Benchmarking your Business Metrics

Welcome to this webinar. If you are just joining us, we'll get started again at 11 AM Hong Kong, Singapore. So if you are already on the call, just stay with us for a few more minutes and we'll get started very shortly. Thank you. Okay, for those who are just joining us, we still have 2 more minutes before we start, so just bear with us and we'll get started shortly. Thank you. All right, okay, so I'd like to welcome all of you to this new webinar on benchmarking your business metrics organized by Coupa in partnership with the Global Supply Chain Council. My name is Max Henry. I'm going to be your host today with our speakers. So just to— before I bring up our 2 great speakers that we have today, I wanted to give you a few guidelines about how we're going to be running this event. So this The entire session is going to last just 55 minutes, so we'll be done again 5 minutes before the end of the hour. We will have 2 presentations, very short, followed by an interactive Q&A. So during the Q&A, you will be able to ask a question, but if you have any questions before that, you can ask your questions at any time using the Q&A button located at the bottom of the screen. So as you start to watch the presentation, if you have any question, go ahead and click that Q&A button. You can also, if you want, in the chat, just quickly introduce yourself, just tell us who you are, what you do. And but again, if you have any questions, make sure to use the Q&A button at the bottom of your screen. So today we have 2 great speakers. We have Michael Odom from Coupa, which will be speaking first for about 10-15 minutes. And then we will have Vincent Tessier-Treton, who's a partner at Devolut and also used to work at Telenor. So without further ado, I'd like to bring on Michael to join us and start with his presentation. So welcome, Michael.

