So, we’ve implemented e-Procurement, adopted Spend Analysis, and identified Supplier Management as the next Source-to-Pay solution to implement. But it has as many aspects on its own as Source-to-Pay has, so finding the right solution is going to be tough. First we have to decide which aspects of the CORNED QUIP, as identified in Part 15, the organization needs, and then we need to make sure that the solution has the necessary features for each aspect the organization needs. What are those features? Let’s take the aspects one by one, starting with some of the classic capabilities first.
Supplier Information Management (SIM) is where it all began back in the early 2000s. Some would even argue that it began with the formation and launch of Aravo, one of the first pure Supplier Management solutions, and possibly the last surviving great granddaddy in the Supplier Management space. (Aravo was among the first to get big name clients, including Google, using a pure-play SIM platform.)
Almost every Supplier Management solution does basic Supplier Information Management because you can’t really do any supplier management without tracking basic information. (However, these solutions are not all equal in terms of depth and breadth, and the degree of differentiation is quite large.) The core, and the point, of a SIM solution was the centralization of all supplier information for tracking, access, and reporting purposes, which, long ago, was seen as the foundation for management. As a result, the core capabilities required are both limited and fairly obvious:
- Extensible Schema
- If the schema is fixed or has very limited extensibility, it’s not a modern SIM solution — every S2P system can store the supplier information the S2P system needs to function in a fixed, or limited extensibility, schema. A modern SIM solution has to support unlimited extensibility so that an organization can use it as the supplier master data management (SMDM) solution.
- Fuzzy Search
- More technically, full reg-ex (regular expression) search across all data fields for partial/like matches as well as weighted rankings (using customized similarity models) for finding the right suppliers (with existing relationships) to meet buyers’ needs.
- Customizable Approval Flows
- Just like every S2P solution contains a fixed schema that captures the supplier information it needs to function, any that require supplier interaction have a basic onboarding flow. As such, a modern SIM solution needs to have customizable onboarding flows with customizable approval rules.
- Customizable Alerting
- The platform should support configurable rule-based alerts that can be defined on any field, dimension, or derived dimension to alert a user when a threshold is reached or a value is detected, especially as a modern SIM solution should be the foundation for SMDM. This sounds vague, but the capability has to be very generic and flexible because neither a relationship, performance, compliance, or uncertainty solution will be able to detect everything on their own.
A relationship system that tracks active supplier relationships may not detect that a person just entered into the system as a rep is one that you dealt with in the past (at another supplier that consistently performed poor when you needed to interact with that rep). A performance solution will only detect performance for projects and suppliers actively being tracked, and may not be able to compare that to full historical benchmarks (or realize that the increase in performance correlated to a decrease in ESG activity). A compliance solution will detect compliance with regulations, but not necessarily with corporate goals designed to meet anticipated regulations, or how the compliance affects performance. The uncertainty solution will only be able to identify risks based on the integrated data sources and the integrated models, which won’t cover everything. Nor will it be useful to build risk models for situations that are currently irrelevant for the organization. However, the organization should be detecting whether it may need to build new, or augment, existing models — and that will often be if a value in the database exceeds a threshold. (E.g. The organization is not currently doing a detailed risk of financial failure predictions, but an OTD KPI dropping below a threshold is a signal to start, and that data is currently only tracked in the inventory management solution, and pushed to the SIM, serving as the SMDM, in the weekly cross-enterprise system synch.)
What’s the point of tracking information if you don’t do anything with it? The next major solution to hit the scene was Supplier Relationship Management (SRM), where the data was used to help manage the supplier relationship. The majority of modern supplier management solutions claim to be SRM platforms, even though they have wildly different definitions of what SRM is and wildly different functions. Most definitions considerably overlap with SIM and SPM, but we don’t agree with this. While such a system needs extensive data to be effective, and must track performance, it needs to focus on managing the relationship, not the data or the numbers.
A Supplier Relationship Management solution must provide functionality geared around managing and improving the supplier relationship. This must include functionality geared towards helping a buyer identify and implement best practices to manage and improve supplier performance and, in addition to functionality geared towards helping the supplier interact with the buyer, collaborate with the buyer to proactively identify and improve processes to improve future performance.
- Synchronous and Asynchronous Messaging
- In addition to the standard asynchronous messaging supported by every platform with collaborative elements, it must also support synchronous messaging and real-time discussion and collaboration through voice (with auto-transcript and storage) and screen-sharing and support saving, search, and semi-automatic/assisted work/change order creation from these sessions.
- Collaborative Project and/or Product Plans
- The system must allow for the collaborative creation of (improvement) project plans — with milestones, tasks, and owners — as well as checks, balances, notes, and sign-offs. If the solution is for direct/manufacturing, it should also support the creation, possibly through integration hooks to CAD/CAM systems, approval, and management of product (production) plans.
- Integrated Best Practice Guides
- A modern solution should contain a large library of standard improvement plans for common situations, as well as automated best-practice plan selection and guidance when key metrics (either computed internally or imported from an SPM solution) exceed threshholds or predictive metrics indicate likely problems. If the platform does not provide insight, at the end of the day, it’s no better than a SIM.
At the end of the day, relationships are important, but you, as a buyer, get measured on performance, and you need that from your suppliers too. Relationship management should be the foundation for improved performance management. However, performance management is more than just relationship management. It’s measurable process, and product, management, and that’s the focus of a Supplier Performance Management (SPM) capability.
- KPIs and Custom KPIs
- Performance is all about improving KPIs, so it should be obvious that the platform should track KPIs. But not just a small set of standard “canned” KPIs! The platform should track standard, customized, and any specific KPIs you can think of to identify potential issues or opportunities for improvement. Just like there is no one set of reports that can uncover everything of relevance in a spend analytics project, there is no one set of KPIs that can guarantee everything is running smooth and that there are no opportunities for improvement. While the standard KPIs are critical, and display major issues that need to be addressed, you want to discover those KPIs that present leading indicators that allow you to sniff out, and deal with, a problem early (before it becomes significant enough to make a noticeable difference in a standard KPI).
- Internal and External Benchmarks
- KPIs are good, but only measuring against your own benchmarks only tells you how good each supplier is doing against the best supplier for your business, not the average performance other businesses in your industry get from their suppliers, or their best suppliers; you want those external benchmarks built from anonymized data for deeper insight from the KPIs you calculate.
- Easy Data Ingestion
- Product quality is going to be in the quality / PLM system. OTD (On-Time Delivery) is going to require promised dates from the contract/PO system and receipt dates from the inventory system, etc. It’s going to be critical to get lots of data from related systems to make the maximum use of the supplier performance management module.
- Performance Improvement Management
- Once you detect an issue from a KPI or a benchmark, you need to do something about it. It might be as simple as contacting a supplier to find out that the root cause was force majeure and outside of their control (a flood prevented transport for three days) or just the result of a miscommunication or it might be that the supplier is repeatedly delivering defective units and there is obviously an issue with their quality control. In the latter case, you will need to start a supplier development project, and the platform should allow you to define it, track it, and, hopefully, manage the interactions (possibly through the relationship management functionality).
In our next post, we’ll move onto the next set of the more classic capabilities: Compliance, Quality, and Uncertainty Management when we flip it to the B-Side in Part 17.