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SIG Global Summit 2010 - Williams-Sonoma - Beyond the Benchmark Survey

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  • 1.
  • 2. Today’s Session
    Challenges with traditional benchmark surveys
    Innovation that is changing reporting and benchmarking
    The 10 must measure metrics and KPIs
    How to build a benchmarking and measurement strategy
  • 3. Who We Are
    Ravi Thakur
    Vice President of Services & Support
    Coupa Software
    Warren Ganda
    Corporate Purchasing
    Williams-Sonoma
  • 4. About Coupa
    Empowering organizations to:
    Spend Less: Reduce maverick spending by ~33% 
    Pay Less: Lower average order costs by ~25%
    Reduce Cycle Time: Reduce time to get goods by ~30%
    Reduce Operating Costs: Reduce time spent on purchasing / auditing by ~20%
    Improve Spend Predictability: Increase spend under management by ~20%
    Total Customers: 150+ including
    Platform Spend: More than $2.5B through 35,000 suppliers
    Spend Growth: 704% year-over-year
    System Availability: 99.999% uptime
  • 5. About Williams-Sonoma
    The first store opened in 1956
    Brand sells hundreds of products from around the world
    More than 250 stores nationwide
    Direct-mail business that distributes millions of catalogs a year
    Highly successful e-commerce site
    Dedication to customer service and strong commitment to quality
  • 6. The Thing About Traditional Benchmark Surveys
  • 7. They Can Tell You A Lot…
    Market metrics and trends
    Savings / spend 2 – 8%
    Quality: Rejection % 4.1%
    Cost of Processing per Order / Invoice (USD) PO: $217 average
    Spend Under Management 48% - 87%
    Req Approval Cycle (Time) 5.79 - 9.35 days
    Total Procurement Costs .34 -.38% of revenue, .80-.85% of spend
    (Source: AMR Research)
  • 8. …but what can you do with it?
    High level data
    Limited segmentation ability by role or industry
    Insightful – but inactionable – findings
    Promotes the results of “best-in-class”
    But doesn’t tell you specifically how to get there
    Data quality
    Often collected 6-to-12 months prior to publication
    Self-reported, survey data subject to interpretation
  • 9. A New Approach to Benchmarking & Measurement
  • 10. Transactional – Not Survey – Driven Benchmarks
    Necessary to track your performance and demonstrate success
    Without true measurement, you cannot quantify results or define action plans
    Tremendous value to measure oneself against other organizations by industry, employees, spend, etc.
  • 11. Establishing Transactional Benchmarks
    Benchmarks are only as good as the data being collected!
    The Cloud can help organizations incorporate benchmarks as a part of business flows
    Multi-Tenant architecture on one code line allows for the same set of measurements for the same metrics
    Instant scaling and load balancing for real-time data collection and calculation
  • 12. Success in the Cloud
  • 13. Innovation in the Cloud
    Traditional Dev Model
    Lengthy Independent Upgrades
    Difficult Independent Implementations
    Multiple Code Bases
    Non-viable long-term business model
    Cloud Dev Model
    Quick and Simple Upgrades
    Rapid Implementation
    One Optimized Code Base
    Sustainable Business Model
    VS
    Cloud Platform
  • 14. The Cloud is the Most Cost Effective
    Year 2
    Year 3
    Year 1
  • 45. 10 Must Measure Metrics & KPIs
  • 46. How To Demonstrate Success
    Spend management success measured by improvement in:
    Efficiency
    Removing road blocks that cause delays
    Eliminating need for manual intervention
    Driving user adoption of system
    Effectiveness
    Ensuring purchase policy compliance
    Moving toward 100% of spend under management
    Delivering savings to the organization’s bottom line
  • 47. 10 Must Measure Metrics
    Efficiency
    Req & PO Approval Cycle (Time)
    Orders & Invoices Processed per FTE (#)
    Purchasing Operating Costs (USD)
    Days Payable Outstanding (DPO)
    ‘Touchless’ Procurement
    Effectiveness
    Savings / spend
    Quality - Rejection %
    Cost of Processing per Order & per Invoice (USD)
    Spend Under Management
    Customer Satisfaction Ratings
  • 48. Ways to Improve
    • Allow for mobile approvals
    • 49. Provide pertinent information in requisition emails
    • 50. Give real time budget information to approvers
    Requisition Approval Cycle Time
    Requisition Approval Cycle Time
    Amount of time taken to approve a requisition from the time it is submitted
    Important to track the velocity of business
  • 51. % of Requisitions Rejected
    Percentage of Requisitions Rejected
    How many requisitions are being rejected to eliminate wasteful spend
    High percentage could indicate:
    Poorly documented/visible
    A lot of off contract spend that is reigned in via the approval process
    Ways to Improve
    • Policies available at time of requisition
    • 52. Flexible catalogs and e-forms to drive employee request process
  • Number Processed per FTE
    Ways to Improve
    • Streamline processes with advanced approval workflows, contract checks, etc.