Awesome. Thanks, Max. Great to see everybody. Really excited about today's session. Just to give you some background on myself, I'm Michael Odom. I've been working across procurement technology for the last about 15 years, with the last 6 of it being here in the Asia region, spending time up in Japan, about 5 years in Singapore, and now down in Australia. So really excited to have the opportunity to really talk through what Coupa does across benchmarking. And then we'll also hear from Vincent around how he's seen benchmarking used across different organizations for specific targeted improvement projects. So just to give some background around why Coupa does the benchmark report, I think we've seen quite a bit across the market. It's— this webinar is Extremely timely. We're seeing rising inflation, labor costs. As procurement professionals, we really need to be more strategic than ever. As we work hand in hand with finance, we need to find that balance between cost savings in an environment like this and really just creating true value for the business as well. And that's really started to shift some of our priorities. I think we've always had the longstanding priorities that focus on cost savings, supporting the business's ability to adapt and respond to needs within agility and ultimately drive compliance, drive governance. But over the last several years, we've also seen new priorities emerge as well. Managing inflation has become a huge priority. I mean, in this market, it's not always about cost reduction. Just paying the same price can be seen as a major win for some categories. We're also seeing more and more pressure to deliver on ESG initiatives that I think everybody's promising big, big things around ESG. ESG in annual reports, sustainability statements, leadership statements. Ultimately, we're now being asked to deliver upon those statements as well. So being able to actually leverage procurement to drive a lot of those ESG initiatives has become more of a topic that we have to tackle. And just beyond some of those initiatives as well, just the general changes and disruptions across supply chain that we've seen over the last 24 months have really made it important for us to To know our suppliers, know our supply chain, and know how the impacts of those areas ultimately will affect our business. And that's a that's a really important part of really understanding where we stand. So when we look across these different priorities and we look to create new value, we really have to understand how our business is doing right now. And that's ultimately where where Cooper. we seek to provide a lot of guidance there. So our community is built from over 3,000 customers, 9.5 million suppliers, and over $4 trillion of spend that's gone through the community. Now, what I'm gonna share today is some of our most relevant benchmarks across our 2023 Global Business Spend Management Benchmark Report, which we release every year to really help you understand where your organization's today. Because ultimately, we want that to be able to provide you insight into some of the— what we see as critical KPIs and not just us here at Coupa, but also within the customers within our community. It ultimately allows you to see how top performers are operating and give you some benchmarks for data-driven peer-to-peer comparisons. Now, we really look at 20 key KPIs. There are dozens of success metrics that we track within Coupa, but we've really identified 20 that are most often tracked and really we feel provide the most most value in terms of seeing how you're performing across the business. And across those 20 KPIs, we look at the top quartile. So ultimately the top 25% of performers across each of these KPIs to provide that benchmark that you can measure yourself against. Now, we won't go through all of those KPIs. You can see the ones that we measure on the right side of the screen, but we will highlight a few of them. But one of the ones I really want to highlight right there at the top is ultimately spend control. All of these roll up into the ability to put more spend under management and ultimately control the prices, the expenses, the costs to the business that you're seeing. And what we found is that a lot of analysts look at what spend management can deliver. They typically will estimate 3 to 4%. Within Coupa's top performers, we're seeing 6.6% across business spend management savings. Now, one thing that I've found very interesting, we'll talk a little bit about differences across regions, across industries, but within the Asia-Pacific region, we're actually seeing those numbers even higher, close to 8.2%. And during the Q&A, we can talk a little bit around why I think some of these benchmarks skew differently across the region as well as across different industries. But it really is something that we look across from an industry and regional perspective to understand why there are some of these changes and ultimately give you the data that you can use to successfully benchmark a program that you might put forward. So why do organizations typically look to benchmark? Well, I think a lot of times it's looking at identifying how you— what goals you have as an organization and how you want to get there. How can you achieve those goals? And seeing what leaders are achieving across very similar goals can help guide your plan. So whether you're looking at driving profitability, within the organization, whether you're looking to better mitigate risk, avoiding fraud, overages, and just the supplier relationships, if you're looking to optimize cash or just operate more efficiently, a lot of these different KPIs can be used to essentially help you build almost like a checklist or a report card to see how you are performing across these different areas. So as I mentioned, I'd like to dive into a couple of these in a little bit more detail and really highlight what kind of trends we've seen both across the globe as well as within the region. The first one that I think is very timely because, you know, more and more we've heard that the focus of procurement has shifted less to be around cost savings and more to be around just compliance, risk management, ensuring that the business continues to be able to operate with the suppliers that it's working with. And that's where the risk management evaluation completion rate is one of the ones that we find talking about again and again. And over the last year, we've identified that the completion rate is very high, over 99%. But what's really striking here is that just a year ago, it was only around 82%. So we asked a number of organizations that are leveraging Coupa why they've seen this increase. And really, their feedback was, Risk management has become such an important part with everything that's happened with COVID supply chain challenges. Understanding the risks to their business continuity across the supply chain, across the suppliers that they're working with, has become absolutely critical. So they've really driven programs that push hard on risk evaluation completion. They looked at how they're segmenting their suppliers, which suppliers need to complete these evaluations, and really So really focusing more on how they're managing those relationships and the risks involved with them. We've also looked at on-contract spend. So this is really the— ultimately the ability to put spend through the organization against pre-negotiated contracts, essentially where you've been able to go out, negotiate terms, prices, and have those better prices and terms available team members throughout the business in order to leverage the work that procurement has done against the contracts that have been pre-established. And this is where we're seeing our top performers achieving over 80% of spend on contract. Now, what we've seen here is that the numbers really haven't changed year over year. We've seen a slight increase, but it really just focuses on one of the core areas of spend management is driving more and more spend onto a process that's pre-approved, so you don't just have invoices showing up. And even better than that, being able to drive spend and buying practices to activities and items, services that have already been renegotiated. And that's ultimately where we're seeing most mature organizations are able to identify forecasts, work with suppliers proactively to contract the correct terms, rates, and ultimately allow the business to buy against these contracts. Now, one thing we've seen in Asia-Pac is that the, the numbers of spend on contract are actually a little lower than the global number. But what's interesting here is when you look at the overall spend under management, both globally as well as across Asia, it's about at 95%. So that includes both spend on contract as well as anything that goes through a pre-approval process. So while spend on contract may be a little lower in Asia and Australia and New Zealand, we are finding that organizations that are still top performers are able to leverage pre-approval processes and still engage in a way that allows spend to be reviewed, approved before it's committed, even if it's not necessarily at a pre-approved price on a contract. Now, the last benchmark set that I really want to look at is cycle times. Now we have cycle time KPIs across the entire source-to-pay cycle, whether we're looking at the amount of time it takes a supplier to update their information records or contract approvals, sourcing times, all of these. But the ones I really wanted to focus on today are a little bit more focused on the operational side. So requisitions, invoices, expense reports, because ultimately these are the ones that really show how procurement, finance, how your teams are working with the business as a whole. This isn't something that's siloed to specific organizations that are really focused on procurement only, but really focus more on how procurement is helping the entire business operate. And this is where we've seen the trends have gone pretty much— they've gone down in a good way. So the cycle times have gone down for the most part. You'll see across the requisition and invoice times very slight changes, so not too much, but it is trending in a positive direction. Now, one thing we did notice was that expense reports are taking a little bit longer to process, and when we asked organizations, why do you think that's the case, they said that just with the types of controls that have been put in place over the last 18, 24 months, there is a lot more scrutiny on spend going through the system. There's a lot more scrutiny as to, does this spend actually need to take place? Why did this spend take place in the case of expense reports? And we've actually seen this reflected with the number of denied requisitions as well. So even though that's not reflected in the cycle times, it's just showing that there's just— there's more of a watchful eye. with businesses being a lot more careful about how their money is being spent. Now, when we look at the APAC trends here, we're seeing in general APAC tends to operate a little bit faster except for on that expense report time. And again, we receive the same feedback. When it comes to expense reports, there's just a lot more scrutiny as to what's going through the system, whereas with requisitions, invoices, especially where it's tied to existing contracts, pre-approvals through a purchase order process, there's a lot more trust within the business that this spend is legitimate. This is spend that's been approved by the business, and ultimately it's spend that needs to take place in order to drive the organization to success. So we have a number of different— we've only covered about 5 of these KPIs, and we could go into each of these in much more detail and happy to answer any questions you may have. But ultimately, I think what we'd like to do now is encourage you to download the benchmark report, take a look at it, take a look at how it covers different functional areas within the organization and, and how it can ultimately help you drive and set different success metrics that you may have within your business. And beyond that, I think ultimately what, what I've shared today is a very cross-industry look. There's also the ability to start to look down at specific examples of how benchmarking can help. We can look at industry cases, we can look at regional cases, and ultimately tailor the information to within the benchmark report to a very specific program that you may have. to drive your initiative. And with that, I'd like to turn it over to Vincent. So Vincent's going to talk us through exactly how he's seen organizations leverage benchmarking programs like this to ultimately drive world-class performance management. So Vincent, over to you.

