Moody’s x Coupa: Direct spend

Speaker A: By downloading or listening to this podcast, you are agreeing to Moody's legal terms and conditions found@moody's.com disclaimer, including that the information provided is not investment or financial advice and that Moody's will not be liable for losses arising from your use of the information.

Speaker B: This is Risk Reframed, the show where we you, the leading risk experts from Moody's, our partners, and the wider ecosystem to discuss the risks organizations face, how they're interconnected, and ultimately what you, the risk professional, can do about them. Earlier this year on Risk Reframed, we covered the basics of supply chain risk management in our 101 series. However, there are layers to supplier, onboarding, vendor, risk management, and procurement, and one of those is direct spend management. We're going to unpack this today. And joining us, we have Dean Bain from Cooper, one of Moody's Strategic partners, where you're the SVP and General Manager of supply chain and direct spend. We also have Chelsea Walker, Director of Partnerships at Moody's, who manages Cooper, as one of your key relationships. Thank you both for joining.

Speaker C: Thanks for having us.

Speaker A: Thank you.

Speaker B: Of course. Uh, you were at the Inspire Conference hosted by Cooper yesterday. How was it, Dean, as one of the hosts?

Speaker C: Yeah, it was excellent. Um, as part of Cooper's Inspire series, um, we do Inspire World tours to cover various geographies around the world. And so on Tuesday, we had our Inspire London event with about 400 attendees. Um, this coming off the back of Inspire Las Vegas, which had about 3,000 attendees.

Speaker B: Okay, so a bit of catching up to do for those of us this side of the pond.

Speaker C: Exactly. Yes.

Speaker B: Next year. Next year We've got a 7x8x if I get my mouse right. And Chelsea, how was it as a guest Inspire?

Speaker A: Oh, it was exhilarating. So I was at the Las Vegas event, and I also joined the London event. Las Vegas was amazing because Koopa went all out. I mean, they had all of the top C suite there. They had presentations, they had demos, they had. Acquisition was announced live on stage. Um, it was. I met so many different customers who are all using Koopa. Um, they had customers presenting to customers on how they've implemented coupa, which was fascinating. Um, got to speak to a lot of fellow partners that Kupa works with as well. Found a lot of joint problems and opportunities that we can help clients with. Um, and then London, on the other hand, it was much more intimate, but it was still just as fun. I got to actually shake hands with Lee and some of their C suites and talk to Salva and they're just such lovely people and they're so wonderful to work with. And Koopa is. They advertise themselves as a community and they really are like, it's a community of procurement professionals, all using the same system, all collaborating together. Um, and I just love that they're the most customer focused company that I think I've seen.

Speaker C: Well, thank you for that.

Speaker A: You're welcome.

Speaker B: Well, high praise indeed. I suppose the interesting thing is it sounds like you had practitioners talking to practitioners and so experts talking to experts, whereas today you're talking to the layperson. And we'll have many listeners that are not directly in this area of risk management, but are interested in it. Essentially trying to learn more on this show really about all the different areas that could affect, uh, any business or the business of the listener. So regular listeners will know. I will always start with a definition. It's probably become a bit cliche at this point, but we're talking about direct spend. Uh, Dean, would you mind just defining that for the those that uh, are unfamiliar with the term.

Speaker C: Yeah, absolutely. It's not as complex as it sounds. Um, when you think about a manufacturing or process operation, um, you have materials goods that go into the manufacturing of a product or um, a service. Um, so when we speak about direct procurement or direct spend, we're specifically talking about those goods. Um, you can think of this typically on a balance sheet as your cost of goods sold. Um, in manufacturing operations it's typically 60 to 80% of the cost of the goods produced. Um, quite different from indirect spend. Um, coupa's been, we celebrated actually this year, our 20 year anniversary, our start, our founding was in indirect spend. Um, indirect spend itself very different from direct spend. It's more around the people, the services, the technologies that help operate the business on a day to day, uh, to day basis. So thinking of things like your IT spend, thinking of things such as your office supplies, thinking of things such as services.

Speaker B: Okay, so it's kind of like there's the specific to you and then there is the general to business sort of your two.

Speaker C: Correct. And, and maybe just to give some perspective, I mean when we think about direct spend, um, the size of this. Right. So we, we Talked about being 60 to 80% of the cost of the, the goods being produced. Um, in the world today, we estimate around 16 to 18 trillion dollars of direct spend flowing in an annual basis.

