Daily Archives: February 3, 2017

It’s Time to Go Beyond Supplier Management, But Where is That?

Supplier Management has been a thing ever since Aravo burst onto the scene back in 2003 and made it a thing with their Supplier Information Management solution. Since then we’ve progressed from just tracking contact information and associated documents to tracking and managing performance metrics to putting in place the foundations of relationship management.

But’s that just the beginning. As per a recent Primer post over on Spend Matters Plus [membership required], the following overlaps Supplier Management:

  • Corporate Social Responsibility (CSR)
  • Supplier Information Management (SIM)
  • Sustainability Initiatives
  • Supplier Development
  • Risk Management
  • Compliance

But even this is just the tip of the iceberg. There’s also:

  • Contract Management
  • New Product Introduction
  • Maintenance, Repair and Operation (MRO)
  • Services and Service Management
  • Spend Analytics

Supplier Management is a difficult subject because it is key to Supply Management, and that’s what it’s all about. And we know where Supply Management is, and has been, but where does it need to go. It’s a hard call, but three things we can say for sure are:

Visibility. In order to manage your supply chain, you need to see beyond your supplier. Especially if you are buying contract manufactured goods and not taking the time to understand where your suppliers parts, components, and raw materials are coming from.

Value-Driven Design. These days, it’s not just the lowest cost product that wins the game. There is corporate social responsibility in making sure there is no slave or abused labour in the supply chain. Sustainability both in terms of materials used and in their production and harvesting. Carbon footprints. Reclamation and recycling laws. And so on. You need to go beyond design for supply and even design for three Rs and design something that captures value to each segment (supplier, consumer, and regulatory body) that the product touches. And that’s almost impossible to do on your own.

Verocity. Organizations these days need more than traditional historically focussed spend analytics that tell them, weeks or months after, what was spent, on what, from whom, by whom, from where, to where, and in what quantity. You need to know what is being spent, by whom, on what in real time … and where the dollars are trending towards. Is a new supplier taking all of the spot buy spend, or even worse, spend that is supposed to be on another contract? Are product and services tastes changing? Are market costs changing? The application has to not only be able to keep up, but identify the most pertinent trends and options for dealing with them … it has to have advanced predictive analytics that, at the very least, identifies the most relevant changes (and ranks them by value or statistics or outlier distance from the expected norm), if not offering prescriptive analytics on how to take advantage of changes, minimize losses, or control them in (historically) well understood situations.

More requirements will surface as markets move, but this should help you understand that supplier (relationship) management is not enough.