Thank you, Mike. And hi, everyone. Really happy to be here today. I'm Vincent. I'm a specialist in digital transformation and procurement technologies. I used to work in Telenor where we implemented an enormous Coupa implementation with about 10,000 active users at the end. So benchmarking is definitely a topic that I had to explore in depth. So if we go to the next slide, please. I first asked ChatGPT what it has to say about benchmarking, and it nailed it. It said that it's important to approach it with a critical eye.

Why?

Because when I see these benchmarks, these KPIs from Coupa, I'm very, very impressed. And 3 years ago, when I started to implement the continuous improvement framework and performance management, I looked at these leaders' figures and I couldn't believe it. We were so far behind on some of them, and some were not even looking very realistic. How can you get a requisition approved in 3 hours When you need to have maybe the privacy officers, the finance controller, well, you have a lot of different things, right? And that's why benchmarking is interesting, to understand the capabilities of the system, what you can achieve. But at the same time, you have compliance, you have many different other things that you need to put in perspective to, to really leverage on it. So if we go to the next slide, please. It also depends a lot on who is reading what you're presenting as benchmark. So here I just put an example. The figures are dummy figures, but it's typical reporting that most of you might know. You put your baseline, your actual, your target, and very often you're asked to compare to leaders or to have a benchmark. So you put that and then you you compute your delta. And if I'm a performance manager or performance director, I'm looking at it and I see a huge gap between my targets and the leaders. So I see a lot of exploration possibilities, I see a lot of uplift potential. So I know I have work for the coming 5 years, right? However, if I'm a CFO and I'm looking at that, my first question would be, how come we are so bad? How come we are so much behind leaders? And the discussions can turn pretty negative immediately. So different personas will also see different things. What I would look at the CPO is that, okay, my baseline versus actual, we get a good progression, steady progression, we're on track for the target. So it really depends on the perspective you have. That's why if you put it just like that, it depends on the persona, you can have very, very different reactions. Next slide, please. So when you put that in perspective, you have to look at different things, compare what is comparable. Are you talking about the same industry? Are these leaders in your industry? What are the categories in scope? I know that, for example, a lot of Coupa customers are from the US and mostly having indirect spend, But if you have direct spend, how can you compare? You have very different requirements when it comes to approval chain, to compliance for direct materials. Also, you have a system which is made for transaction efficiency. So very likely you don't have only sourcing transactions. You might have other non-sourcing transactions, what we also call delegated areas. Is that in scope of what you're trying to measure? Very important to put that in perspective. Compliance and regulatory requirements. One of the fantastic KPIs in Coupa is electronic invoicing, right? But if you're in Thailand, this is totally irrelevant because there's a regulation that says that you need a paper invoice. So again, it's really about putting everything in perspective. Probably you have an approval chain which is longer because of certain compliance requirements. If you're in banking, you might have more Scrutiny, etc., etc. Also very important to understand: maybe you perform very well on the count of transactions, but you don't perform very well on the volume. You maybe have one transaction which is $100 million, and this transaction is not on contract, and is totally skewing up your your KPI. So very important to put both volume and count as well. Definitions. I remember talking with the analytics director in Coupa about touchless invoices. Who has a very clear definition of what is a touchless invoice? Is it an invoice received electronically, PO-backed, and matched at the first pass? Or is it something that has been input electronically by the supplier? Does it count as touch-free? There's a lot of very different definitions for different KPIs. So, it's extremely important when you benchmark yourself to leaders to make sure that you use the exact same definition and that this definition is fit to your process. If it's not, then drop the benchmark because you cannot measure what's not comparable. Data quality. What analytical tools do you use? We use Coupa Analytics, but very often people are outputting Excel sheets with all the transactions and putting that in a Power BI or in a BI tool with automatic extraction. So ultimately, how good is this extract? How good is your data quality? I've seen, for example, for commodities, when you enter your commodity, people are lazy, don't want to find the right one, so they take the first one on the list. And that's totally making no sense when you're trying to report on performance. And again, when you look at leaders, you tend to want to copy what they do to be at the same level, but that actually limits your creative mindset. You have your own process, your own people, your own requirements and constraints. So innovate, don't copy. Next slide, please. One thing that I really liked to do when I was doing benchmarking is to drill down. So you can drill down by geography, count, amount, by categories or commodities, indirect versus direct, and go the most granular you can. And you get this kind of colored mosaic with green, yellow, and red. And you can very quickly identify where are your gaps. And that's very powerful because if suddenly here you see this one cell red, which is in my BU number 2 for advertisement, I got 1% compliance. But why is that? Maybe it's a delegated area. If it's a delegated area, they are exempt from the process. So instead of having it red because it's exempt, you put it gray. And then you can provide a map to your management, which shows something realistic, including the exceptions, but also that helps you to identify the areas of improvement. And then you can say, hey, actually, I went to the marketing people, I talked with them, and we have decided to include maybe a compliance component in their performance metrics, individual performance metrics. So we expect this KPI to increase significantly in the next quarter. That's very, very powerful. And also a lot of people will tell you, oh, we're very, very compliant, it's impossible what you're finding. Well, when you show them that and when you show them red, you hurt a bit their pride. So it's not necessarily a very good discussion. But typically what you see is after a few weeks, people come back to you and, oh, you know, you were right, there was a problem there, we actually fixed it and look where we are now. When you hurt the pride of someone, you also get the opposite reaction where they will work hard to improve, and that technique was working very, very well. Next slide, please. So this is my last slide for today, just a little tip about how you would structure a performance management framework, and that depends on your audience. Typically, you have OPI, KPI, PIs. Your OPI is one, maybe 2 top-level KPIs that you show to top management. They're supposed to represent the work of your full organization, of your full function, and they should showcase the overall improvement efforts. It can be an aggregate of many different KPIs weighted, it's up to you, but you have to select one or 2 OPIs. These will have a strong target on it, And these will be representing what you do. KPIs, you use that for business reviews on the local perspective. You typically have 3 to 6, you don't want to have too many, otherwise you spend hours discussing really small details and it's not really productive. But ultimately, what you should have for each and every one of them is an explanation of why you are at this level and what are the next, let's say, the top 3 initiatives. That you have to improve this, this KPI. And they are used in top management meetings as a backup of the OPI to showcase in more granular detail if it's needed and requested by management. And finally, the performance indicators, probably the most important for me, because that's the one you use every day in the operation schemes for analytics and continuous improvement. And you should have as many as possible. We build dashboards with maybe 25, 30 KPIs and we track them daily. We have a report going daily to everyone in the transactional and tactical teams. Why is that? Because here you don't put target, you don't put any target. It's not productive to put targets on everything. Here you just build this kind of mosaic, you identify the areas of improvement, and you work on it. Really, the goal is to explain why the KPIs are how they are and to try to find the opportunities and the pockets of improvement. So that's more or less what I wanted to present to you today. I'll give it back to you, Max, and ready for Q&As.

