution and Market Analysis [PRO]

data analytics

This Spend Matters PRO brief provides a solution and market analysis of Coupa’s announced acquisition of Trade Extensions. Based on subscriber feedback, we’ve already been asked to go into details about what makes Trade Extensions’ optimization capability different from Jaggaer ASO (formerly CombineNet), BravoSolution, Keelvar, Determine/Iasta and Emptoris (IBM).

In addition, this brief offers a broader market-based analysis of the acquisition. As always, we invite Spend Matters PRO advisory customers to reach out to us for more insight behind our thinking and also to discuss if Trade Extensions is right for them (as well as alternatives). We will publish a separate customer and partner analysis PRO research brief later this week.

Given our knowledge and background in this market, we tried to think of an analogy to describe the combination of Coupa and Trade Extensions’ strategic sourcing capability. We think we’ve got a good one. However, we’ll share this analogy at the end of this research brief. First, to focus on what really matters, we’ll delve into some of the less superficial solution, customer and market analysis.

Coupa Enters an Agreement to Buy Trade Extensions: A Game Changing Move For Strategic Sourcing

After market close on Friday, Coupa announced it had entered into an agreement to purchase Trade Extensions, a specialist e-sourcing and strategic sourcing optimization vendor.

Coupa will pay $45 million for Trade Extensions when the transaction closes — $41 million will be paid in cash and $4 million in stock (which will be issued, it appears, to employees). Spend Matters estimates the valuation range for Trade Extensions (as a multiple of revenue) is in line with other typical SaaS companies, and that Coupa did not pay a premium for Trade Extensions, especially considering how unique the asset is in the market.

Why Every CPO is a “CEO” — But Not the CEO You’re Thinking Of

Global Risk Management Solutions (GRMS)

As value chains go digital, many enterprises have been trying to take a strategic approach in formulating digital business strategies rather than just translating existing business strategies into IT projects. Organizationally, many have appointed chief digital officers to manage this digital transformation. But digitization is only one megatrend. Its twin sibling is externalization, which is not just traditional outsourcing but the ability to similarly drive transformation by bringing the (increasingly digital) power of supply markets into the enterprise. You could then ask who would be best suited within the organization to perform the function of chief externalization officer (“CEO”).

Strategic Sourcing and E-Sourcing: Level 1 [Plus+]

Strategic sourcing does not just involve a five- or seven-step flowchart. Nor is it just a “leave behind” by consultants once they’ve helped your organization to identify savings. Rather, strategic sourcing is a process that maximizes the value of each purchase made by a company — at least in theory! And it’s one that, in our opinion, requires the support of a solid technology solution that in turn must support each step of the process.

Strategic sourcing does not come in a one flavor. In fact, in the introduction to this series, we suggested there are six different approaches to strategic sourcing. Starting with the foundation (Level 1) today, this multi-part research brief will delve into the six approaches to strategic sourcing and the requirements, technologies and checklists required to pursue sourcing on the right foot.

Graphically, a Level 1 sourcing platform may look something like this: As one can see from the above diagram, there are four primary requirements for a solution to support e-negotiation. Such a product may contain more capabilities, but it will generally contain at least these four (although very basic platforms, especially those embedded in suite-driven platforms, may not support the full extent of reverse auction capability). In this article, we will discuss each of these four core requirements and some of the key features that define them.

Ready, set, source!

Strategic Sourcing and E-Sourcing Defined and Explained: A Preamble

What the heck is strategic sourcing? As with most things in life (and business), it depends on whom you ask.

One cynical definition might suggest it was an initial set of activities to make purchasing become more strategic without having to more broadly embed the function within the business — or at least sound more strategic. Another cynical lens might suggest that the terming of the phrase was a ruse by consultancies to prove they could identify savings (and of course leave behind a “process” to further justify their fees).

Yet we won’t just start the New Year with our cynical cap on. Strategic sourcing really does have multiple definitions.

Deloitte’s Global Sourcing Insights (GSI) — From Best Shoring to Best Sourcing [PRO]

In Part 1 of this analysis, we discussed the need for a truly strategic supply chain sourcing platform built on a supply network design model rather than just the typical BOM-based sourcing workflows and low-level commodity sourcing efforts that use “empty” e-RFX tools. We detailed the full requirements for such a supply network-based platform in a four-part series (see related articles below), but in Part 4, one of the trends highlighted included a pivot from such empty apps to content-enabled apps increasingly provided by large service providers that use cloud-based analytics and intelligence platforms as a way to deliver continuous insight and value. In that piece, we highlighted Deloitte’s Global Sourcing Insights (GSI) solution as a prime example:

GSI is a strategic sourcing and extended supply network design workbench that allows clients to explore high-level sourcing strategies by uploading their supply network configuration and then performing what-if and predictive scenarios in the tool that is pre-integrated with regional and country-specific cost and risk data. It is truly the harbinger of things to come with consulting organizations that need to survive and thrive by productizing their IP.

Many organizations strive to perform “best shoring” to optimally determine what regions to source from. Deloitte’s GSI solution is the only solution I have ever seen that is so well suited to best shoring, especially in a retail-oriented supply chain. It not only helps optimize the regions that you shore (source) from but also drives down to the cost elements and sub-regions that help you tailor their supplier-level sourcing execution activities that perform cost, risk and capability discovery and then subsequent “risk-adjusted cost” analysis against a “benchmark supply chain” of your peers (and if you load up your own manufacturing plants as suppliers, you can also do make vs. buy analysis).

Phew, that’s a mouthful!

Since the platform is pre-loaded with all sorts of external content and benchmarking data on costs, spend and risk, you can test whether the supply chain that you’ve built over the years still holds untapped opportunities. It basically is like a risk-adjusted should-cost analysis in a box. That’s why it’s more of a “best sourcing” tool than a simple “best shoring” analysis. We spend a lot of time go through it and the bottom line is that it’s pretty badass — and that it has some implications far beyond the consulting ecosystem and how it’ll impact firms that sell app suites, niche apps, analytics, market intelligence (apps/services), “networks”, BPO and the like.

In this Spend Matters PRO analysis, we’ll look under the covers at an offering we feel is on the vanguard of an emerging solution model in sourcing and supply chain. If you are a practitioner who subscribes to Spend Matters Plus and are interested in this content, please drop us a line and we’ll send you a copy.

Getting a Grip on Category Management (Part 1): A History Lesson [Plus+]

complex sourcing

Category management is broader than strategic sourcing. For example, while strategic sourcing has been a useful methodology for procurement to proactively rationalize the supply base in recurring spend categories, the traditional strategic sourcing methodology has had a strong bias toward purchase price reduction to meet savings goals, because despite all of the talk about the importance of sustainability and supplier development, procurement is still predominantly measured on purchased cost savings rather than a truly balanced scorecard of supply that optimizes the total value of the purchase. As a result, chaining category management to traditional strategic sourcing shrinks its scope to within the sourcing silo and limits its ability as a methodology for broader organizational value creation. The goal of this series is to explain what category management is, how to best go about it, how it intersects with strategic sourcing and how it can be used to take an organization's sourcing efforts to the next level.