SourceDay, a Coupa App Marketplace Partner, Improves Supplier Order Fulfillment
Today's post is co-written by Nari Viswanathan, Sr. Director of Product Segment Marketing at Coupa and guest author Tom Kieley, CEO & Co-Founder at SourceDay. SourceDay is a CoupaLink technology partner that provides advanced supplier collaboration so customers get a holistic view of their spend, both direct and indirect.
Supply chain and sourcing challenges are expected to continue through 2022 and beyond as manufacturing, procurement, and logistics frameworks remain in flux. From rising costs for raw materials to ongoing staffing shortages and increasing demand for both air and sea freight options, change is the only constant.
For businesses, this creates an ongoing issue: effective management of direct spend. The term refers to money spent on anything that will eventually be sold to customers, such as the parts and raw materials needed to make a product. Indirect spend, meanwhile, covers everything else — from office supplies to new computer hardware — anything that indirectly benefits the bottom line but isn't directly tied to revenue via sales.
Coupa's Business Spend Management (BSM) platform excels at managing direct as well as indirect spend. Coupa provides a single platform through which procurement, supply chain, and finance organizations gain complete visibility and control over business spend. A number of key areas within Business Spend Management are highlighted in Figure 1. SourceDay's advanced supplier collaboration network is part of the Coupa App Marketplace and supports the purchase order collaboration process shown in the Figure below.
Figure 1. Coupa’s integrated direct spend management solution
The dynamic nature of direct spend
According to a recent survey from Gartner, 87% of supply chain professionals plan to spend on increased supply chain resilience over the next few years. It makes sense since the last two years have made it clear that materials sourcing and procurement are far more dynamic than previously thought. Without the right processes in place, companies can find themselves behind the curve when it comes to meeting order due dates and keeping customers happy.
Direct spend is similarly dynamic. According to data from SourceDay, 52% of purchase orders (POs) require adjustments owing to varying lead time and prices, labor or material availability issues, or part revision changes — all related to demand and supply changes at the PO line level. If data is missed, or if manufacturing resource planning (MRP) tools don't have the most up-to-date information resulting from the PO changes, POs could be incorrect, and companies could lose money as all of the downstream production and distribution planning is done with incorrect material availability assumptions.
Consider a supplier that has been consistent with order delivery; items have always arrived on time and in full (OTIF). If changing conditions force them to deliver half of the requested materials on time and half at a later date, their PO must be adjusted accordingly. If this data isn't entered in real-time and connected to MRP systems, however, POs will likely be processed as per usual, in turn creating a disconnect between what was spent and what was received.
This isn't an uncommon example: SourceDay found that 60% to 85% of POs are mismatched because of data inconsistencies between POs and order data.
The challenges of supply chain spend management
As the supply chain evolves and direct spending becomes more dynamic, two key challenges have emerged:
Lack of visibility
Supplier lead and fulfillment times can change overnight. Without visibility into this data, companies put themselves at risk: If suppliers say they can deliver by a certain date, then encounter unexpected challenges but don't relay that data to their partners, companies are left waiting on goods that may be weeks or months delayed.
Lacking visibility also creates limited ability to optimize spend. With spend and supply data all in one place and reliably updated, businesses can optimize supplier bids and create favorable contracts. This also sets the stage for AI-driven analysis of supplier data to help determine the most efficient approach to direct spend management at scale.
As the speed of supply, shipping, and manufacturing processes increase, accuracy naturally suffers. In the case of indirect spend, human oversight of goods or services being delayed or delivered is often enough to reconcile these accuracy gaps.
When it comes to direct spend, meanwhile, information is changing so rapidly that without automated solutions in place, invoices and POs are frequently incorrect. This leads to the potential of overspending on goods that didn't arrive, or resynchronization of purchases and POs, in turn, creating potential supplier conflicts.
Telling the whole direct and indirect spend story
Through Coupa’s integrated direct spend management solution driven by SourceDay's PO collaboration and Coupa’s accounts payable (AP) automation tools, it is possible for companies to inherently achieve 95% or greater match rates on invoices — enabling companies to achieve the "golden standard" of 95% or better OTIF.
It's no easy task — the solution combines massive volumes of disparate data points to tell the end-to-end story of supplier order fulfillment. Are suppliers trending toward longer lead times on average? How are suppliers ranking on overall quality and reliability? What specific part numbers or raw materials are most in-demand, and when can your team expect them to arrive?
Delivering direct spend management benefits
Put simply: To drive reliable, on-time, in-full delivery, businesses need reliable direct spend management solutions. Coupa's BSM platform, in partnership with SourceDay, offers the best of both worlds, making it possible for businesses to achieve a best-in-class, holistic view of their supply chain and business spend.
The SourceDay solution enables manufacturers, distributors, and direct-to-consumer businesses to save money on their direct material while also protecting revenue and margins, increasing inventory terms, reducing safety stock, and improving on-time delivery to their customers.
Figure 2. SourceDay is available through the Coupa App Marketplace
The result is a unified solution, tailor-made for product companies, that addresses all spend that integrates seamlessly with their existing ERP. Shared customers of Coupa and SourceDay can now embrace the promise of comprehensive Business Spend Management while also addressing the supply chain challenges that are unique to their business.