Thank you very much, Vincent. Very interesting presentation for both Vincent and Michael. Again, I want to remind all of you that if you have any questions, Go ahead, you can ask your question now. You can click on the Q&A button located at the bottom of the screen, and Michael or Vincent will be very happy to respond to them. We have a few questions coming up already, but maybe I'll get started with you, Michael. In your presentation, you mentioned some of the specificities of the Asian markets when it comes to benchmarking. When you start looking at some of the numbers of the report, what actually surprised you on some of the KPIs or other countries that you've seen, especially in Southeast Asia?

Yeah, I think it's really interesting, especially when you compare the broader maturity of organizations across regions. You see organizations across Asia that are in many cases very mature with their procurement processes, especially across direct materials and how they're managing the, their supply chains. On the flip side, you have a lot of organizations that are just starting to move into digital procurement. They're looking at how do we move from emails, paper, Excel into something that is actually tracked, just getting the basics around operational procurement right. And what's interesting is looking across the organizations that are leaders versus laggards, it's actually quite a mix of organizations that A couple of years ago, they were fairly immature, but they've made huge leaps in terms of being able to move more and more spend under management to drive down cycle times. So a lot of times you expect that organizations that are— they started off extremely mature just in terms of how they're managing categories, how they're doing their processes, they would have the best KPIs. But that's not always the case. We see that not only across different industries, different organizations, but also within the region as well. And just based on how different the organizational maturity is across Asia, I bet that was one of my biggest takeaways, was just seeing that there wasn't necessarily one underlying trend, but rather you saw these pockets of maturity and immaturity that would really jump out through the KPI numbers.

