Daily Archives: May 19, 2017

Supply Management Technical Difficulty … Part III

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master’s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. Having covered basic sourcing and basic procurement it’s time to move on to Supplier Management.

But first, what is Supplier Management? Supplier Management, depending on the vendor, is defined as the provision of Supplier Information Management, Supplier Performance Management, and/or Supplier Relationship Management. The question is, do either of these areas contain any technical difficulty.

Supplier Information Management

Technical Challenge: NONE

Let’s face it, supplier information management is just data in, data out. Collect the data, push it in the database, run a report, pull it out. It’s just a database with a pre-defined schema and some fancy, optimized, UI for getting the right data to push in and pull out.

Supplier Performance Management

Technical Challenge: NONE

Supplier performance management is two part — performance tracking, done with software, and performance improvement initiatives, identified and managed by humans. The latter can be complex, but since this series is focussed on technical complexity, we will ignore this aspect. As for performance tracking, this is just tracking computed metrics over time. Essentially information management, but focussed on collected performance data and metrics.

Supplier Relationship Management

Technical Challenge: NONE

Supplier relationship management is all about managing the relationship. It’s usually done with collaboration (and collaboration software is not technically challenging), development management (lean, six sigma, and other programs), and innovation management (goal definition, initiative tracking, and workflow). All human challenges, not technical challenges.

But does this mean there are no challenges? Depends whether you are using old definitions or new definitions. A new definition goes beyond the basics and looks to software to guide the future of Supplier Management. And that’s where the challenges come in.

Technical Challenge: Predictive Analytics

Inventory levels, sales, and costs are relatively easy to predict with high accuracy with enough data using a suite of trend algorithms. They’re not always right, but they’re right more often than human “gut” (unless you happen to have a true expert who’s top of her league and been doing it for 20 years, and those are very rare) and that’s all we can expect.

But predicting a market trend is different than predicting supplier performance as performance shifts can result from a variety of factors that include, but aren’t limited to, worker problems (such as union strikes), financial problems (which can happen overnight as the result of a massive launch failure, loss, etc.), raw material shortages (as the result of a mine failure, etc.) and so on.

Thus, predicting future performance requires not only tracking performance, but also external market indicators of a financial, regulatory, and incident nature. The latter is particularly tricky as incidents are the result of events that can often only be detected by monitoring news feeds and applying semantic algorithms to the data to identify incidents that can affect future performance. Then, all of this data needs to be integrated to paint a picture that can more accurately predict performance than the predictions made from just monitoring internal data sources.

In other words, if all you are being sold is a data collection and monitoring tool, it’s not particularly challenging to build (and a business process management / workflow configurator tool could probably be used to build a prototype with your custom requirements in a week), but if it’s a true, modern, performance management solution with integrated predicted analytics to help you identify those relationships at risk, that’s a completely different story.

Next Up: Analytics!