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The focus: How procurement leaders can best manage their digitization journey to effectively deliver value across the organization. The event: At the recent SIG Procurement Technology Summit, Coupa VP of Procurement Michael Van Keulen joined Alpar Kamber, Head of Procurement Services at WNS – a next-generation procurement services provider – for an interactive webinar session, hosted by Stephanie McGarry, VP at SIG (Sourcing Industry Group), the premier global sourcing association.    Here’s a quick recap of some of the expertise shared: Alpar shared that WNS’s latest research indicates that 83 percent of CPOs prioritize digitalization as a key objective -- yet, only 28 percent of those CPOs have seen great adoption and positive ROI from their investments. How does a procurement leader address this challenge? Recognize the importance of change management in smart digitizationAccording to Van Keulen, “The key to digitization is change management. You need to both understand your current processes and envision how they will look in a digitized process, making sure that whatever (technology) solution you pick, you involve the business and get user adoption. Without a user-centric platform, you won’t get the adoption, and then procurement doesn’t reap the benefits of digitization.” Think holistically about your interconnected procurement ecosystem  Kamber shared the importance of recognizing how today everything in the procurement system is interconnected – disparate systems and siloed data just won’t cut it anymore. “What we’ve seen is that leaders think about their procurement ecosystem holistically. You may think the desired outcome is savings, but to get that ‘rain’ you need an entire ecosystem to support it. The whole idea is everything is interrelated.”   Watch the full webinar and learn: How to identify your digitization bottlenecks, the first step to knowing what you should be prioritizing  Gain insight into how to create an operating model that enables you to segment tactical from strategic roles The importance of category management, contract management, and deep analytics  How to create both upstream and downstream value through effective processes  The bottom line: Plan before you act and double your change management effortsAccording to both Kamber and Van Keulen, smart planning and committed change management programs are the keys to success for digitization initiatives that can drive true procurement transformation. Kamber summed it up well: “Tools are essential enablers, but without the right plan, new processes, and change management programs, digitization efforts will fail.” For more on how CPOs can get high-impact results from digital transformation projects, watch the full webinar, and read Alpar’s blog post, How CPOs Can Lead Smart Digitalization in 2020 and Beyond.
Understanding Contract Lifecycle Management Every business has contracts. They form the foundation of any enterprise, influencing revenues, expenses, workflows and virtually every other operational aspect of the company. And as a business grows, so does the number of contracts that need to be managed. Contract lifecycle management, or CLM, refers to the processes that streamline the creation, oversight and management of contracts. Contracts are living documents and failing to properly manage them can expose your company to risk and significant losses. Without insight into all of your contracts (which could number in the thousands) it’s virtually impossible to effectively manage every agreement at every stage of the lifecycle, from drafting to execution to post-execution analysis. CLM streamlines this process. It provides actionable insights at every stage of the contracting process, while also eliminating bottlenecks, improving security and decreasing the potential for errors. Instead of spending days or weeks drafting contracts, and then missing out on revenues due to missed milestones – or inadvertently exposing your company to risk with errors, noncompliance, or unmet terms and conditions – you can improve your workflows and bottom-line with CLM. The Basics of the Contract Lifecycle To make the right decisions in regard to contract lifecycle management, it’s useful to understand exactly what the contract lifecycle looks like. Contract lifecycles go well beyond simply drafting, negotiating and signing a document. When you see the full picture -- all of the steps that go into a complete contract lifecycle -- then you can unlock the full value of your contracts. Realizing this value requires implementing nine essential steps into every single contract, no matter how seemingly small or inconsequential they may seem to be. Following these steps reduces the likelihood of a risky contract, prevents important contracts from falling between the cracks, and allows you to optimize your contracts’ performance, improving the overall value of your portfolio. Here are the nine steps to the ideal contract lifecycle. Request. Generally, contracts begin with a request from a specific individual or department, outlining the needs for the contract. Without a streamlined and consistent approach, the risk of a rogue deal or risky terms increases. Effective CLM begins with a standard request process that eliminates