Vincent, you mentioned that example of Thailand, which, you know, which is still using paper invoice. But I think, I guess, this is not the only country in Asia which does that. So do you see, do you see the existing government regulation kind of blocking some of those improvements, you know, especially in Asia?

I don't really think so. I think especially there's more and more adoption of electronic invoicing like PayPal Network, very strong in Singapore, in ANZ, and it's coming to other countries, I think in Malaysia end of the year or next year. So on this aspect, there's a lot of improvement. But I think that the compliance aspect in Asia is much, much more strong than it is in Europe. A simple example, when we started to implement in Asia, the finance controller told us, but how do you calculate exchange rate variance in your accruals?

And we're like, what is that?

Because we implemented Coupa in Europe and we never had to book that. Because in Europe, for example, they have very stable currencies and they don't care. It's so insignificant that they don't care at all. The way they do accrual is typically probabilistic. They take samples to verify the accuracy of it. While in Asia, it's really line by line and it has to be perfect.

Why?

Because a regulator, in case of audit discrepancy, is much, much, much harder in Asia than in Europe. If you fail your government audits, you can get very hefty fines and limits in business. We've seen that in geographies like Bangladesh, like Thailand, very strong. So typically the compliance requirements make you a bit slower.

Yeah.

But then I would like to send back the question. If you approve an invoice in 3 hours, wonderful. But don't you skip some compliance requirements? Are you really sure that you have control? Sometimes improving a KPI comes at the expense of others, and that's what you have to be very careful of.

So it's important to strike a balance between all of that. Yeah. Okay, we have some questions, so let me take them right away because we might have more coming in. And again, if you have a question for Vincent or Michael, you know, you can go ahead and click that Q&A button now. First question, maybe from Pramod, who's asking, what could be the main reason to have on-contract spend at 80%? Is there a possibility that spot buy increase to handle disruption, or new saving opportunity, lower price than contracted, or some innovation attempts? Vincent and Michael, you can see that question here. What's your take?

So I'll take that one first. I think when you look at best practices, and this is a— it's a very broad statement that Probably doesn't cover every single category out there. In fact, I know it doesn't. There will always be categories where you're going to have to go out and do spot buys just based on the nature of that type of business. But broadly speaking, more and more you want to drive as much spend under contract as possible. You want to pre-negotiate, have preferred vendors, consolidate vendors, which again, there are pros and cons to that strategy as well. But it allows you ultimately to narrow the supply base, be able to identify preferred suppliers that are lower risk, and really ultimately drive that spend under something that's pre-negotiated to really maximize the benefit you can achieve. Of course, there will always be opportunities to leverage spot buy capabilities, especially across a preferred panel of suppliers to drive down prices for specific types of SOW work or where there may be customer requirements, deliverables, that sort of thing. But what we see time and time again is that the best-performing organizations try and structure and standardize their spend as much as possible and drive more and more of that onto contract. Again, it's— with all of these, there's always the caveat of it does depend on the type of procurement. It does depend on the category. But when we look at these numbers and the KPIs, it is blended across industries as well as— As well as categories.

Okay, Vincent.

Yeah, for me, 80% is not realistic. It shouldn't be a goal for the simple reason that if you cover the full span of your organizations, it's a lot of delegation where you don't need a contract or you— that doesn't make any sense. I think for pure sourcing categories, yes, what you want to have is buying on the right terms, on the right price, And that's the only way to achieve it, is to make sure that you do it on contract. Let me give you an example. There's a famous vendor in sourcing automation software integrated with Coupa, actually, that basically captures a PR, will send an RFP automatically to the market. And what they've seen doing that is that the vendors replying to these RFPs are sometimes outbidding themselves from their contract pricing. So they give you a contract value of $100 per unit, and because of the urgency of the request, they will be ready to actually go down to $90. So ultimately, for me, what it is about, it's about process. For the 20% that are not on contract, or 30% or 40%, doesn't matter, what happens to it? Does it go through the right channels? Is there any control? Or Or you don't have any visibility on it. I think that's more the question and the storyline that should be presented during business reviews.

Okay.

Yeah, it's, I think looking at, it's not the topic for today, but buying channels is something that really impacts all of these KPIs. Looking at how different categories fit into different buying channels and ways of buying can ultimately impact the way you're driving the business forward.

Okay, let's take another question from Yongen, who's asking, could you give us some examples of PIs to measure margin or probability used in daily operation?

Vincent, you want to take a first stab at that one?