Speaker A: Wow.

Speaker C: Uh, so it's massive.

Speaker B: Yeah. Chevy to visualize. Right. Like correct the whole thing with big numbers. So we just go. Yeah.

Speaker C: So for Most organizations, it's a, uh, it's a critical component to their profitability. It's a critical component to their, to their margin. Um, and it's uh, it's quite, quite interesting in these times.

Speaker B: Yeah, well, I'm told you sort of stole the show yesterday. Although Chelsea, you know, would say that just before you come on. So I'll take you to face value, Chelsea. But, um, but you did say that. Yeah, as a Dean stole the show. Sort of really getting across the, the why this matters. Would you maybe give me your reflection? I mean, Dean's mentioned a couple of things there, but, um, what did you take away from that talk?

Speaker A: Well, I mean, just the impact of directs depend on the company's bottom and top line. So to me, direct spend is where the risk becomes real. If you have a delay from your supplier, it means you have a delay to your buyer and that is your reputation in the market that's retaining your customers. I mean, that's your entire business and that's also for your margin. That's where money can be made. So if you have too much supplier concentration of specific geography, you might look to optimize by moving that to a different lower cost geography. Um, naturally, being this a risk reframed podcast, I'm going to bring in the risk component. You don't want to go from bad to worse. So if you're moving suppliers, you want to make sure you're moving to somewhere that's more stable. Um, their financial, cyber, geopolitical, reputational risk is still at least on par, ideally better than what you're currently using. But if it's not in direct spend, you're going to see real impact to your business, um, and real delays that are potentially newsworthy in a bad way.

Speaker B: Dean, has this just always been the case or has this become sort of increasingly important, I should say, or of importance as the world has sort of changed over the last several years?

Speaker C: To a certain extent it's always been a factor, but, uh, I think it's definitely magnified now. Um, the world is very different. I mean, it's much more dynamic than it's ever been. Uh, the amount of, the amount of risk, the amount of change, the amount of geopolitical pressures that we see on a day to day basis, um, have completely fragmented how we operate. Um, you know, we're seeing customers now that have to react to, um, you know, tariffs or geopolitical tensions. And you know, five years ago you might have had a matter of months to think about and react to this. Now it's a matter of days. And so the pressure, the time frame has compressed and it makes it much, much more difficult as we think about the sheer volume and scale of what we're managing now in today's world.

Speaker B: I know people talk about supply chain resilience all the time. That's saying that Carolina, uh, Rizal, our strategist for supply chain, talked about when she was on that one episode I mentioned at the top of the show. But I think I saw a frame in Chelsea that you mentioned. Dean made anti fragile, anti fragility. Could you maybe just comment on that and put a bit of meat on that bone?

Speaker C: Yeah, it's a term that's used in the industry. I won't say that we coined it, but we certainly reference it. I mean, the concept of being antifragile is quite an interesting thought and I think it's thought provoking in itself because you sit back and you look at it, you're like, okay, what does that mean to be antifragile? Um, when we think of things that are fragile, I mean they're obviously very delicate, they break easy, they shatter. And when we think of supply chains that aren't built for resiliency, that's exactly what they face. As soon as a disruption occurs, it completely falls apart, it breaks. Um, so when we think about an anti fragile supply chain, we're really thinking about a supply chain that's built with inherent risk and resiliency in its model. It has the ability to adapt, live as it's being faced with disruptions. And so we go through this and we'll talk more, I'm sure. Um, but as we think about this and how it comes into direct spend as a whole, it's really about kind of breaking down the gaps that we've seen in the past. So it's, how do we break down the silos within our organization so that we're all communicating and working off a single sheet of music, if you will. Um, how do we think about how we communicate and collaborate with our suppliers? How do we think about getting this nth tier visibility into our supply network? It's no longer good enough to just have the visibility to your tier one supplier. You now have to go down to the tier 2, tier 3. Understand the risk of your supplier suppliers to truly be antifragile.

Speaker B: It's interesting. We've done this series, I mentioned the 101 series, talked about trade credit, we talked about TPRM, talked about supply chain. We even talked about growth and strategy as a risk problem, rather than a, uh, thing to just give to salespeople. Um, and in all of those there's this idea of bringing things forwarding or further up the process upstream so that almost the planning is done. I know they talk a lot about scenario planning in supply chain. It sounds like that would sort of be a key task in this. Would that, that be fair?

