COGS/COS-Related Margin Improvement

Evidence and data. Before deploying Coupa, the interviewees’ organizations suffered from a lack of visibility and control regarding their direct materials. Without proper visibility, the organizations missed out on opportunities to negotiate better contract terms, while a lack of control led to unorganized and inefficient sourcing and buying processes. The VP of global procurement operations from the food processor said: “We didn’t fully understand the leverage we had. Sometimes we would go to a supplier and say we spent $30 million with them, but it turned out to be $50 million. Our needs were so large and systems so complex that we just didn’t know what we should have known.” The innovation manager from the mining business shared, “We weren’t doing enough diligence on our sourcing practices or asking the right questions of our suppliers to get the best possible outcome.”

However, after deploying Coupa, the interviewees’ organizations had the visibility and amount of data they needed to be able to negotiate better contract terms while also making their source-to-pay processes more efficient. The innovation manager from the mining business noted: “Using Coupa for direct materials wasn’t built into our business case, but it soon became very clear our business needed it. We’ve improved supplier list management, contract management, and on-time payments. We now not only have more sourcing options than before, enabling better contract terms, we’re running a true TCO (total cost of ownership) on all sourcing, and asking suppliers the right questions and getting better options for our business.” The VP of global procurement operations for the food processor shared: “Coupa has given us the ability to have full visibility and to manage every buy. We’re getting the best value from suppliers and have basically done away with contract leakage.”

Modeling and assumptions. Based on the interviews, Forrester modeled the following for the composite organization:

• The composite’s total annual direct materials spend before using Coupa was $38.4 billion.
• An average of 20% of direct materials contracts come up for renewal each year.
• Savings to this spend amount to 0.5% in Year 1, 0.9% in Year 2, and 1.4% in Year 3.
• Thirty percent of this spend is attributable to Coupa, with the remainder being attributable to people and processes.

Risks. The actual impact of any COGS or COS-related margin improvement will vary with:

• The current spend on COGS or COS.
• The length of current contracts and their negotiation cycles.
• The percentage of savings attributable to people and processes as opposed to Coupa’s technology.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $44 million.

Logistics-Related Margin Improvement

Evidence and data. Interviewees reported that their organizations experienced margin improvements from managing their logistics-related spend with Coupa. The organizations were able to reduce their contracted costs both for transportation materials such as gasoline and for logistics services and suppliers. The senior director of indirect procurement at the CPG company said: “Coupa’s CSO module’s analytics capabilities are phenomenal. We use it for bidding for both ground and ocean transportation and can bid for thousands of lanes and invite many suppliers across different regions [while] quickly identifying what suppliers are right for us.”

The interviewees shared typically saving between 1.7% and 3.5% on transportation and logistics-related spend through Coupa. However, the interviewee from the CPG company noted, “We just completed a big RFP, and the final outcome resulted in savings of 10% over the prior transportation contract.”

The same interviewees also noted that Coupa enabled their organization to further increase competition for bids by using it both for external suppliers and for internal teams. For example, the VP of global procurement operations from the food processor shared: “We’re using Coupa to bid and assess the cost of a supplier versus ourselves. We’re getting even better deals by engaging the competitive nature of our internal transportation teams in the process.”

Modeling and assumptions. Based on the interviews, Forrester modeled the following for the composite organization:

• The composite’s annual logistics spend is $8.8 billion.
• Fifty percent of the organization’s logistics contracts come up for renewal annually.
• Thirty percent of savings are related to technology, as opposed to people and processes.

Risks. The impact of logistics-related margin improvement will vary with:

• The total amount of logistics spend.
• The amount of logistics spend that comes up for contract renewal each year.
• The percentage of savings attributable to people and processes, as opposed to technology.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $33 million.

SG&A-Related Margin Improvement

Evidence and data. The interviewees shared that their organizations improved their margins related to selling, general, and administrative expenses. For example, the senior director of indirect procurement from the CPG organization said: “For us, our SG&A savings from Coupa don’t include headcount. Instead, it’s saving on services contracts like advertising and consulting. We were targeting 0.5% margin improvement but were soon surpassing that and are now beating our even higher 0.7% target.”

Modeling and assumptions. Based on the interviews, Forrester modeled the following for the composite organization:

• The composite’s prior total annual spend on SG&A was $8 billion.
• One-third of these contracts come up for renewal each year.
• Thirty percent of margin improvement is attributable to technology and not people or processes.