those risks while gathering information from the requester that will expedite the drafting process. Create. Contract creation is another area that can create risk. While complex contracts are often handled by your company’s legal department, that process can take days or even weeks to complete, slowing down negotiations. In other cases, attorneys may simply create contracts using existing documents as a template or cobbling together clauses from other contracts. Even if everyone uses the same, correct versions of the documents, the process of sending redlined drafts to multiple parties increases the chance of error. With CLM, your team has the option of using a template-based contract creation wizard, ensuring that every contract is drafted correctly and when possible, quickly. Approve. Once the contract is drafted, it needs to be approved – and without a centralized, streamlined workflow, not only can the approval process cause delays, but it’s possible that changes or approvals may be made without an audit trail. CLM allows for certain approvals to be automatically included within contracts that meet pre-approved criteria, but also ensures that contracts are only approved after going through the proper channels and that there are meticulous records about approvals and changes. Negotiate. CLM helps streamline the negotiation process by providing “playbooks” that include preferred terms and positions, clause libraries and issue lists. When everything is stored and managed in one place, it’s easy to see and compare documents and view redlines, so you know exactly what has been negotiated. Sign. CLM makes the process of signing and executing contracts simpler. With digital signatures on electronic documents, both parties automatically receive copies as a record of their agreement. Capture. Once contracts are signed, CLM really begins to shine. Instead of simply filing the documents away, the vital data locked inside those documents are turned into structured data. The documents and data are then centrally stored to enable quick, secure access. Comply. Analyzing contracts for risks and opportunities is only part of the story. It’s also vital to ensure compliance with all contract obligations, terms and conditions, as well as regulatory compliance. This is often challenging when you have thousands of active contracts, but it can be made simpler with a CLM system. With your documents centrally stored and data universally structured, CLM allows custom, granular alerts and reminders to be created, sending notifications when predetermined criteria is met, including upcoming renewal dates. Manage. Keeping track of orders, amendments, renewals, terminations and performance targets is challenging – and often a source of lost revenue and increased risk. Again, centralization and visibility provided by an advanced contract platform takes the guesswork out of managing contracts with instant access to prevailing terms and key dates. Optimize. Finally, the contract lifecycle includes using your data to optimize performance and efficiency. You need a continuous feedback loop between your contract portfolio and business performance to ensure you’re getting the most value from your contracts. CLM provides this feedback, letting you easily identify areas that need improvement. How to Get the Most from Your Contracts The more contracts your business has, the more challenging it becomes to successfully implement all of the steps in a contract’s lifecycle. Manually analyzing contracts for non-compliant terms, for instance, can take hundreds of working hours and is potentially error-prone. Implementing a contract lifecycle management platform eliminates that problem by changing processes in four key ways: Collaboration and Control. Collaboration across teams is a necessary part of contracting, and a CLM platform ensures full transparency while also making the process easier. It also ensures full control, providing audit trails, restricting access to specific data and processes, and supporting complete regulatory compliance. Organization. Do you know where all of your contracts live? Are they scattered throughout the company in various filing cabinets and on different hard drives? Is everyone working from the same databases? CLM ensures that your contracts are organized and consistent, so everyone within the organization knows where to find correct, truthful information. Analysis. CLM analytics serves two purposes: Locating and analyzing contract terms to identify and mitigate risk and analyzing processes to streamline contract development. Integration. A robust CLM platform integrates fully with existing ERP, CRM, SRM and DPM systems, allowing information to be shared and extracted for accurate visibility into operational responsibilities, relationships and risk. Ultimately, implementing an enterprise-wide CLM platform helps ensure that all steps of the contract lifecycle take place, and that everyone involved with contracting has a 360-degree view of contracts – not just “their” part of the process. This will reduce costs, increase revenues, improve compliance, and give you more certainty about the overall contracting process and the amount of risk faced by your business. To learn more, download the Guide to Contract Lifecycle Management.