Speaker C: Yeah, we do see it as a key task. And we talk a lot about digital twins. Um, so one of the capabilities that Cooper brings to market is the ability to build a digital twin of your supply chain. Um, and when we think about that, that's everything from your suppliers through your production and modeling inside your four walls for production constraints, um, all the way through to distribution, transportation and the end consumer. And so when we think about that digital twin itself, um, what this enables is the ability to really perform thousands of operations of scenarios and scenario planning. And so you're testing the model, you're testing where the bottlenecks are, you're testing where the constraints are. You're throwing at it things that may, may change in your network. Or if you have different strategies that you're just exploring as options, maybe it's a alternate supplier, maybe it's an alternate port that you want to bring your goods in through. How does that affect you? How does that affect your network? How does it, uh, affect your supply? How, how long does it affect in terms of your time to transit, your delivery of your goods? Um, how does you think about that in terms of your cost to operate?

Speaker B: Yeah. And to your point, Chelsea, I assume if you get those things right, then that your customer, the person that feeds your business, the revenue that lets everything else happen, even if you've got problems, they don't need to know, right. Like if they still get in their thing from you at the, on the time that they wanted it for the price that you said, etc. They're kind of like cool you're managing your business. I don't want to know. Um, yeah, I mean it strikes me that that would be the key thing in your anti fragility sort of framing Dean of just, okay, we've done the plan and therefore when we take a knock, we, the next thing just happens or we already have planned for it.

Speaker C: Yeah. And I can maybe speak a bit more to that, Alex. Um, you know, we've always had, you know, for 20 plus years we've had digital twins and models of our supply chains. Um, I think what's different now is as we've moved from these kind of static systems into these Continuous, always on digital twins. And so with that, what we're enabling, what customers are leveraging, is the fact that we're leveraging more real time data and M, that data is being absorbed and consumed by these systems that are now obviously powered by a lot of AI as well, that we're using that to take real time decision making. So we're moving away from a very reactive world into a very much proactive and resilient world.

Speaker B: I think we'll come back around to that data point. But just before we uh, go too far into sort of that expert level, could you maybe just talk through what does direct spend management look like in practice today? Like the sort of component parts that would be on the job description?

Speaker C: Yeah, um, I'll start with kind of probably the more common definition. Um, so when we think about direct spend management, we're talking about the process and the tasks required to produce goods. And so this typically had started with demand planning, thinking about how much demand we need to prepare for. Um, that's being fed from marketing plans, that's being fed from new product introductions. That goes through to your supplier, um, sourcing strategies, it goes through to your purchase order strategies, goes through to your invoicing and your receipt of goods, and then finally your, your distribution and logistics network itself. Um, what's changed A little bit there is, as we think about diversifying supply building in risk resiliency, um, we're seeing a lot greater focus on the front end of that model. Um, so what we're seeing, as we talked about just a second ago, is that strategy for the network, the supply chain optimization. Um, but the next key component that we're seeing that's really helping our customers is really thinking about the category strategies themselves. How do you think about the goods you're sourcing, the categories they fall into? And when you're doing that, we, you know, typically in the past a lot of companies optimize solely for cost. We could, and now we have to balance cost, resiliency, risk, time. Um, and so when you think about that and you know, you start layering in things like ESG and CO2 and emissions. And so when you start thinking about that, that doesn't happen. A lot of people think that happens through the supply network itself, that you're doing that by choosing the right transportation vendor, choosing ocean freight versus air freight, there's a lot more to it. Uh, it comes down to the category strategy. And when you're thinking about the category strategy, using an optimization engine in that itself to help you determine what suppliers you use and how those suppliers meet your personal corporate financial objectives or ESG objectives or supply chain objectives. Um, and then on top of that, you layer in this concept of sourcing. And. And how do you now move away from kind of very manual sourcing policies? And, you know, if you go back 30, 40 years, sourcing was kind of a buddy system, right. You had a friend that you worked with for years, and they got your business and you could trust them. Um, but that. That trust may still exist, but there's constraints that are outside of their control. Outside of your control. You now need to diversify that risk. And so when you start thinking about sourcing, you now have to run that in a very automated fashion to make sure that you run multiple sourcing beds. We'll have to take that one.