That one is a bit tricky. I mean, I don't know your process. I don't know how you calculate that. Typically, if you don't really have a process in place or a KPI, start with out-of-the-box KPIs that your system provides. Start with a standard definition and then iterate over it. So you'll get your KPI, you'll get a value that doesn't make sense to you, you're going to search why, you're going to figure out why, you're going to amend your definition And typically, when we came up with new KPIs, we thought we crafted them very, very well, we presented to management, and then we got a lot of backlash on it because we didn't think of this or that. Doesn't matter. But ultimately, this is what should happen. You should get feedback early on your KPIs definition, and then you amend it. You add exclusion lists, You add other variables into it, weightage. There's a lot of techniques, but really crafting KPIs, it's an iteration. And I think to get a really stable and satisfactory measurement framework across the full transactional and tactical layer, it took us about 2 years and a half to really get it right with all the stakeholders happy about it.

Okay. Vincent, did you look at Across your programs, did you look at cost savings from, you know, what would be negotiated through a sourcing process, contracted, and ultimately achieved through operational procurement? Is that something you would track, or did you have challenges across that?

So initially, when we started to build the measurement framework for Telenor, when they set up the central procurement, the first KPI was contracted savings. We need to start with something, right? Then the next year we went into realized savings, because then once you have a bit of control over your contracted savings, you want to see, do you actually fulfill your contractual obligations? And of course, there's a huge gap, right? And after that, you continue to complement the realized savings with other KPIs. Like, you can have quality measurements, go-to-market speed, are you a bottleneck? What is your SLA as a procurement organization as well? So all across the saving process, we were measuring different types of KPIs.

Yeah.

Okay. That's— sorry, go ahead, Max.

No, no, go ahead, Michael.

I was gonna say, it's a lot of times when I talk to different organizations that are different stages of their journey across spend management, some of them are just struggling across some of the basic visibility. They don't have one place where they can see all of the spend. So how are they going to be able to calculate savings? So it's always great to see organizations that have kind of moved forward in that journey, and they're a couple steps ahead. So they now have visibility. What are they doing with that visibility? How are they tracking what was contracted versus realized? So it's, yeah, it's always pretty exciting to see how organizations leverage the information that they have There's an interesting—

I think you nailed it here because there is one thing that for me is the foundation of being able to drive performance management. It's getting the data centralized, getting the definitions harmonized, normalized. You get everything in one place. If you have to start with something, start with putting all your data in one place and having visibility on your full span. This is to me priority number one for So I want—

I just wanted to bring up a comment. Someone is saying the only KPI applicable for contracts is that it is consumed correctly and all conditions are served. You agree with that?

I mean, it depends on which side, right? You commit to spend when you sign a contract. if you want to leverage the full benefit and help your finance with their forecast, you need to consume it properly. Totally agree. But actually, there's a lot of hidden value in suppliers not performing their obligations. There's a lot of solutions in procurement technologies that goes around obligations management. They would typically scan your contracts automatically, extract your obligation clauses, and give you an interface to rate the performance versus the obligation. And I've seen in renewal discussions this visibility over obligation performance being an extremely powerful argument to drive the next contract.

Yeah, it's, yeah, I mean, when I look across contract compliance, being able to, a lot of organizations I've talked to that haven't tied together negotiating the contract to executing the contract to actually delivering the work against the contract, they have no idea whether the invoices that they're paying are actually at the contracted rate unless they're doing spot checks, unless they're doing some type of audit. And that's a huge gap if you don't have that end-to-end visibility. So ultimately, I mean, procurement could be doing all this great work, going out negotiating contracts, helping drive costs down, find the right vendor. But if you're not actually looking back at these contracts and ensuring that you're compliant to them, then you may be missing out on quite a bit of negotiated savings and ultimately missing out on a lot of the SLAs and obligations that were negotiated as well.

And that same person is adding, contracts can give you savings or lose money. It may show savings upon engagement but could give you losses once completed. Okay, let me take a few more questions because we have a few things that I'd like to— again, a question from Pramer again for you, Vincent. He's saying top management will expect KPIs with best in class and less bother to compare industry or apple to apple. Top management will push to achieve best in class KPIs. How do you practically resolve this conflict?

It's like everything, it's change management. What is your storyline when you bring something? It would be unreasonable when you have done your homework and you put everything into perspective to say that you don't do your job or you don't do it properly or you should improve more. Yes, as a leader, you probably want to push as much as you want, as you can, your teams to perform. But if your team is presenting the right storyline, basically something which is in perspective, which is explained, and with the next step very clearly identified, and even potentially the impact of these next steps, that's something we are trying to forecast. I think that's the best change management way, right? You want to go in the sense of your management, Yeah, we need to improve. We have identified here, there, and there, and this is what we are doing for it. And this is the impact we expect within 3 months. If you can give this storyline during this kind of management calls, you will very likely make the discussion a good discussion.

Okay. All right, let's take another question from— this is from Keqing. He's saying, a top executive would like to see how procurement savings impact the P&L. What is any of the KPI shows that?