The Hackett Group, CrossCountry Consulting, and Acquis Consulting Group are seasoned experts at helping businesses implement e-procurement and digital procure-to-pay (P2P) business spend management solutions. Given their immense experience “in the trenches,” we here at Coupa thought we’d pick their collective brains about what they’re seeing as the most significant trends, opportunities, and challenges in procurement today. Some questions we were particularly interested in include: How will organizations that have already digitized expand their footprint of digital procurement? What broader economic and regulatory trends could influence procurement organizations? Which new technologies will enterprises and mid-market companies be eager to adopt? So, without further ado, here are the insights from our three experts: Tim Yoo, The Hackett Group Digital P2P is moving from the wish list to being a must-haveLast year we definitely spent less time convincing clients they need new technology, and more time helping them develop the business case for it. The market has shifted, and I think that fact will push those companies who have not yet invested in digital technology for procurement to finally make a move. So, we’re preparing for the market to accelerate even more this year. Data-driven technology is creating new talent requirementsCompanies are finding that, as they implement P2P technology, it doesn’t necessarily reduce headcount. Instead, it drives a need for people with different skills and a different mindset. Tech-enabled procurement organizations need experts who understand how the technology works and how to optimize it for their particular business situation. And they need people who can analyze data and know what actions to take based on the results.Leadership will need to start measuring people on outcomes versus activity and set targets and goals that are aligned to department or program goals. Savings will remain part of those goals, but the old “two bids and beat up on your vendors” approach is giving way to proactively using data to increase predictability and improve the business, and workers will need to be savvy enough to keep up. Harpreet Narula, CrossCountry Consulting The move to best-of-breed systems continues on, with a twistLast year, I predicted that companies would move to best-of-breed solutions for end-to-end processes, rather than expanding their ERP deployments. That was directionally correct, though I don’t think we saw the kind of progress I envisioned. However, we’ll see continued movement in that direction in 2019, with an added emphasis on selecting solutions that have the right controls. With GDPR regulations in full force and the continuation of the Sarbanes-Oxley Act in the US, more and more companies are realizing they have got to address risk and compliance with external regulations and internal policies and they’re looking for technology to help them. Supplier management is coming to the foreSupplier management and consolidation are foundational procurement tasks, but I think there are some factors that will drive more activity this year, along with a search for better tools. First, you can’t look at risk and compliance without looking at supplier risk. Companies really need to be weeding through their suppliers and validating and updating information at least annually, but I’d bet money that most don’t. During this recent period of economic expansion, a lot of companies have been focused on growth. Now, a tilt toward optimization and mitigating risk is necessary, but companies are not going to want to do it the old, manual way. So, they are looking at tools that can automate parts or all of the process, and consequently, most of the technology players in this space are working to develop and expand their offerings. CFOs are joining in the funThe shift toward a more holistic approach to business spend management started around 2015. In 2018, we started to see CFOs and CEOs realize this is something the need to pay attention to. Over the next couple of years, more companies are going to look at how they can leverage procurement to help them with compliance and, of course, with cost savings. It’s been almost a decade since the Great Recession. A lot of companies are thinking about how to be more fiscally responsible so that they can weather any economic bumps in the road ahead. Sean Park, Acquis Consulting Group Enterprise marketplaces are growing in both scale and depthVertical marketplaces are popping up in a number of industries, and I think we’ll see procurement organizations capitalize on them more 2019. These are B2B-focused marketplaces that are positioning themselves to be the single point of contact for an entire category of spend.For example, in clinical research, a lot of biotech and pharma companies have preferred supplier programs and preferred rate cards, but as we all know the supply market fluctuates according to supply and demand. Now, there’s even a marketplace where these companies can put out an RFP for a research study or a clinical trial, and they will collect the bids and come back with two-to-three recommendations. The trial can get started almost right away because all the specifications are already documented and the marketplace is directly contracted with those suppliers, and the customer is contracted with the marketplace. AI, AR, and VR are gaining traction with enterprisesThis isn’t confined solely to procurement, but last year we saw large enterprises begin experimenting with artificial intelligence and augmented and virtual reality, and that will continue this year. However, the supply market for these technologies is still very volatile. There are lots of small players popping up, merging and getting bought, and so far, there are no clear winners. We may start to see some penetration into the mid-market this year, but I think smaller companies are going to watch and wait, for now. The one exception could be manufacturing companies, which are beginning to look seriously at AI and VR for maintenance of their capital equipment. While your organization might have its own particular needs, it’s always a good idea to keep apprised of what’s happening in the procurement industry. We hope you find these expert insights to be a useful benchmark as you work to improve your own processes. We’ll be sure to check in with these e-procurement veterans to keep you informed on any new developments! Tim Yoo is a Principal at The Hackett Group. Harpreet Narula is a Partner at CrossCountry Consulting. Sean Park is Senior Vice President, Procurement and Strategic Sourcing Advisory Services at Acquis Consulting Group.