Speaker B: Yeah, well, yeah.

Speaker C: And that was one. My phone.

Speaker B: Oh, is that what I was like?

Speaker C: I took it out of here. I had it in my lap. Uh, um, sourcing bids.

Speaker A: Sourcing. Multiple sourcing bids.

Speaker C: Yeah. And so you have to run multiple sourcing bids to ensure that you're. You're looking at all the factors that go into that. You're not waiting a decision on a single measure, such as cost, that you're optimizing for cost and resiliency.

Speaker B: I mean, Chelsea, you're nodding your head. I would be if I wasn't so conscious of the camera. But it's like I'm sort of hearing connected systems, connected intelligence, interconnected risk. All the things that we've probably, um, fought and talked a lot about here. Again, when you were, uh, at the conference yesterday, and when you're speaking with Cooper customers, is. Are, ah, you just sort of seeing natural homes for the work that you typically do, or are there bits where you're like, that's where we can help and others. No, that's for somebody else.

Speaker A: No, 100%. I think what I saw, uh, at Inspire is that risk needs to be part of every single part of that process, from the category strategy, when you're thinking about who you should be buying from to sourcing, to make sure that at that point in time, that supplier isn't experiencing financial difficulty or reputational incident all the way through monitoring of that supplier and so on and so forth. So risk is in literally every single part of that process, Process from front to back, top to bottom. So there's really no area that you can't utilize the data to make yourself more antifragile and resilient.

Speaker B: Interesting. I suppose my natural follow on Dean would be like, where typically where and how do things go wrong? Because you can't control geopolitics from your desk as a category manager or chief procurement officer or anything like that. But you are in charge of what you do about it from your perspective. So people are trying to follow this process and do it right. Where do they normally go wrong? Or where do they find it more difficult just because maybe a process doesn't exist, perhaps?

Speaker C: Yeah, um, it's quite interesting because some of these are compound effects of how we built our supply chain management practices internally in our corporate environments. Um, and, and then they're compounded by the pressures that we're under. Um, so there's three areas that we kind of see, right? And the first one is typically some organizational silos that we've set up when we think about the business process, um, in many cases, and one of the biggest barriers, um, to execution that we see that we're trying to help our customers solve for is, is breaking down the silos that exist. So when we think about that and we think about direct materials in a supply chain, you have three parties at stake. Essentially. You've got your procurement organization, you have your finance organization, you have your supply chain itself. Um, and in many organizations, ah, in many organizations today, these three departments are still siloed. And so when they have silos, what we find is they're not communicating with one another, they're optimizing for their individual functions, they're measured on their individual KPIs. And each party is trying to do the best job they can to optimize their business units, to optimize their KPIs, not knowing what that knock on effect is. And so if I give you a really simple example, um, take somebody in sourcing that chooses a vendor simply based on cost, not understanding the implications of transportation. Um, if that supplier, um, if that supplier has a disruption in their network, they're unable to meet the supply or they're late with that supply, what happens? That product, that material, that raw good that's going into the component then gets expedited. And so that expedited cost doesn't hit that procurement individual's KPIs, uh, it hits the supply chains KPIs. And so that's the knock on effect. And so the silo gap exists everywhere. And so our goal is to bring everyone together onto a single platform that allows you to communicate and to work off a single set of KPIs. And we typically look at that, you know, across total cost to serve versus just cost of goods. Sold. Um, and there's, there's an interesting thing as a piece of information like as we look at this, um, the, the, the, the knock on effect itself, it creates a massive gap like there's, most organizations today on average are seeing about 16 to 18 million dollars of extra costs in their supply network from expedited costs, from delays from lost sales. And that's because of these missed KPIs. This M silo gap that exists.

Speaker B: Uh, again me being me, I'll try and dumb this down but it was uh, I see this poster in certain like shops, coffee shops, whatever it is, like good, fast, cheap, pick two. And it just reminded me of that,

Speaker C: like is that quite simple actually.

Speaker B: And again in my, my background working sort of more on AML systems, anti money laundering systems, um, to not use the acronym, we always have that total cost of operations M. So TCS would be the equivalent in.

Speaker C: Absolutely.

Speaker B: Yeah.

Speaker C: Yeah.

