Daily Archives: February 16, 2011

Is The Cliffhanger Paradox Limiting Your Supplier Performance?

A recent article in The Globe and Mail on why you need to keep stroking clients discussed a major reason businesses lose clients and don’t maximize lifetime value from the relationship. Dubbed the cliffhanger paradox, which describes the situation where businesses want continued loyalty and financial gains — but don’t get it, the article points out that the reason clients jump ship is because, once the client is won, the business fails to communicate meaningfully, frequently, and personally with them. Like a cliff-hanger, both sides are left in suspense.

If businesses don’t continuously communicate with clients, they don’t know where they stand until those customers either buy again or jump ship to the competition.

But the same holds true in supplier performance management. Often a company will begin a supplier improvement initiative, target the most critical or most under-performing suppliers, work with them for months until the performance meets the target level, and then quickly move on to the next supplier in the queue, thinking “the supplier has everything under control now”. Maybe they do, maybe they don’t. But most importantly, neither side knows that. If the supplier thinks all is well with the world again, they might slowly drift back to their old, under-performing ways. And if the supplier thinks you have given up on them, they might put minimal effort into fulfilling their contracted obligations and instead put all of their effort into pleasing another, easier to retain, customer. Both ways end up with you not getting the best performance you can. It’s not just your customers that need to be stroked on a regular basis … your suppliers need their whiskers stroked too.

BravoSolution: Making Spend Analysis More Useful to the Average Supply Management Professional, Part I

For reasons I don’t quite understand, spend analysis is not used enough in the average organization. More often than not, even basic spend reporting — that would tell an organization what is being spent, on what, with whom, and when — is not run. Even though most organizations can probably name seven of their top ten suppliers, categories, and organizational units by spend if you just ask them, chances are that not only will they be surprised by the other three, but they won’t quite comprehend the magnitude of the spend. And until an organization understands the magnitude of their lack of comprehension, getting spend analysis adoption in the organization is likely to be a problem.

However, that is only the first obstacle. Once a solution is adopted, chances are it will only be used by a small number of senior analysts. Just like decision optimization, there seems to be a common misconception that it is “hard”, requires “math skills”, or “takes too much time” — as a result, many users are intimidated or can’t find the time to try it. The “hard” and “math skills” misconceptions can usually be overcome with a demo or two on a properly implemented, easy to use, tool, but unless it’s easy to import data and generate reports, the “takes too much time” stigma may stay.

But if you get past the stigmas, if all it does is generate a few canned reports, you hit the real problem. It’s usefulness quickly comes to an end. Once you’ve attacked the Top N suppliers, Top N categories, and Top N spenders in the organization and reigned in costs and performance, unless there is a way to identify the next N opportunities, the usefulness of the tool has come to an end. That’s why the traditional spend analysis value curve flattens out within a year and spend analysis never reaches wide adoption.

But this doesn’t have to be the case. Not only can spend analysis reach wide adoption throughout the supply chain organization, but it can continue to deliver value year over year if it is properly integrated into daily supply chain activities. And the key to making this happen in your average Supply Management organization is integrating spend analysis not only into the (e)Sourcing process but the e(S)ourcing suite. From eBidding through Decision Optimization and Contract Management through Supplier Performance Management, Spend Analysis can play a vital role.

In BravoSolution‘s Collaborative Sourcing Suite, Spend Analysis is integrated into the Contract Management solution, Compliance (& Spend) Management, and Performance Management and will be integrated into Risk Management in the next version of the solution that is currently under development. In tomorrow’s post, we will discuss the benefits of integrated spend analysis and what is available in BravoSolution’s suite.