Risks. The impact of SG&A-related margin improvement will vary with:

• The amount of SG&A spend.
• The percentage of SG&A-related contracts coming up for renewal.
• The amount of savings attributable to people and processes and not technology.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $7.5 million.

Asset Redeployment-Related Margin Improvement

Evidence and data. Interestingly, the interviewees’ organizations did not simply use Coupa for managing external spend or creating competition between external and internal teams; they also leveraged Coupa to better track assets and inventory, which reduced the need to buy when an asset was already owned or source when inventory already existed. For example, the VP of global procurement operations from the food processor stated: “Before Coupa, procurement could do their best to get a better price, but they had no influence at all over what the business said they needed. Thanks to a better-structured process with Coupa, we know when a request comes in for an asset we already have on hand and can transfer that asset to the location needed without having to procure a new one.”

Similarly, the innovation manager from the mining company noted their organization redeployed inventory for sales rather than sourcing new products. They said: “We have Coupa’s inventory modules integrated with our warehouses, so now when someone puts in an order, the first results are those from our warehouses. We’ve reduced external purchases where we had the product on the shelf and [we have] seen a resultant uptick in inventory turnover.”

Modeling and assumptions. Based on the interviews, Forrester modeled that the composite organization’s prior annual spend on duplicative assets was $43 million.

Risks. The impact of asset redeployment-related margin improvement will vary with:

• The amount spent on duplicative assets.
• The amount of savings attributable to people and processes and not technology.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $2.9 million.

Invoicing Efficiencies

Evidence and data. Interviewees said Coupa not only helped their organizations improve their management of expenses related to direct materials, logistics and supplies, SG&A services, and assets and inventory, but that it also helped help them to improve a number of business process efficiencies. One of these with the largest financial impact was in accounts payable.

Leveraging Coupa for automation enabled the interviewees’ organizations to digitize and automate invoicing and payment processes, improve visibility into orders (including status, payment timing, and impact on financial statements), and make better business decisions using this data. The VP of global procurement operations said: “Not only have we been able to bring electronic invoicing up to 80%, we’ve [also] automated 90% of payments, reallocating folks to much higher-value work. We’ve brought our on-time payments up by 32 percentage points and now have access to incredible opportunities with supply chain finance programs.”

The VP of global purchasing from the manufacturing organization shared: “Digitizing our payments has meant incredible time savings. Not only did we need to give access to the corporate card to many more individuals before, but they would also have to input the card every time a payment was made. Now, the payment method is automatically integrated into our systems with permissioned access for those that need it. Each of these is also automatically checked against a valid invoice before going through. On top of all that, we now have deep knowledge about local spend on items we never knew [about] before, like corporate meal charges.”

Modeling and assumptions. Based on the interviews, Forrester modeled the following for the composite organization:

• Before using Coupa, 14 financing professionals handled invoicing.
• Invoicing automation enables up to 50% of these professionals to reallocate their time to higher-value work.
• The average fully burdened annual rate for one of these finance professionals is $100,000.

Risks. The impact of invoicing efficiencies will vary with:

• The number of finance professionals who currently handle invoicing.
• The annual fully burdened rates for these finance professionals.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1 million.

Sourcing And Spend Report Efficiencies

Evidence and data. Interviewees said another process made more efficient thanks to deploying Coupa was reporting, specifically on sourcing and spend. In their prior environments, the interviewees’ organizations had upwards of 100 sourcing reports to complete annually, with each taking several hours to complete by manually entering data into a template. Interviewees also shared having to complete a global spend report every one or two years. This would take up to 100 hours for each business group, and  one interviewee reported having up to 62 different business groups globally. Such reporting was digitized and automated by Coupa’s platform because it became the single source of truth for spend management across the organizations.

Modeling and assumptions. Based on the interviews, Forrester modeled the following for the composite organization:

• Previously, the composite spent 13,000 hours annually on sourcing and spend reporting.
• The average fully burdened hourly rate for an employee who does sourcing and spend reporting is $40.
• The composite eliminates up to 100% of sourcing and spend reporting with Coupa.

Risks. The impact of SG&A-related margin improvement will vary with:

• The amount spent on sourcing and spend reporting.
• The average hourly rate for employees who work on sourcing and spend reporting.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $706,000.

