1. MANAGE SPENDING AND DRIVE
SUPPLIER PERFORMANCE WITH
PROCUREMENT IN THE CLOUD
This report summarizes a workshop conducted in
March, 2011 at the CFO Rising Conference in Orlando.
Leaders: Ravi Thakur, VP of Services and Support at
Coupa, and Scott Mars, Engagement Manager at Emptoris

2. MANAGE SPENDING AND DRIVE SUPPLIER
PERFORMANCE WITH PROCUREMENT IN THE CLOUD
A typical business using cloud-based, spend-management solutions
can save $40 on every purchase order (PO) processed. Moreover, 10%
of the annual spend on direct and indirect materials can be eliminated.
Finance executives are intrigued by these messages—and they want
to learn how automation can address inefficiencies in procurement,
payables management, sourcing, and contract management.
The great promises of business automation have always been cost A critical point: automation allows a procurement team to cut the
reduction, faster cycle times, and information accuracy. Procure- time spent on purchasing by 20%. It also eliminates the time that
ment and payables management are functional areas that have long has to be spent by accounts payables staff resolving data problems
been rich but resistant targets. That is about to change, as cloud- on invoices and other documents essential in the P-to-P process.
based computing enters the scene. Kicking off a workshop on this
theme, Ravi Thakur, vice president of services and support at Coupa, Automation also promises to reduce maverick spending by 33%,
explained his “simple $40-per-PO formula” for optimizing spend according to Mr. Thakur. Maverick spending, of course, occurs when
management. The idea, he argued, is to confront problems and employees purchase goods or services from vendors who are not
waste caused by paper-based procurement and invoice processing. on their company’s approved list. In addition, automation promises
The typical procure-to-pay (P-to-P) process is rife with opportuni- to deliver granular views of the business drivers of financial results.
ties for dramatic process improvement, and automation is the key to Conceivably, those perspectives can enable the finance managers to
eliminating as much paper as possible. improve the guidance they provide to unit managers trying to meet
monthly or quarterly financial targets. For example, with faster and
To demonstrate his point, Mr. Thakur urged attendees to answer easier access to data about impending purchases, financial analysts
candidly this list of questions: can increase the accuracy of forecasts and then, if need be, alert the
controller that he or she ought to intervene and prevent unnecessary
• Are you able to stop maverick spending? spending. This is crucial when margins unexpectedly come under
• Are employees spending too much time keying paper-based pressure. The key here is that automation delivers information that
data into systems? finance teams can turn into actions.
• Are documents unsecure or often lost?
• Is it difficult to analyze spend patterns and provide useful In contrast, Mr. Thakur noted, automated processing yields
guidance to procurement staff? practical information that senior finance executives can access via
• Does it take too long to identify which departments or units dashboards.
are going to exceed their budgets for direct and indirect
spending by the quarter’s end? Looking beyond the $40 per-PO cost-reduction model, “best-in-
• Do you lack the time needed to improve the sourcing of high- class organizations are now saving, on average, 10% of their annual
value categories of spend? spend on direct and indirect materials by adopting electronic
• Can you drive more spend on individual POs? contract-management and e-sourcing capabilities,” contended
• Does it take too long to obtain goods and services needed to Mr. Mars, engagement manager at Emptoris. These solutions
operate efficiently? deliver “spend analytics” that provide the financial or procurement
analyst with vital transaction-level data that then sets the stage for
improved negotiations with suppliers. Specifically, these solutions
permit companies to:
2| © 2011 CFO PUBLISHING LLC JUNE 2011

3. • Quickly analyze price differences among suppliers Mr. Thakur explained that Rent-A-Center is a classic low-margin
• View addressable spend by category retailing operation that has to watch every dollar of spend. “Late
• Analyze payment terms data doesn’t allow for proactive guidance, and it works to subvert
• Leverage flexible and interactive reports, including: the accurate measurement of and prediction of business perfor-
• On/off PO mance.” A core question for a company like this is: How can the
• Working capital analysis organization get 18,000 people to act uniformly as they go about
• Preferred-supplier spend recoding information about the types of services they are
• On/off contract spend purchasing, and from whom? “Whether it’s a computer repair ser-
vice or the crew that arrives at midnight to clean a store, the problem
“You can use a spend-analysis tool to support market analysis and de- is that you cannot get that many people to conform to a common set
velop category-specific procurement strategies. It can help you to see of definitions, no matter how hard you try. And as a result, you get
otherwise hidden opportunities to reduce costs,” said Mr. Mars. There murky data that you cannot easily consolidate and decipher,”
is a clear trend, he added, among Emptoris customers: “They want to he said.
bring 80% of their spending into the system to do robust analysis.” As
for contract management, these e-sourcing solutions allow a business Another issue is that people want to see screens. With the prolifera-
to create contracts directly from sourcing events and to control spend tion of social media and personal computing, people are used to
by automatically tracking spending against contracts. seeing and relating to digital screens. If you don’t provide a comfort-
able digital interface, they will resist any regime you try to impose
Case Study: Rent-A-Center to drive data input consistency. “So even if you have great systems,
Rent-A-Center is the largest U.S. operator in what is known as the if you don’t have employees who want to use those systems, you’re
“rent-to-own” industry, with approximately 35% market share based sunk,” offered Mr. Thakur. “You must invest in technology people
on store count. With more than 3,000 stores and over 18,000 employ- will embrace.”
ees, Rent-A-Center in 2009 reported annual revenue of more than
$2.8 billion. After adopting innovations in e-procurement and With the right technology solutions, Rent-A-Center gained ready
e-sourcing with inherent spend analysis capabilities, this organization access to fact-based and forward-looking information at the
was able to report savings of $1 million in just two months. corporate level, as well as a tool that could be easily mastered by its
retail employees. The organization was able to perform “real-time
In 2010, Rent-A-Center adopted Coupa’s P-to-P solution along with synchs between Lawson [its ERP system] and Coupa for easy
the Emptoris solution for sourcing, contract management, and spend reconciliation.” It also enjoyed seamless business processing
analysis. Mr. Thakur explained that this retailer had been over- between locations, corporate-level AP, and senior management.
whelmed by spending data coming from 31 locations doing business In all, the business enjoyed an integrated solution that involved:
with more than 3,000 suppliers. “The issue was how to consolidate
all that data and offer proactive guidance,” said Mr. Thakur. By the • Sourcing
time finance managers who were supporting the regional and district • Contract management
management teams received the consolidated and reviewed data, the • Spend analysis
view was outdated and murky. They were unable to notify the right • Procure-to-pay
people in time for them to take immediate action. They were unable to
offer decision support about how to drive better spend decisions. Rent-A-Center ended up with “a closed-loop solution,” said
Mr. Thakur. Moving forward, the company is focused on continuous
There are several root causes of “murky data:” process improvement and ongoing productivity improvements that
• Manual processes will no doubt yield bottom-line enhancement.
• Paper-based
• Entry errors (miscodings), omissions
• Separate, siloed systems
• Difficult to access and aggregate
• Data shared between systems is limited
• Decentralized operations
• Inconsistent data
• Local, unknown suppliers
• Working around the system
• PO-less invoices
JUNE 2011 © 2011 CFO PUBLISHING LLC |3

4. Manage Spending and Drive Supplier
Performance with Procurement in the Cloud was
published by CFO Publishing LLC, 51 Sleeper St.,
Boston, MA 02210. Please direct inquiries to Lisa
Nelson at (617) 790-3249 or lisanelson@cfo.com.
CFO Conferences is a unit of CFO Publishing LLC,
which also incorporates CFO magazine, CFO.com,
and CFO Research Services.
June 2011
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