Spend Matters’ recent coverage of Coupa’s purchase of Aquiire details Coupa’s acquisition rationale and the general wisdom of its decision — but the deal also calls attention to a useful context that evaluators of “Amazon-like” e-procurement systems would be well served to understand. As these systems are tailored for different industries, they should be evaluated for how they differ, not how they're the same. Let's look at three types of marketplaces spawned by the Amazon model.
Coupa announced its latest acquisition Monday with its purchase of Aquiire, a provider of e-procurement and procure-to-pay software. The deal brings to Coupa’s business spend management suite — which now includes support for e-procurement, P2P, source-to-pay, travel and expense management, and services procurement — many of the latest features for front-end shopping and catalog management, particularly several patents related to real-time search and third-party-hosted catalog integration capabilities. Viewed as part of Coupa’s larger strategy, however, Aquiire is just one piece of a larger puzzle that Coupa has been trying to assemble for the last decade.
The purchase of Cincinnati, Ohio-based Aquiire, along with Coupa’s own innovations in the guided buying area and the company’s 2017 acquisition of Simeno, forms the basis of a shift away from one-to-one, proprietary “punch-out”-based B2B e-commerce models and toward a streamlined, almost touchless approach to finding and buying goods and services. This entails far more than creating a friendly user experience that’s “Amazon-like.” Coupa wants to go one step further, making the search for a corporate purchase as easy as answering a question with Google: one question (sometimes auto-suggested) into the box, numerous answers delivered within the next screen, in real time, prioritized by relevance, price and desired procurement controls.
Coupa’s goal is to make B2B purchasing as easy and reflexive as everyday information retrieval on the broader web. Said another way, when you need to know something, you Google it; when you need to buy something at work, you would Coupa it. Obviously, Coupa is not going to become a verb anytime soon on the scale of Google. The key is to provide a B2B buyer-relevant search that is tuned to the “persona” of the individual buyer to quickly get him or her the needed goods and services from the preferred supply sources and buying channels.
This Spend Matters PRO research brief explores the feasibility of the “Google-like” search concept, as well as how Coupa’s acquisition of Aquiire enables it. It also touches on how Coupa’s approach to front-end shopping enablement compares with the broader e-procurement market, as well as what this means for competitors.
Sometimes cleverly crafted demos can gloss over important nuances or mask inadequacies, which can cause major problems later during implementation — and the dreaded scope creep. So, here are some areas that I recommend digging into and questions to ask during a purchase-to-pay demo.
Traditionally, procurement organizations have been advised to consolidate their supplier base (with the handful of suppliers with the greatest percentage of purchases), negotiate strong contractual discounts and encourage their employees to purchase from these preferred vendors at the prenegotiated pricing. On the surface, rationalizing an organization’s supply base can seem like an effective way to improve procurement performance. By rationalizing the number of suppliers that enterprises work with, procurement leaders can reduce costs, improve quality and save the time of procurement teams who are too often lost in the arduous process of managing indirect tail spend. However, due to the rise of more advanced B2B e-commerce platforms and highly volatile pricing fluctuations for products, the supplier consolidation strategy is quickly becoming outdated.
A wealth of worthwhile benefits can be gained through adopting an effective buying approach. By making just small changes in our approach to buying, we can expect to see significant value and benefits as a direct result. You might ask why you should do anything differently at all when individuals and organizations already manage to buy well without any kind of intervention. But to truly appreciate why we should consider a new buying approach, we must first recognize the size of the prize that can be obtained.
Editor’s note: This is part of the Ask Spend Matters series, where readers send in their burning questions about procurement and supply chain.
A reader recently wrote in asking for ideas on controlling high-volume, low-dollar PO spend on readily available commodity items in order to free up time for value-add activity. The conventional wisdom is that purchase orders act as a point of reference and an insurance of sorts against fraud or unintentional errors related to invoicing, pricing, duplicates and wrong products. Yet POs can undoubtedly be a pain for buyers to draft, not to mention that all of the paperwork lengthens and slows down the entire purchasing process. There are two main options here to consider.