Speaker B: Tristan, in a good process then, does that mean these teams are sitting together? Does it mean the one system? Does it mean uh, there should be a common set of KPIs and lots of companies use OKRs or variations. Now like what does, what does good look like at a leading organization?

Speaker C: Yeah, I mean I think good in particular. Um, the first and foremost is solving for that, that silo. So we see that through, we see that through the platform itself. Putting customers on, on one unified platform working off of a common data set, um, a tool set, you know, and when you think about platform, to break that down, what does it have to do? It has to enable two way communication. It has to enable these people, these, these departments to be able to speak with one another to understand that there aren't those knock on effects and how do they optimize based on that single KPI versus individual KPI's. Um, the other piece, right, as you think about supply chain, I mean there's, there's three factors overall. One is one is that collaborative framework and, and working off a single, a single platform. Um, two is visibility into the network itself. And so when we think about visibility, um, it's really you know, understanding your supply, having collaboration with your suppliers. Um, we've launched in the last couple years, um, a series of products across what we call supply chain collaboration. So allowing you to do demand forecast collaboration, allowing you to do your PO collaboration. So the POs that you communicate to your suppliers, understanding if they're able to meet that supply. So you may ask if I, if I break it down, you may ask for 100 units of, of a widget um, they may come back to you, say, I can. I can ship 50 today, and 50 are going to be a month late. But having that collaborative framework in a digital tool allows you to understand and model the implications right away. It allows you to then understand what the effect is on your business and allows you to then look at alternate sourcing. Is there another supplier that can meet that demand? And so you're not just waiting for supply, you're actually constantly solving for those supply gaps.

Speaker B: Really interesting. And, Chelsea, one of the things, your role is very, very interesting as well, because you work across the top of customers and our account, uh, managers, et cetera. So you get exposure to more accounts than the typical person. Right. And as Dean's explaining, uh, sort of what good looks like, do you have a rough idea in your head, like. Or a gut feel of, like, how many are really leading edge? How many organizations would be in the middle? How many are right at the start of trying to break down this silo? Because you almost always assume a typical bell curve, but it's not always the case. Just wondering, your reflection because of that exposure.

Speaker A: Yeah, that's a great question. And actually, I'll draw it back to a question Dean asked at the conference the other day, which was, I think there was four, five scales around the maturity staircase. Yes. How advanced are you? Do you feel like you're completely reactive, or do you feel like you have a crystal ball and you can see into the future? And I think the audience was somewhere around a, uh, three or a four, the honest ones. You know, I think people were probably more towards the beginning of the staircase than they like to admit. But it's a great question, and you're right, Alex. We do see in our customer conversations with. With Coupa, um, and Moody's, the bell curve is very much spread. It has a lot of. We have a lot of customers that are at the very beginning of that journey where they've maybe just onboarded coupons. They've been working off of Excel spreadsheets for years. And usually it comes to a point where something breaks. And I can't tell you how many times I've had customers come up to me and be like, something happened and I need to make sure it doesn't happen again. And that could be anything. It could be there's been a cyber breach that was the result of a Tier 3 supplier. It could have been. We were sole sourced for the single supplier, and they went bankrupt. Um, we had a multimillion dollar delay. We had. We shut down an assembly line at an automobile manufacturer, um, it could be any variety of instances. And so when we speak to customers about this, they're always interested in hearing what best practices are, but we always come back to that same single source of truth. And the silo problem, which, which is if you have. And they all do. They all have multiple systems, they have their ERPs, they have their HIRs, they have their CRMs, they have their scrims, and none of it really speaks to each other. And so the benefit then of using coupa and or Moody's is that you can bring all these departments together, cross functionally from source to procure or source to pay, and you're all offering operating off of the same sheet. And then again with the Moody's data, you don't even need to swivel, chair and go into multiple systems. It's going to be right there with you. You can trigger approvals, you can trigger, um, alerts based off of the Moody's data and when instances happen. So you eventually do get that crystal ball.

Speaker B: Good. So there is the staircase. There's the staircase. Maybe we'll build an elevator or. Exactly.

Speaker C: And the staircase itself, Alex, is quite interesting. I mean, there are five steps to the staircase. I mean, you go from level one is basically your reactive firefighting. Um, probably about 30% of organizations are still in that level one, um, all the way to level five, which is kind of your autonomous AI driven, always on, constantly taking decisions, um, in an autonomous fashion. And very few are there yet.

