The Strategic Sourcing Category

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.

Hot Off the Press: Looking Back at Strategic Sourcing to Project the Future of E-Sourcing

sourcing

Brand new hot-off-the-press research is now available from the Spend Matters team! Jason Busch, founder and managing director, and Thomas Kase, vice president of research, present The Past and Future of Strategic Sourcing – Looking Back to Look Forward at E-Sourcing. What does the future hold for strategic sourcing? Have we reached the full value potential for this segment or are there even more savings to be had? Get the full story here!

Maersk E-Sourcing Efforts Lauded by The Wall Street Journal

complex sourcing

Anyone who has met Jacob Gorm Larsen, Maersk Group’s global e-sourcing manager, knows he is passionate about sourcing and market design. In many ways, he is the heir to some of the best thinkers that I worked with at FreeMarkets 15 years ago, who pioneered the concept of online auctions for sourcing with different price discovery and feedback mechanisms – nearly all of which are par for the strategic sourcing course today. Jacob deserves to be recognized. But it’s good to see his efforts acknowledged outside of just the procurement world itself. Earlier this summer, The Wall Street Journal covered what Jacob and his team were up to at A.P. Møller-Maersk.

Anti-Dumping Effort Gains Attention (and Spend Matters Network Weighs In)

Rep. Billy Long is pushing federal authorities to take a closer look at the goods global suppliers are shipping to the US. And, the world’s largest bedspring supplier, Leggett & Platt, is throwing its weight behind the effort – going as far as to hire a lobbying firm to convince lawmakers this is an important issue that needs to be addressed.

Strategic Sourcing and Driving Spending with Small Businesses Don’t Have to be in Conflict

Regardless of whether it’s public or private sector, I would argue that the basics of strategic sourcing (i.e., aggregate and consolidate spending with fewer suppliers to create leverage in negotiations and more strategic relationships overall) are in conflict with the drive to encourage supplier diversity. But they don’t have to be. Here’s why: strategic sourcing does not only have to focus on demand aggregation and sourcing strategies based on driving down price with tier one suppliers.