Yeah, I think there's a couple of— I mean, as I mentioned, our benchmark report covers 20 different KPIs, but there are— there's a large number of KPIs that you can track. Typically, we'll look at these different KPIs and identify how they either help you be more effective, whether it's driving hard savings, or ultimately if it's something that's more of a soft savings that you can essentially explain. You're being— you're able to do more with less from a team perspective. Now, there's always arguments. If you're not reducing headcount, what are these team members doing that is strategically delivering more value? How is that impacting bottom line? And ultimately, that involves talking through with the business what are some of the objectives beyond just what these KPIs are driving, and how are those team members helping move those forward. Across some of the hard savings areas, though, that is where we look at some of the negotiated savings, realized savings, being able to tie that directly back to how it's impacting the bottom line. Ultimately, you can leverage that number and directly tie a procurement program to how you're affecting the balance sheet, how that's actually showing to shareholders or stakeholders that you may have that are looking at What is the value of procurement overall? And that's, that balance of hard versus soft savings is always something we like to look at when we look at the benefits of a program like this.

Vincent?

Yeah, fully agreed with you, Mike. I think showcasing the P&L effect is very important because, yeah, I as a procurement function realized 12% savings this year. Wow, amazing. But what does it mean for me? What does it mean for me as a CFO, as a business unit, as a department? How much did you save me? Are you really relevant? Do we need you? You need to showcase what you're doing. What is your SLA? How much value did you bring to this business unit or function in monetary terms? How much did you impact the bottom line? But there's other soft KPIs, especially when we talk about risk. it's not necessarily about how much value you create, it's about how much impact you avoid, negative impact. So that's what we call the fear factor. That, for example, if you work with privacy risk or data breach risk, your fear factor would be, okay, this year the average fine imposed by the authorities for data breach was $7 million for companies our size. the average stock loss is 5% after privacy breach is announced. So collecting this external data is also very interesting to show the fear factor. And at the same time you say, hey, we have completed, let's say, 80% risk review of our top 500 suppliers. So you show what is the potential negative impact to your organization, but also how much coverage, how much you're in control of this risk.

I had a question for you, Michael. You know, again, obviously those companies and people are watching us and see those great numbers. I was curious to understand how does actually Coupa provide advice to your existing clients, because when, you know, when they having those numbers, you need to find a way or path to achieve them. So do you kind of internally or within the system provide some kind of methodology for the companies and the clients that you have to reach them?

Yeah, absolutely. So anytime we engage with an organization before they decide to go down the Coupa path, we love to work with them across what are their success metrics, what are the KPIs that they want to drive, and ultimately how does that tie to the objectives they have as an organization. The team I'm on, we have a methodology and approach where we identify different value drivers. What are some of those KPIs? And before you even start using Coupa, what would we estimate that you would see with the Coupa application? Now, I think a lot of different solution providers have that type of approach, but with Coupa, it doesn't just stop there. We ultimately build that into the solution. So within Coupa's reporting, we have a Essentially, we call it the success metrics tab, and within the success metrics, all of those different KPIs, all of the different value drivers that we talk about before you even start a project, we start tracking with real-time data. So it's a I mean, I I find it to be really cool because it's a it allows me when I'm talking to an organization before they start their project to see twelve months down the road how are they actually performing against the metrics that we highlighted if they're not performing. The system provides AI-driven insights that essentially look across the community and identify here's how the top performers have reached some of these goals and provide some of that guidance. Maybe based on your behaviors, you should look at these things. But even beyond that, every organization that works with Coupa also has a customer value manager who works with them to put that human touch on there as well, to look at how you're performing and ultimately use the information the system is providing to provide some guidance as well.

And Vincent, with your own experience, you know, implementing COPA, especially within the APAC region, what would be your advice, you know, to companies who are looking to embark into that journey, and which KPIs should they be focusing on if they want to have quick wins in the region?

Yeah, so I typically structure my KPIs in 3 dimensions. One which is about compliance, because that's an extremely important factor. So that would be, for example, your on-contract, on-catalog, on-PO spend. Then you also want to bring speed. So what is your average cycle time for POs, for invoices, for expenses? You also want to have data quality. So one KPI that we crafted that is not available in Coupa was contracts— no, catalog— contracts on catalog. So basically we look at how many contracts we have and we look at how many have a catalog available for users to select from, to pick the right price, to pick the right payment terms, etc. And that improves significantly data quality. So these 3 are definitely what you should look at, I think, as a start, because that's what will drive transactional value. But let's not forget the tactical value, because here we talk a lot about transactional, about PO, PR, PO, invoice. But the tactical part, eRFPs, eAuctions, etc., is very, very often forgotten. If you have a procurement process, let's say you start with an RFI, then you continue with an RFP, you have contract drafting, redlining, contract implementation. Most of the organizations I talk to, they have no idea how long on average does it take for each and every of these phases. Very important to measure because then you understand where is your bottleneck. And we all know that stakeholders are typically not satisfied with the pace of procurement. So that's definitely the easy low-hanging fruit to improve stakeholder management, to improve your, your even supplier relationship management. There's a lot of benefits In measuring, identifying bottlenecks, and putting the resources where they're needed. I'm a big fan of measuring everything, of performance management culture. What I've noticed in talking to a lot of companies, including the top performers in procurement, is that they all have a very strong performance management culture. They measure everything. A little funny anecdote about Coupa, but Koopa measures quite many things, and typically as an approver, it will compare you to the rest of the organization. And I remember having a very senior leader in Telenor sending an email that she had a problem with the system and that she doesn't appreciate being compared to a turtle, because Koopa shows you a turtle if you're a slow approver. That was quite funny, but ultimately That's coming back to my argument earlier, that you hurt the pride and you push people to get better.