Speaker B: Well, I was going to, going to ask that, actually. Dean around the whole world's excited about AI or fearful one or the other two sides of the same coin to a certain extent, um, excitement and anxiety. But as we get excited about that or looking at it, but then we have 30% that are in spreadsheets or not yet out of a siloed. Do you do leapfrog and you go to an AI agent or a genic led um, system for this work or a star expenditure, or is it. No, you need to do sort of each step one off the other, and build your maturity as you go. Like, how do you see that playing out?

Speaker C: It's possible to leapfrog. I would say that most don't. I'd say it is a journey. Um, and we kind of referenced it earlier. I mean, when we think about the data itself, the data challenge, I mean, 51% of organizations still struggle with the data. Um, and so to get to that fully autonomous state, you have to take the journey to build the data. Um, and so Typically that's done in a stepwise fashion, as they think about that maturity curve or maturity staircase. Um, what's, what's interesting is, you know, the, the staircase itself. I mean, that journey, what does it look like? Why, why do you take in steps? One is, you know, you're building digital systems. Two is you're connecting to your suppliers, your supply base, to internally within your organizations, to your demand. Um, and then three, you're starting to layer on data intelligence. And then lastly you're laying on AI to help with that data intelligence. And so when you think about how complex that is, um, you have to take that journey to get there, um, to leapfrog to that would, would, you know, essentially take a long time to do. And you have to learn as you go. You have to build upon the practices as you go. And so it does take some time.

Speaker B: I imagine that's the danger. And I'm starting to see sort of the counter narrative on this around AI, that if you haven't mastered the skill before you brought it in, or you don't understand the data underneath it, then you are, uh, setting yourself up for a potentially nasty fall. Right? You got to have some level of mastery before you give it to an agent. Um, how people are going to build that mastery if the agent's doing it, I think is the other big question we're all reading about.

Speaker C: But, yeah, but if I interject there, I mean, I think there's an interesting piece with the agents. And I mean, it goes to some of the recent acquisitions we've made, um, as we think of like companies like Tonkin that we've just acquired or even rosm. Um, you know, the AI agents are also helping us build that data. They're helping us digitize some of the process. They're helping us take some documents that are still, um, in a, and communicated in a manual fashion. Now we're no longer in the FACS simile age. Right. So that's a good thing.

Speaker B: Hopefully only some areas of government. So.

Speaker C: Yeah, but, you know, when you think about the process, um, when we think about category strategies, these are typically done in PowerPoints. When we think about sourcing optimization, how we source goods, these are done in Excel spreadsheets. And when we think about collaborating with our suppliers, it's done over email. And so while these sound like digital systems, they're truly not because that data is not being harmonized. It's not being collected in any single source of truth. And so the AI agents layered on top of the platform are helping us digitize that data. We don't have to immediately move to digitized standards. Working, communicating in a digitized fashion. We allow our customers, we allow our vendors to still work in the ways that worked before so that the process is still simple, but it is digitized and you're getting the value from that data.

Speaker B: Understood. Let's try to unpeel, um, some of that, that data onion.

Speaker C: Okay.

Speaker B: Stretch these analogies. But, uh, so when we say data, that's almost everything.

Speaker C: Yeah.

Speaker B: When we think specifically about direct spend, is there sort of like a first category of data to get? Right. Um, or to master, and then you add on the next bit and the next bit and the next bit. Because, Chelsea, you mentioned things like, uh, probability of default or bank bankruptcy and predictors, you talked about cyber, etc. But these are sort of signals that sort of come after some of the fundamentals. So maybe, Dean, I'll stay with you if you can maybe walk through, like, the big chunks as you think of them. And then, Chelsea, please come in because you're the one working across all of this and can probably take us a little bit further down the rabbit hole. Yeah.

Speaker C: And this could go down a very deep rabbit hole. We're not careful.

Speaker B: We have marked it. Don't worry.