OMNIA Partners, a group purchasing organization (GPO) composed of National IPA, Prime Advantage and Corporate United, announced Monday it had entered an agreement to buy Communities Program Management LLC, the organization that staffs and manages the operations of the U.S. Communities Government Purchasing Alliance. Dangerous weather and labor strikes are not the only issues that can hold up shipments at ports. Sometimes a supply disruption can be caused by something as a simple as a shortage of green stickers. Afternoon Coffee brings you the latest in procurement and supply chain news.
Spend Matters welcomes this guest post from Jonathan O'Brien, CEO of Positive Purchasing.
Everyone has a choice about how they buy. Within companies, this could be determined by marketplace understanding, suppliers, future needs or how important a supplier is now and in the future. However, to understand what level of “buying power” you may have, it’s important to understand what type of buyer you are.
Joining a GPO is like getting a Costco membership. You know you’re not going to get ripped off, so you probably won’t put much thought into joining. But therein lies the rub for GPO members. Like Costco, a GPO is a one-size-fits-all marketplace where you may overbuy when you get there or underbuy by not getting there at all.
In an increasingly Amazon-dominated world, however, this model is not the only available option.Today, the assortment and pricing of items available to consumers are tuned to the user and monetized most efficiently by intermediaries that can source better and optimize for lowest total landed costs better than individual buyers. Procurement organizations are now looking to bring this experience to the complex world of B2B purchasing. And where GPOs fit into this more sophisticated equation is not a simple answer (many are still trying to figure it out themselves).
But that doesn’t mean GPOs will go the way of the 1980s big box retailer. Instead, GPOs will have to take on a role beyond the race to the lowest price. This multipart Spend Matters PRO series explains what motivates GPOs and helps procurement organizations best decide when and how to engage them. In this second installment (see our initial GPO introduction), we explore GPOs from a supplier perspective and offer recommendations for vendors working through GPOs to make these relationships more successful. We also explore how GPO options and capabilities are evolving and segment the GPO market by model and type and provide case example looks at different GPO business models. These include vertical/industry independent, member-owned, horizontal, affinity, category-specific and procurement technology led GPO models.
Group purchasing organizations (GPOs) are not a new idea. Agricultural cooperatives aggregated the buying power of farmers hundreds of years ago. That said, GPOs have evolved quite a bit, and the infusion of new digital capabilities is taking that evolution to an even higher level. This evolution also means that procurement organizations must go in “eyes wide open” to best utilize this important tool in the procurement tool belt.
Not all GPOs (or GPO models) are the same. Understanding the differences will make you a more educated, and thus likely more successful, buyer. Therefore, we’ve decided to delve a little deeper into this obscure sector of the procurement provider market and shed some light on how to best extract value from it.
This multipart Spend Matters PRO brief is designed to demystify GPOs and put procurement organizations on the same information playing field as the GPOs attempting to sign them up, expand their utilization of contracts and sell additional services. Within this series, we will explore GPOs by type, as there are several business models in play, and by industry segment, as GPOs are heavily embedded in certain markets and are little more than a supply option in others.
This first installment in our GPO coverage:
A reader recently wrote in with a question about how to find group purchasing organizations (GPOs) or purchasing consortia. This individual is a U.S.-based sourcing manager at Heidelberg, a multinational company that provides equipment and services for the print media industry. The reader told us that his company is thinking about bidding out for copiers next year, and he became interested in looking into GPOs after hearing about them at a local ISM meeting. However, a casual internet search for GPOs yielded no shortage of results.
In Deloitte’s 2016 Global CPO Survey 2016 report, 74% of respondents stated cost reduction as their top priority in 2017. Also, 70% of the surveyed procurement executives cited indirect spend as a top focus for controlling and reducing costs. Recent studies have found that indirect spend can account for up to 50% of a company’s purchases, and manufacturers specifically can spend 20% or more of their total revenue on indirect expenditures. It is clear the next profound impact area for procurement professionals is in accessing hidden and unexploited areas of indirect spend.