    • 53. Enable invoice submission vis cXML or EDI
    • 54. Utilize a supplier network to flip PO’s into invoices
    Number of requisition / invoice line items processed per FTE
    A large amount of requisitions / invoices should be processed by each FTE
    Should not touch each requisition / invoice, simply review exceptions
  • 55. Total Cost of Procurement
    Ways to Improve
    • Do more with less resources
    • 56. Streamline processes with advanced approval workflows, contract checks, etc.
    Total Cost of Procurement
    How much of your revenue and spend go to cover procurement costs, including:
    Soft costs: FTEs
    Hard costs: applications, hardware, maintenance costs, software, etc.
    TCO should be as low as possible
  • 57. Days Payable Outstanding
    Days Payable Outstanding
    Time from Invoice Receipt to Invoice Payment
    Need to balance cash on hand vs. payment terms vs. early payment discount opportunities
    Ways to Improve
    • Integrate finance / invoice management as a part of process
    • 58. Take advantage of favorable payment terms and discounts
  • ‘Touchless’ Procurement
    Ways to Improve
    • Reduce manual intervention points
    • 59. Move processes online when possible
    • 60. Leverage workflow automation
    ‘Touchless’ Procurement
    The efficiency of your procurement process
    Should require as little manual processing as possible
    Manual handling should be the exception, not the rule
  • 61. Cost of Processing
    Cost of processing requisitions / invoices
    Based on the loaded cost per FTE and the number of requisitions / invoices processed
    This number should be as low as possible
    Ways to Improve
    • Utilize automation to continually move this metric down
  • Savings Percent of Spend
    Ways to Improve
    • Understand why employees are not using negotiated pricing
    • 62. Sole-source or find two or three vendors that can fit your needs
    • 63. Negotiate with vendors to gain favorable pricing
    • 64. Put controls in place to route employees to use the new negotiated pricing
    Savings as a % of spend
    Total amount saved through discounts, negotiated prices, avoidance, etc. across all spend
    Low percentage would indicate that certain areas of spend are not being covered by strategic activities
  • 65. Spend Under Management
    Ways to Improve
    • Drive user adoption
    • 66. Ensure all spend goes through one centralized system
    • 67. Include all spend: POs, expenses, indirect, etc.
    Spend Under Management
    How much of your spend is visible to the appropriate decision-makers
    Defines spend visibility and impacts the ability to properly control spend
    100% spend under management means no spending surprises
  • 68. Customer Satisfaction
    Ways to Improve
    • Continuously collect feedback and measure
    • 69. Let customers provide input into the process
    Customer Satisfaction Ratings
    How is the process impacting the ability to meet customer needs
    Employees get what they need to meet customer needs
    Negotiated pricing, discounts, etc. help keep customer costs low
  • 70. Develop a Metrics Strategy
    Plan: Develop migration plan for the metrics with timeframes and milestones
    Scope: Define feasible and actionable scope, by supply chain, end-to-end
    Process: Pay attention to ownership, roles, responsibilities, and structure
    Culture: Manage the culture and motivation
    Tools: Invest in the tools that will enable repeatability
    Pilot: Use pilots to test the approach
    Tradeoffs: Beware of tunnel vision and understand the interdependencies
    Turning data into action: Identify conclusions using patterns and levers, prioritize results, and manage the communication
    Power through Process: Institutionalize the measurement program through a business process (e.g., S&OP/Procurement) to make it “sticky”
  • 71. Williams-Sonoma
    Building a benchmarking and measurement strategy
  • 72. The Benchmarking Challenge in Retail
    A distributed model
    Each brand operates “independently”
    Limited consistency in process, spend categorization and suppliers
    Difficult to access complete spend data by category
  • 73. Benchmarking Today
    3 BIG challenges
    No spend visibility
    Information “after the fact”
    No spend control
    Spend not approved prior to purchase
    Lost opportunity
    Limited ability to act based on insights available
  • 74. A New Approach
    Cloud spend management
    One platform for all brands to manage spend
    Real-time data, benchmarks, alerts, action
    Starting with the end in mind
    Benchmarking is to key to long-term success
    Must be included as a part of upfront implementation efforts – you can’t go back after the fact to get the data you need!