Speaker C: Well, I'll keep it simple. Um, I mean, I think if you start with the data Foundation, Um, we've been doing this for 20 years. I mean, it's the legacy ERP systems. Um, and so inside these legacy ERP systems, we have our financial data, we have our cost data. Um, but these systems weren't built for the complexities of the supply chain and direct world today as we know it. Um, and so we have to layer upon this. And so now we start thinking about where do we house production data typically sits in some type of PLM system, as an example. Um, um, or in an ERP itself. Um, and as we think about how do we optimize our supply chains, when we think about digital twins, when we think about being able to probe that digital twin for a particular scenario, you need that data. You need to understand your capacity constraints, your production capacity. You need to understand the bottlenecks in your supply chain, how much warehouse capacity you have, um, your suppliers or even your logistics providers, how much volume they have within their fleets and within the routes. And so that data starts now getting layered upon. So a lot of the data exists is the good news. It sits in so many different systems. Um, I'd say that, you know, from what we see and we hear, I mean, many companies have been on a data harmonization journey for the last maybe five to ten years. You, um, think about companies that announce every day that they're moving to data platforms such as Snowflake as an example, where we're building data lakes or data pools or data moats, as we started

Speaker B: calling them, various bodies of water.

Speaker C: Choose the next one. Right. I'm from Scotland. Maybe we'll call them data locks. Um, but, you know, we've started to bring that data into a centralized repository. Um, the challenge now is understanding that data, understanding how accurate that data is, and then how we leverage it.

Speaker B: So there's the internal data that you mentioned. You've got your supplier and supply chain, which is some external data, but you may be sourcing it. And then there's the mastering of that data. And we did last year do an episode on sort of Master Data Management. Um, feels like that's the, the harmonization piece. And then, Chelsea, how do you think about that? Where do you typically come in and get involved with. With the account teams and customers.

Speaker A: Yeah, so Dean said it, but I think I get involved when it becomes a matter of trust. So Koopa gives you the ability to get the first party data from your suppliers. You can send them a questionnaire and ask them to fill it out. Sometimes they do, sometimes they don't. That's the second challenge. You can get the Koopa community data from other Koopa users on how they're interacting with that supplier. And Koopa does a great job about giving you the access to that data, but you still have these two sources and you don't have a way to validate and verify them. That's where the third party risk management data comes in. It either validates what you're seeing, or it calls out an anomaly, which then triggers somebody to go and look into that, potentially preventing a future failure. So that's usually where Moody's gets pulled into the conversation. Um, and it can be at a stage five of the staircase where they've completely done their massive data management. They're on year 10 of their data harmonization, and they're like, okay, now we're doing supplier hierarchy, which is like, oh. Everyone's like, oh, gosh, that's the hardest one to do, right? That, uh, child parent entity data. That's where Moody specializes in. So we'll geek out about it, but it's a hard one to solve. So, you know, that's kind of the last step. But sometimes they start at the first step too, because they're like, let's set this up right from the beginning. So really, at any stage of your journey, you can utilize a third party data source to help verify what you're receiving from coupa from your suppliers, from the market. And it ultimately allows you to have more confidence in that decision. And so at the end of the day, if, if you are a category strategy manager or procurement procurement manager, or a chief supply chain officer, and you have to go and you have to make a decision around, yes, we should do this, or uh, no, we shouldn't, you want to make sure that you can back up that decision, and that's what Moody's can help you with.

Speaker B: This kind of has answered the last question I had anyway, but I will just kind of rephrase it slightly of just. That's kind of how the partnership works today. Clearly, you just articulated Chelsea, like, as, uh, this area evolves with new tools, data sets, new world events, dare I say it. Do you see the partnership evolving with it? Is there a different way this goes, or is it more of the same? And Chelsea, please carry on and then we'll throw it over to Dean.

Speaker A: Yeah, no, great question. And again, I think what I've seen at the Aspire events is fascinating. So Koopa is building out a completely agentic platform. Right. They're now calling it Agentic as a service. And so they've recently launched an agent studio where, where customers, uh, can go in and build their own agents. You can plug in an API into that. So you could plug in Moody's data today and build an agent to start automizing your workflow. Um, from that, we're then looking at mcp. So Koopa's building out access for an mcp. So what we'll likely see in the partnership is an evolution of how you're interacting with the Moody's data. So today we have the traditional connector on the marketplace, which integrates into, you know, more singular modules within Koopa. But what we want to do is to be able to wrap everything within Koopa in sort of, uh, an agentic platform. So wherever you're working, if you're working over in your direct spend modules or your indirect spend modules, you can access Moody's data and query it and help you make those decisions faster and with greater confidence.

Speaker B: Indeed, yeah.