Technology-Related Margin Improvement

Evidence and data. The majority of the interviewees reported that their organization had some legacy technology in place that covered portions of what Coupa would go on to do, but only for sub-groups. For example, one interviewee noted having a contract lifecycle management (CLM) tool in place and a limited electronic invoicing solution that enabled their organization to reach 2% of its electronic invoices. Another interviewee shared having a cloud tool for sourcing, but they said this tool did not have capabilities related to price implementation. Interviewees reported that given the lack of functionality and breadth of these solutions, their organizations received limited benefits from them. They said they decommissioned these solutions in favor of Coupa and that it provided much larger benefits.

Modeling and assumptions. Based on the interviews, Forrester modeled the following for the composite organization:

• By Year 2, the composite decommissions one prior technology solution.
• The total cost of this legacy technology is $562,500 per year.

Risks. The impact of technology-related margin improvement will vary with:

• The number of prior technology solutions able to be decommissioned.
• The total cost of these solutions and any internal or external costs associated with managing them.

Results. To account for these risks, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $710,000.

Unquantified Benefits

Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:

• Supplier diversity. Interviewees said Coupa provided structure to their organizations in terms of analyzing and understanding their supplier bases. One outcome of this was enhancing ESG efforts related to supplier diversity. The VP of global procurement operations for the food processor shared: “Coupa has enabled us to be more intentional in tracking our award rates to diverse suppliers. It has been incredibly helpful to us in our goal of setting the competitive global standard for supplier diversity. We’re actually getting awards and accolades all the time now.”
• Improved supplier relationships. Coupa enabled the interviewees’ organizations not just to analyze and understand their suppliers better but also to improve their relationships with these suppliers. For example, the innovation manager from the mining company said: “Coupa has improved our supplier relationships in so many ways. First, we can directly communicate in the tool, managing things that might be in flight. If someone leaves the business, we can catch if an invoice gets stuck before it becomes a problem. We’ve given suppliers better visibility into payments, and we’re also paying them faster [and] taking more early payment discounts as a result.”
• Risk mitigation. The interviewees reported that Coupa mitigated risk related to supply chain failure and regulatory penalties. On supply chain failure, the innovation manager at the mining company said: “Coupa enabled us to deploy supplier questionnaires regarding how they might handle a supply chain failure. We could then better understand the risk tolerance for our various suppliers and use Coupa to go and look at other market options if need be.” On regulatory penalties, the same interviewee shared: “Coupa makes it easier to pull backup and proof of transactions. Since deploying Coupa, none of the businesses that have adopted it have been fined. Approvals and auditability are clear and concise, which has also driven more businesses to adopt it.”
• Community performance benchmarks and value management. The interviewees noted that partnering with Coupa’s value management team provided benefits that were important even if unquantifiable. For example, the innovation manager from the mining organization said: “We use Coupa’s value management team several times annually. They help us with benchmarking and, importantly, [they] enable us to better understand where we stand competitively in our space. When we need to understand how we’re faring against other companies in similar positions, we always choose to interact with them.”

Flexibility

The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Coupa and later realize additional uses and business opportunities, including:

• Collaboration and internal standing of procurement team. The interviewees noted that the visibility that Coupa provides into sourcing and procurement helps to improve internal collaboration while also improving the perceived value of the procurement team. The innovation manager from the mining company said: “The procurement process used to be a black box. Coupa is entirely transparent. Comments, questions, and approvals are all there, reducing frustration and enabling collaboration among teams that was nearly impossible before.” The VP of global purchasing from the manufacturer shared: “The visibility provided by Coupa has improved how procurement is seen internally. Now that the data is tracked and available, it proves how effective procurement is at what we do.”
• Talent recruitment and employee satisfaction. The interviewees also noted that Coupa improved talent recruitment and employee satisfaction efforts because it made the lives of procurement and finance professionals easier. The VP of global procurement operations at the food processor said: “If I’m trying to get the best talent and then inform them that they’ll be using spreadsheets to track our sourcing and procurement, they’re not going to join our team. But now that we have Coupa, we can recruit top talent that will deliver the best value.” The VP of global purchasing from the manufacturer shared: “Coupa has improved employee satisfaction with their work. It’s because Coupa makes personalization easy, and it works. We can manage the system, make configurations, and implement unique features or processes for our various units, making it easy for them to make the switch to Coupa.”

Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).