Oh, sorry, Max, you're on mute.

Yeah, there's a question in the chat that I would like to take. Manoj is asking, how about arbitrage for long lead times, dollar fluctuation? Does Coupa have an AI-based tool to do the same?

Michael? I'm not familiar with one. This may be something worth taking to our solution consultants. Being able to look ahead and see what's happening from a long lead time and forecasting perspective is something that is— it seemed mixed results across the market. Now, we have done some of this across a couple of the solutions we have across a couple of categories and looking across some of the things we do within our treasury solutions. solutions, but I will need to likely defer this one to our solutions team for a little more detail on that one.

Okay, we have a few more minutes and maybe I'd like to wrap up. Vincent, you wanted to add something?

Yeah, we looked into that actually. We didn't find the feature. I don't think there is, but ultimately it goes down to finance, a bit outside of procurement here. What I've seen a lot is that People don't have the capability to do arbitrage. It's very, very rare. I've seen very little companies doing that. So typically what they do is that they implement currency clauses where you define either a fixed rate or a specific time or date at which the rate is— the spot rate is taken. This is a great way to mitigate the risk. I've seen fluctuations of currencies in Pakistan where we had 10 to 20% from one week to another. And then having the currency close basically lock your rate to the week before, let's say 10 AM on the Monday, something like that. That's pretty efficient at mitigating risk. But to capture opportunities of arbitrage, I think that requires pretty strong visibility on your spend in the finance side.

Okay, we have just 2 more minutes and I wanted to end because I think you brought it up, Vincent, and Michael, you also mentioned ChatGPT, generative AI. As you know, there have been a lot of talks in the last 6 months about this. I wanted to just get your quick take on, you know, what do you think is going to be the biggest impact on procurement in the coming years? Maybe starting with you, Vincent, and maybe Michael, maybe you could then just wrap it up and tell us how Coupa is embracing also AI with your existing technology. Vincent?

Yeah, I think the biggest challenge in transactional procurement especially is adoption. When you place a PR twice a year, after 6 months you already forgot how you did for the previous one. You have no idea if you're a basic Lambda end user. You have no idea, you're very frustrated. What is GL code? I have no idea what it is. How do you solve this problem? I think ChatGPT has the potential to be augmented with different wrappers around it to retrieve information, whether it's internal documentation or external documentation, to summarize that and help you in a conversational way. I think that's going to help a lot with adoption. Definitely. I see also a lot of potential in supply chain in general, maybe in planning or planning. You get a lot of data coming from everywhere, right? If you feed that as a context to ChatGPT, it has very, very strong summarization capabilities and that can be a help. Of course, it always needs review, but that can be a very, very strong help in in processing information much quicker and in a conversational way.

Okay, Michael.

Yeah, I mean, just to add on to the adoption point, I think that's— Coupa has always viewed the user as the really the center of the experience and really driving procurement excellence, being able to address their needs with a process that doesn't have barriers from adoption. It has just always been a core part of what we do. Now, when we look at how that ties to future direction and how that ties to where that fits in with technology, I mean, generative AI has been a huge focus over the last 6 months. We've been looking across how we incorporate that into helping guide users. We have capabilities that were just released or just announced At our latest Inspire event, really focused on leveraging a lot of those insights from a category management perspective. So I'm I don't think the focus on user experience is going anywhere anytime soon, but we're really just looking to augment that and to to ensure that users have the right information at the right time to make the right decisions. Ultimately, pulling all of that information together so that it is presented when it needs to be is a huge focus. And I think the organizations that do that the best are going to be the ones that succeed.

Okay, well, with that, I want to thank both of you for being with us today for this very interesting webinar on benchmarking your business metrics. Thank you very much, Vincent. Thank you, Michael, for sharing your insights and being with us. For those who are wondering, we'll be sharing again the recording We'll be sending you a thank you email and you will have access to the recording so you can rewatch that session. And if you're interested to get, you know, a copy of that presentation, we'll also be sharing a PDF copy of what you have seen today during that session. So thanks again, guys, and we look forward to see you next time. Thanks again for joining us.

Thank you.

Bye.