Speaker C: Chelsea did a great job answering that. I mean, we've taken approach of being very agnostic. Um, we've built a marketplace. Chelsea's used the word community. We believe strongly in community. Um, and so we enable a platform that allows great partners like Moody's to provide their data for customers to leverage that data. Um, and we've built the framework within the tool for that data to really complement the decision making that's happening. Um, when you think about a supply chain model, when you think about a network, when you think about collaboration, when you think about sourcing suppliers, that risk data is key in all those decisions. And so that's built into the platform and it's sourced by Moody, which is great. Um, and as we think about the community itself, it's how do we learn from one another, how do we get stronger together? Um, Coupa's very proud. Over 20 years, we've amassed over, uh, what are we up to now? I think $10 trillion of spend that have gone through this platform. Um, and we use this data in a very ethical and responsible way, um, to help our customers benchmark themselves, to help them understand what better looks like. And that data helps support that.

Speaker B: Very good. Well, so that was my last question. However, uh, there are one or two audience questions. Just an eye on time. Maybe we'll ask, uh, one main one, and I think you actually referred to it earlier, Dean, but maybe it's a chance just to go a little deeper. Uh, one, uh, of the people I know listen to this did ask me to ask, how do you balance cost pressure with supplier resilience, particularly in the environment that we've, we've alluded to today?

Speaker C: Um, it's a tricky one. Yeah. Um, I think there's a couple of factors, um, and it probably goes very well in hand to the partnership. Um, as we think about one, understanding the risk of your supplier and your supplier suppliers network, um, that's the foundation you have to understand. Um, we obviously help our customers build a diverse supply portfolio in their networks. Um, and as you think about these models we talked about, the digital twins, as you think about sourcing optimization itself, that's a key decision that we're helping you make. Or no longer doing that in spreadsheets. Spreadsheets can't handle that anymore. It's too complex. Um, so thinking about what that supplier and sourcing risk is and finding a balance to have a diversified portfolio, I mean, we're seeing a lot of this today with, with tariffs as an example. Um, when we think about the geopolitical pressures and the tariff pressures that we're under, there's a lot of movement of sourcing happening in the world to try and absorb and negate the tariff pressures. Um, but you have to do that in a way that you think about the risk and resiliency of the network itself. And so taking that decision in a way that you're never going to move away from that original supplier 100%, not overnight anyway. Um, but how do you think about moving, shifting 20%, 40% of your volume to a different capacity to a different supplier? That can help reduce the risk in your network, can help reduce the cost pressures, help, um, avoid some of the tariff exposure.

Speaker B: Very good. Well, I hope that answered the question for that audience member. Uh, and then the last thing that we always just finish on is just somebody wants to learn a bit more about direct spend management. Is there any way you'd send them any recommended reading?

Speaker C: Yeah, absolutely. I mean coopa.com has magical resources across our blogs, our white papers, um, and the website itself. Um, we, we just recently launched a, ah, direct Spend maturity report, um, that's really educational and insightful reading that goes very well in hand with this conversation of understanding where companies are and some of the steps that they're taking and what success looks like. So I definitely encourage to read that.

Speaker B: Very good. We'll get the links, uh, for those from you and put them in the show notes. And Chelsea, if somebody wants to know more about the partnership and how Moody's works with Cooper, just reach out to you or anywhere else they should go.

Speaker A: Oh yeah, absolutely. You can reach out to me, but bit quicker you could go to the Koopa App Marketplace. Moody's is a platinum partner, so we're featured right at the top. Um, you can check out there's videos. We actually have our entire configuration guide, a 50 page document. You can learn exactly how you can get our data into Coupa. Um, it's right there and you can submit a get started form and you will eventually come to me. You could also go to Moody's.com, we have a Coupa partner page where we've posted, put customer case studies, we've got um, video, uh, recordings and we've got an interactive ah, demo that you can click through and see exactly what Moody's data in Koopa looks like.

Speaker B: Fantastic. So again, we'll get the links, put them in the show notes. Please go through and have a click if ah, that is what you want to do. Dean, thank you so much for coming in. Chelsea. Always good to catch up with you and we'll definitely have to have you back next year.

Speaker C: Thanks for having us.

Speaker A: Thank you. Thanks for listening to this Moody's Talks podcast. To find out more about the topics discussed, please follow the links in the show notes. You can check out other Moody's talks podcasts by visiting Moody's.com podcasts.