The Coupa team, along with around 3,000 other supply management & purchasing professionals, descended on St. Louis for a wonderful conference sponsored by the Institute for Supply Management.

We exhibited and had a great event, meeting old friends and making new ones. Here’s what our booth looked like (click to get full size image):

My favorite topic at the show was Green Purchasing. This is such a complex and important area that it is fascinating to wade into and learn the real challenges firms are wrestling with. One attendee who was a high-volume wine manufacturer shared his challenges of vendor “green-washing”. It was tough to know what the truth was on the sustainability of his supplies and the alternatives he was considering.

St. Louis was a fun place for the event. The Arch is a must-see, and Busch Stadium runs a close 2nd. And for those new to Purchasing and Supply Management, the ISM is a great organization to network in & learn from. So consider joining- follow this link to their signup site.

E-Procurement vendors like Coupa love bad times just as well as good times. There’s nothing like a recession to get businesses to pay attention to their operational efficiency and control. When growing revenue seems harder and harder to achieve, a great way to maintain profits is to turn to purchasing automation and control. We’re hearing this more and more these days.

I’ve seen discipline exercised in different ways at different firms. Some very large firms, so used to managing to quarterly expectations, would sometimes turn off their purchasing & travel expenditure programs to control spending. “There’s a travel & buying freeze” they’d say. But these firms already had effective and disciplined buying habits in place.

For small and midsized businesses so intent on growing the top-line, inefficiency and wasteful spending sometimes run wild. These firms can rein in uncontrolled spending quite rapidly through automating and streamlining their corporate purchasing. Coupa can help - with one of the easiest and most affordable on demand e-procurement systems out there. All you need is a web browser to get started. And a desire to maintain profits in turbulent economic times.

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Coupa has been working with a number of healthcare organizations lately, and so we thought we’d share some of the e-procurement challenges that we see as unique to that industry.

We’ll start with a simple question that has a surprisingly un-simple answer: Should healthcare providers prioritize quality over efficiency when in comes to patient care? Yes, you say, of course! But what does that really mean? Let’s take this question past the typical sound bite by using a specific example -

Discussion Point: Orthopedic casts

There are two different “technologies” used in the casting process. The casts are most frequently made from plaster, but fiberglass bandages are viewed as an increasingly popular and more modern alternative.

So what if you take a fresh batch of physicians, straight out of medical school, and plug them into a system where plaster is mandated (let’s say due to the presumption of lower cost due to “part” and “procedure” standardization)? Let’s say these newer physicians are inexperienced in plaster because they’ve always used the “newer” fiberglass bandage method in their residency programs. What you’ll most likely find is both quality and efficiency of casting by these new physicians is very low. Compound that with a low frequency of performing the casting procedures, and you’ll realize it will take a long time for proficiency to rise to adequate levels. The original goals of standardizing will have failed - costs will be higher, procedures will take too long, and quality of care won’t be high enough.

The obvious answer, to use fiberglass for casts, has a hidden problem. The hidden problem is the more senior physicians. They have used plaster for years and are very proficient at it. These physicians can give a higher quality of care at a lower cost using plaster - without a doubt. Not only that, they may have a perspective that fiberglass is not as good as plaster and may be fairly unwilling to move to what they view as a lower quality method of casting.

At this point some hospitals and clinics just give up and carry both fiberglass and plaster. And maybe that’s the right decision. Perhaps over time fiberglass may displace plaster altogether. What is the real cost / benefit for pushing one method over the other, especially once the true costs of switching for your professionals are factored in?

Conclusion for Healthcare organizations adopting e-procurement initiatives

An efficient e-procurement program recognizes the need for a high quality of care and supplies the necessary goods to practitioners even if it means sacrificing on the admirable goals of part standardization. We’d assert that being flexible with physicians results in lower total cost by reducing rework and increasing the operational efficiency of a healthcare organization’s high value assets (its professionals).

The same story can be told across a wide variety of supplies and procedure kits. From sutures to bandages, from scalpels to IV needles, the best supplies are those that your physicians and nurses are most comfortable using.

So consider your e-procurement goals before embarking on your programs in healthcare organizations. Focus first on convenience. With e-procurement your cycle times for receiving materials should be cut by weeks. Focus next on inventory management. With e-procurement you should have a much better handle on min/max reorder points and on your inventory levels and carrying costs.

And then where you can do so without impacting quality, reduce costs further by standardizing - with care.

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A lot of people ask me about Coupa’s business model, and why in particular we sponsor Coupa e-Procurement Express - the leading open source project for e-Procurement. After all, aren’t on demand and open source two fundamentally different approaches to building software?

YES they are! The primary reason has to do with audience. Open source software appeals to a tech-savvy crowd who often serves in IT departments inside businesses. On demand software, or a SaaS approach, appeals to a business crowd who intentionally shy away from anything too technical & focus on results.

On the surface if you look at a comparable market to Procurement, like CRM, you see companies that have chosen one or the other. Salesforce.com is the poster child for SaaS. SugarCRM is the poster child for open source.

But dig deeper into their models and you find these two companies have a lot in common. Salesforce has active open source projects around adapters to Order Management and in other relevant places “around the edges” of their infrastructure. The offer and re-host a number of “free” plug-ins through AppExchange as well. SugarCRM, meanwhile, has a growing on demand business as “an alternative to Salesforce” (and RightNow & others).

To me, the underlying trend behind both models is transparency. Open source says “hey, go ahead, look at the code & see that it’s good. contribute back if you can - but there’s nothing we’re trying to hide.” SaaS / on demand says “buy a 1-year subscription and let me show you the business results - there’s no lock-in - no games.”

For Coupa, sponsoring the e-Procurement Express open source project has helped us get valuable feedback on ways to improve. At the same time it’s helped organizations with a very limited budget for e-Procurement pursue the initiative anyway. It’s also ensured the kernel of our on demand service - the core transactional engine - is rock solid. The on demand service, meanwhile, has blossomed very nicely since our formal launch last October 22nd. Transaction volume is scaling quickly, and the business audience has been attracted to how quick and easy it is to get started.

So for us, on demand and open source are like peas and carrots. Open source and on demand are complimentary and both serve us well.

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