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- March 03, 2015
- Jon Goss
In my last post, I talked about how winning hearts and minds on the plant floor was critical to the success of a procurement project I led for a global manufacturer. It was a big project and the first of my career. When I think about some of the people I admire in procurement - people who have been implementing for 20 or 30 years like Patrick Hopkins at Coca-Cola Bottling - I don’t feel like I can claim to be an expert based on one successful project.
What I can take credit for knowing it was critical to respect the manufacturing culture, visit the plants personally and get to know the people. But I have to be humble. The other key element of my success was the solution: Coupa.
I’d seen enough of failed projects to know I couldn’t just sit in corporate and mandate change. But no matter how many plants you visit and people you meet and how much change management you do, your initiative will fail if you don’t have the right tool. Coupa made it easy for someone with my then level of expertise to be successful.
The ‘spoonful of sugar’
Key goals for the project were to reduce the number of suppliers and rein in maverick spend. This would mean big change for people who had been buying based on long-standing relationships and were used to self-approval limits of $5,000. Coupa’s functionality was the spoonful of sugar that helped these changes go down.
Streamlined approvals are a good example. With the previous system, people had to log in to a VPN, connect to the network, and find the right transaction code to get to the screen where they could do their approval. That really was slowing people down, and speed is everything in manufacturing. I remember being at a plant where the guy who did approvals was on vacation, and they had to approve something and they to call a different plant to figure out how to do it. It wasn’t intuitive at all
By comparison, Coupa makes the approval process almost unnoticeable. You can click ‘approve’ in your email, even on your mobile phone, without logging into anything. Even though we aggressively added approvals, the process around them was so much easier that they actually started to happen.
Coupa is configurable, so you can change approval rules quickly. Obviously that’s not something you want everyone doing or to do all the time. But, when one plant exceeded their tools budget for the month, we were able to re-configure the approval for that month without calling IT. The plant got what they needed to keep the line running, fast and within the procurement process.
Getting people paid
Another thing Coupa helped with was getting people paid quickly, which is critical in manufacturing. Fast invoice turnaround is part of keeping the lines moving.
There are some commodities such as lumber and transportation that need to be paid ‘cash on the barrel,' or with payment terms much shorter than average. It's physically impossible to pay a paper invoice 'on the barrel,' as paper tends to get lost and stuck in in the system so it was a real challenge to pay within terms. Delays in payment would cause an issue with the supplier, such as discounts being revoked.
We implemented all of our PO invoicing through the Coupa Supplier Network or cXML. Through the network, suppliers could see what they needed to do to get paid. They could see payment terms and requirements. They could submit their invoice and have it match automatically and not need approvals because it was already on a PO. This was important not just for lumber and transportation but also for all the mom and pop shops that provide specialty items that keep the line running and depend on timely payment.
Of course Coupa didn’t reduce payment terms, but it allowed for a faster, more flexible process. That helped plants improve supplier relationships, treating them more as a partner rather than someone they had to beat up for terms.
Fast payment is important on the capital expenditures side too. Capital projects require progress payments, and vendors usually won’t start the project, or progress to the next phase, until they get paid.
Coupa also let the company partner with suppliers in some really cool ways. We had one parts supplier that typically did a monthly PO for $4,000, hoping it was right because they had no actual visibility into our supplies.
In Coupa, we were now able to get a lot more detail and accuracy for vendor-managed inventory on POs through their punchout. Now that same vendor could come into the plant, go through all the drawers, and push the buyer a shopping cart of 100 line items with the right quantities of each one..
In the manufacturing environment, it all boils down to having a procurement tool that’s fast, flexible and reliable. If you’re in corporate and someone doesn't get paid for a week or waits a week for an approval, they might not be happy about it, but they’ll probably get along. In a plant if you don't get something done for a week it means that things could be breaking, people’s safety could be at risk and the impact will be felt on the bottom line.
With just a handful of years on the job, I can’t claim to have figured out all the secrets to implementing a procurement system in manufacturing. I’m far from being an expert; what success I've had clearly isn’t due to my long experience. But that’s the exactly the point. Coupa made that kind of experience unnecessary. Coupa was a multiplier for the experience I did have, making it easy for me to be successful and appear a whole lot smarter.
Jon Goss is a solutions consultant for Coupa North America. He was previously a project manager in corporate procurement at Armstrong World Industries.