  • 75. Developing the Strategy
    Step 1: Identify Key KPIs
    Step 2: Establish a Baseline
    Step 3: Align Process, Technology & Measurement
  • 76. Identify Key KPIs
    Spend category measures
    Commodities, supplier contracts, brands
    Efficiency measures
    Time / cost to process PO / invoice
    Effectiveness measures
    Savings vs. spend, rejection / approval rate
    Retail measures
    Store / warehouse inventory, sales vs. operating costs
  • 77. Establish a Baseline
    Review: requisitions and categorize spend appropriately
    Calculate: spend by category, spend by budget, effectiveness metrics
    Review: existing processes and resource requirements
    Calculate: processing time, efficiency metrics
    Review: supplier contracts and spend compliance
    Calculate: % of spend that is on contract, preferred supplier savings, most favorable payment terms
  • 78. Align Process & Technology…
    Stakeholder
    Requirements
    Supplier
    Relationship
    Management
    Category
    Planning
    Contract
    Negotiations &
    Management
    Requisition Issued
    Requisition Approval
    PO Issued to Supplier
    Items Received
    Purchase Need
    Invoice Matching
    Invoice Received
    Invoice Matched to PO
    Item Receipt Confirmed
    Invoice Paid
  • 79. …and Technology & Measurement
    Stakeholder
    Requirements
    Supplier
    Relationship
    Management
    Category
    Planning
    Contract
    Negotiations &
    Management
    Requisition Issued
    Requisition Approval
    PO Issued to Supplier
    Items Received
    Purchase Need
    Metrics: Goods & Services, Suppliers, Amounts, Budget, Submission Timestamp
    Metrics: Accepted / Rejected Status, Approval / Rejection Timestamp
    Metrics: PO Number, Issue Timestamp, Supplier Transmission Timestamp
    Metrics: Receipt Timestamp, Supplier Ratings
    Metrics: Billed Amount, Budget, Invoice Timestamp
    Metrics: Final Amount Paid, Budget, Payment Timestamp
    Metrics: Discount Rate, Preferred Suppliers, Payment Terms
    Invoice Matching
    Database / Reporting Engine
    Invoice Received
    Invoice Matched to PO
    Item Receipt Confirmed
    Invoice Paid
  • 80. Fully Equipped for Effective Spend Management
    Real-Time Executive Dashboards
    Up to the minute views into spend and budgets, real-time savings and performance reporting
    Real-Time Transactional Benchmarks
    Performance comparison with others in the market based on actual transactional data and trends
    Database / Reporting Engine
    Monthly / Quarterly Performance Review
    In-depth spend / performance review, identify areas for long-term improvement, adjust accordingly
  • 81. Ambitious Goals & Targets
    Get 100% spend under management
    Regain spend visibility and control
    Drive 100% user adoption
    Phased rollout with 150 initial users, then company wide
    Cut process costs
    Continue to fine-tune for efficiency and resource optimization
    Consolidate to suppliers / category
    Reduce category overlap for the best deals and discounts
    Put an emphasis on expense management
    Drive savings not just through purchasing, but tighter expense management
  • 82. A Plan for Success
    Baseline benchmark for comparison
    Data collection and metrics are a part of implementation
    Real-time data access through dashboards
    Periodic reports and reviews to identify areas for improvement
  • 83. Q
    &
    A
  • 84. THANK YOU!
    Ravi Thakur
    Vice President of Services & Support
    Coupa Software
    ravi.thakur@coupa.com
    Warren Ganda
    Corporate Purchasing
    Williams-Sonoma
    WGanda@wsgc.com

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