As organizations move to adopt leading technologies such as artificial intelligence and virtual and augmented reality, the question arises as to who should be involved in sourcing suppliers and negotiating deals for them. Having now worked with a few companies on these types of projects, I see a leading role for procurement. The possibilities for these technologies are very exciting, but procurement needs to be involved in order to ensure that there’s a solid business case, and that the organization is building a portfolio that capitalizes on synergies between technologies, while ensuring maximum value from its investment. Right now the supply market is such that some of the large players actually have less advanced and un-integrated solutions, while some of the small, niche players actually have better solutions and technology. The sourcing organization can sort through the hype from the big players, as well as vet the smaller ones for risk and scalability. Making the business caseThe first step, as always, is making a solid business case. My company is working with a global CPG company right now on two applications that are both AI-based. One is a notetaker, which uses natural language processing to take notes for you on a call or live meeting and then create a transcript and summary of the conversation. The presumed business case for this is twofold. It will improve employee satisfaction, because most employees would rather just talk and listen, and not worry about scribbling down notes. A lot of people just don’t do it, or they aren’t good at it. So, the tool does it for them, creating accurate records that can be accessed by anyone who needs it. There’s increased transparency, and institutional knowledge is not stuck in a notebook or in someone’s email box. Up until recently, the error rate on this kind of AI was so high that it was virtually unusable, but it’s progressing rapidly. It’s still relatively expensive, but once you get to a large number of users the price comes down, so it makes sense for the enterprise market. The other application is a voice-based meeting scheduler, which has progressed quickly as well. In both of these cases, we’re rolling out the technology within one geography, within one business unit. We’ll take a survey before the implementation, and then again after a two-month period to see whether or not they want to roll it out to the rest of the U.S. division of the company and/or globally. If the answer is affirmative, we’ll use the experience with the test implementation to make the business case and inform the requirements. We’re taking the same approach with some AR and VR projects for manufacturing organizations, for maintenance and repair applications, and sometimes for installation as well. The basic business case for these is to prevent costly site visits. With AR and VR, a lot of work can be done or supervised remotely, with a high degree of accuracy, within a shorter time frame. Finding the synergiesThese are very different technologies, and yet they can augment each other. Imagine an environment where augmented or virtual reality technologies act as sensors, providing data to an AI platform, which then processes the information for continual improvement. For example, let’s say you have hundreds of turbines at a wind farm. AI can better predict and prevent breakdowns and learns from itself to make increasingly accurate predictions. AR and VR can be used to augment that accuracy, as well as guide a local resource to perform the maintenance. We’re starting to see projects like this in our pipeline. Devising a strategyAs we’ve seen with SaaS, business people are being bombarded by vendors, and IT is being hit up by a lot of the same people. They’re each getting different stories and conflicting information about which way they should go. There’s a lot of potential for new technologies to be applied without a cohesive strategy, ending up in silos within the organization and not delivering all the value they could. So, part of procurement’s role is to look at the big picture and provide impartiality. Obviously, the head of IT and the chief digital officer, if there is one, should be at the table. They understand the infrastructure architecture, what the systems integration needs may be, and the roadmap, while the business best understands the problem they’re trying to solve. Procurement can help bring the two together and balance the needs of both. They can lead an efficient, effective sourcing process, ensuring legal and regulatory compliance. What we’ve seen so far is that when the process is run by IT, technology solutions will typically fit well with the technology roadmap of the company, but they don’t always match the priorities of the business or do the very best job of solving whatever problem it is they’re trying to address. The reason is that these applications—especially AI--are tailored to solve very specific problems. There aren’t many generic or best of breed solutions that are going to work across multiple companies or use cases. Therefore, it’s imperative that everyone have a very deep understanding of the business requirements and make sure that offerings are carefully vetted to make sure they can meet them. Managing riskThe other reason for procurement to lead is that they are often by nature somewhat risk-averse. They should meet vendor hype with a healthy amount of skepticism, positioning themselves to make the business aware of new technologies, but only after they've vetted them. They can save the business a lot of time by buffering them from incessant sales pressure. For technologies of interest, procurement can lead a try out in a piloted environment. I’m a strong advocate of working that way, especially with cutting edge technology. You minimize your exposure, and if it works, then you have a lot of information you can use to do a smooth rollout on a larger scale. This is right in procurement’s wheelhouse--getting IT, legal and the business together to agree on the scale and scope of a pilot, and setting up a scorecard to determine whether there’s a business case—or not. You need that kind of objective process to avoid being seduced by shiny object syndrome. Getting out aheadAs always, the danger for procurement is finding out about these purchases at the last minute, and then they have zero influence over the process or outcome. Now is the time to reach out to the CIO, CDO, CTO, CFO, or whoever else is involved in leading digital transformation at your organization and find out what their investment plans are. I’ve seen studies from a couple of sources that say that 50% of enterprises will spend more on AI-driven solutions than on traditional applications by 2021. I think that figure is inflated, but these technologies are very much on people's minds. Even if ten percent of their application spend goes towards these technologies by 2021, that would still be a significant. Most companies are not in the “innovate or die” kind of situation that salespeople often depict. There’s still plenty of time to get into the game, in a thoughtful way that ensures that these technologies really bring value to the company. The best way to do that is for procurement to take the lead in driving the process. Sean Park is Group Practice Lead, Procurement and Strategic Sourcing at Acquis Consulting Group, an accredited Coupa implementation partner.
Supplier payment terms are extending to historic lengths—an average of 66 days globally—wreaking havoc on supply chains as even well-established businesses close up shop due to cash flow problems. Tighter credit since the Great Recession and the increasing globalization of supply chains are driving demand for better supply chain finance solutions. Consulting firm Bain estimates that the market for supply chain finance is expanding by 15-25% a year in the Americas and by 30-50% in Asia. But yesterday’s solutions won’t work in today’s market. Supply chain finance programs have been offered historically by big banks and financial institutions, but only to top-tier suppliers, not to the small and mid-sized businesses that need them the most. However, technology players are now getting into the game and making a difference. Cloud platforms and marketplaces that handle transactions between buyers and suppliers are beginning to incorporate financing into their transactional flows. They’re creating more visibility for funders, opening up opportunities for them to be more flexible and underwrite a wider range of financing options, for a wider range of suppliers. The positive economic impact could be huge. Of 1,000 UK SMEs surveyed by Crossflow Payments, two thirds said they’d hire up to five more people if working capital improved, leading to as many as 3.4 million new jobs. In the US, a survey by Fundbox estimated that unpaid invoices total five percent of GDP. According to a UK study by the Federation of Small Businesses, 50,000 business bankruptcies could be avoided each year if suppliers consistently got paid on time. Relationships and dataWith so much at stake, why has it been so hard to extend supply chain financing programs to the very businesses that need them most? There are three reasons: These programs have been hard for buyers to set up It’s been difficult for finance providers to establish relationships with smaller suppliers There often hasn’t been enough data for financial institutions to underwrite financing for smaller suppliers or suppliers in emerging markets. On the buyer’s end, setting up a supply chain finance program requires business process change. You need to get people used to putting everything on a purchase order. You have to figure out how the invoice processing workflow is going to change, and how you adapt your finance and treasury controls. It takes about a year, and a lot of internal discipline, to get buy-in and implement such a program. Once you get the program set up and the processes in place, then you have to introduce the financing program to your suppliers and convince them to participate, which requires a big marketing communications effort. Most supplier enablement efforts start with tier-one suppliers and never make it down to the second and third-tier suppliers who are more likely to need financing. Even if you do reach them, it’s a tough sell. In addition to asking them to take a discount, you’re asking them to enroll in program with a new third party and do business via separate channels of communication, and separate transaction flows. On top of that, suppliers may only need financing sporadically. Maybe that’s seasonally related to a specific project or unforeseen circumstance. There may be different decision makers and different conditions within different business units in each supplier company. They might need the option to get funding in a variety of scenarios, without having to commit to discounting every invoice, or getting into a new relationship and having to log into and manage a separate portal to get paid. What platforms and marketplaces offer is the ability to leverage the pre-existing relationship and the communication between buyers and suppliers that is already taking place on the platform in order to offer funds during critical moments of engagement. If you’re offering financing at the same time the supplier is sending a buyer an invoice or PO, you don’t need a marketing push, or a separate login. More data, more offersPlatforms and marketplaces also help solve the data problem. Because cloud platforms have historical data on transactions between suppliers and multiple buyers, they can, with the parties’ permission, make that data available to a variety of funders for underwriting purposes. For example, they could surface the transaction history between a particular buyer and supplier. They could show the history of each with other buyers and suppliers. They could surface supplier reviews. They could pull in multiple external data sources and use machine learning to assign risk scores. With visibility into more data, funders can better manage risk and offer more flexible and compelling financing options. They could decide they don’t need to wait for an invoice. They could fund on a purchase order, for example. In fact, when a purchase order or invoice is created, suppliers could receive financing offers from several funders. They could accept offers on a purchase-order-by-purchase-order, or invoice-by-invoice basis. When you add the capability for buyers to make payments directly through the platform, as many platforms are now doing, the supplier can click a button to accept the most attractive financing offer and have money in their bank account the next day. There could potentially be other funding points as well—receipt of inventory, or milestone completion, for example. When you expose the data and set up a competitive environment, I think you’ll see funders get more creative and dynamic with financing offers that are going to be attractive to suppliers. Unlocking economic valuePrevious approaches to supply chain finance required a lot of energy and effort—setting up separate business processes and business relationships. They required push marketing, business case creation, and straight-up selling. And, stringent underwriting processes coupled with lack of visibility into data meant that the vast majority of suppliers were excluded. By bringing financing into an existing business process, onto a platform where transactions and conversations are already taking place, you eliminate the heavy lifting that’s required to get buyers and suppliers on board. It’s a scalable way to guarantee financing offers are communicated at the right time. And, by giving funders more visibility into data captured on the platform, they can evaluate risk faster and more easily, and make more and better offers. That could significantly speed up business transactions and alleviate cash flow problems for a lot of individual businesses, and unlock a lot of economic value in the aggregate. Ravi Thakur is Senior Vice President, Business Acceleration at Coupa.