Category Archives: Supplier Information Management

Supplier Solutions – All About the Space …

… of Supplier Enablement. In our recent post about Supplier Networks, we discussed the value wasn’t what the provider typically promoted, but the fact that it greatly decreased the effort required by the supplier to do business. It enabled them to be efficient, whereas most sourcing and procurement applications just suck their time.

So if you are going to buy a supplier management solution, then it better be one that truly, truly, truly enables suppliers. So what does this mean?

Find a solution that focuses suppliers on missing, outlier, and information that can’t be confirmed.

Many solutions just send out regular “please review and correct” alerts and call that supplier information management. But information management isn’t about reminders and checking boxes, it’s about finding issues and fixing them. A good solution identifies missing information, information that is outlier from norms (i.e. an insurance certificate is usually only 1 year, but the supplier entered 10), and information that can’t be confirmed (such as third party audits from organizations that can’t be found in government registries).

Find a solution that makes integration with supplier’s systems (MRP, CRM, order management, etc.) easy.

Suppliers need to quickly get POs out of your portal and into their order management, MRP, ERP, accounts receivable, etc. system for which your vendor will likely not have an out-of-the-box integration solution that you are able to implement on behalf of your supplier. So make sure the solution has a well-defined API that makes it easy for the supplier to integrate their systems if they want to and well defined file formats that will allow them to export orders, etc. from your system and import shipping notices, invoices, etc. from theirs.

Find a solution that includes cash forecasting capability for the supplier based on your early payment discounting schedule.

Face it. A supplier isn’t going to go for your early payment discount program just because you say it’s a good idea — they need to run their own numbers and realize that 2% is less than they are paying in interest, etc. Give them an easy to use calculator, especially since their Procurement or AR guys are likely NOT as financially adept as your financial modellers.

In other words, if you want a true supplier solution, find one that truly, truly, truly enables the supplier. Not just you.

You Need a Supplier Network – But Not For the Reasons The Vendor Says!

Every vendor with a supplier network touts their wares, and usually does so quite loudly. They go on and on and on (and on and on) about how their industry leading supplier network:

  • makes it easy to find new suppliers
  • makes it easy to search those suppliers catalogs
  • makes it easy to send out RFXs
  • makes it easy to place orders
  • makes it easy to collaborate with suppliers
  • … and so on and so on and so on (and so on and so on) …

Now, these are valuable benefits, but they are by no means unique to a supplier network. Taking ‘em one by one (we’ll knock ‘em all down as the satellite circus won’t leave town) …

  • you can find new suppliers from online marketplaces, industry associations, co-opetition, and from within your own organization (through better data management)
  • a number of online marketplaces make it easy to search catalogs, and there are a number of suites with integrated catalog management that work quite well, no network needed
  • just about every sourcing, procurement, and related application (suite) has RFX functionality
  • dozens upon dozens of procurement suites, e-commerce applications, etc. make order placement a snap
  • e-mail, online screen sharing, online workplaces, embedded messaging, and so on make collaboration easy

In other words, no supplier network is needed. So why do you need a supplier network?

Could it be for supplier management? Some of the more advanced vendors will submit that with a supplier network will help you:

  • detect supplier performance issues early
  • initiate and manage corrective actions
  • manage innovation management

And it will, but:

  • good metric and performance tracking and regular score-carding can detect issues early just as well
  • there are a number of best of breed corrective action management solutions out there, and many good sourcing suites have this functionality built in
  • and there are solutions for innovation management, and most SXM solutions, which do not necessarily have supplier network capability, have these …

So why do you need a network? And, to be more precise, an open supplier network?

Because supplier information management solutions, supposed to ease the burden of information management, don’t really ease it — they just transfer it to the supplier (who is supposed to log into the portal and maintain it). This sounds great, but given that a given supplier will have hundreds (or thousands) of customers, each with their own sourcing / procurement / SXM solution, instead of one customer having to maintain thousands of supplier profiles, each supplier has to maintain hundreds of their own profile instances for their customers.

In other words, you’ve just transferred costs through the supply chain, shifting your overhead into your suppliers who will, surprise, have to pass that cost onto you. But if you have an open supplier network, a supplier only has to maintain one profile, either in the network, or in the system of their choice that is capable of exporting and updating their profile in a standard (XML) format to the open network as needed. Instead of shifting information management through the chain, and the associated costs, you’ve minimized it, and eliminated the majority of the cost.

On the Fifth day of X-Mas (2016)

On the fifth day of X-Mas
my blogger gave to me:
some SRM Posts
some CLM Posts
some Best Practice Posts
some Trend Bashing Posts
and some ranting on stupidity …

Supplier Relationship Management. It’s another mouthful. And depending on your mindset, it either sounds like it is the consultant fad of the day or just drinks after work. But it is a critical part of Supply Management. Without good supplier relationships, you’re leaving money on the table. Lots of it. Not only does poor supplier performance cost you in terms of stock-outs, quality, returns, etc., but it costs you in opportunity. High performing suppliers are often the best source of innovation and value an organization has, and the organizations that are treated as customers of choice by those suppliers reap the biggest benefits. Thus, SRM is critical to master and to get right. So here are a few good posts to help you understand SRM and the current state of affairs.

It’s 2016! Welcome Back to the Industrial Age of SRM!

SRM Case Studies Speak for Themselves

Is Your SRM Program Leaving Hundreds of Millions on the Table?

Want an Exceptional Supply Management System? Do NOT Forget the Supplier!

Forget SIM. The Real Answer is SIR.

Just What Is A Next Generation Supplier Network

SIM? Is It Old News or a Shiny New Pair of Shoes?
Part I
Part II

The Most Important Word In Supplier Relationship Management Is Not What You Think It Is

Why You Need a Master Data Strategy to Properly Do Supplier Information Management

Why is Supplier Relationship Management (SRM) Under-delivering?

How Do You Identify a Stellar Supplier?

Of course there is much more to be said on the topic, but this gets you started. And searching the archives will keep you going.

Come back tomorrow for the sixth day of X-Mas.

SRM Case Studies Speak for Themselves

On Friday, we noted that State of Flux just released their eighth annual SRM survey, entitled Digital SRM: Supplier Relationships in the New Technology Landscape, and with it the surprising revelation that while leaders are taking steps forward, Procurement organizations as a whole might be stagnant or taking steps back! This, of course, is not a good thing because the best sourcing event in the world is useless if the plan (encapsulated in the contract) isn’t followed through and the expected savings or value never materializes. SRM is the key to realizing sourcing success, and too many companies overlook that (and wonder why 30% to 40% of identified savings never materialize).

We’ve written many posts over the years not only on the importance of SRM but how to implement it and support it with technology, so this time, instead of doing another multi-part series (which can be found in the archives), we’ll just skip to some of the case studies covered in the report and hope that maybe they are enough to convince you to get your SRM act in gear and go forward!

Telstra, a big name in Australian telecoms that is relatively unknown outside of Australia, implemented a SRM program that not only put more structure, process, and value around SRM but repositioned the perception of Procurement from a function that is only focussed on cost saving to one that works with suppliers and stakeholders toward the realization of business goals. As a result of this change in mind set, and more collaboration between different departments and suppliers, Telstra has met 10% of savings targets through increased revenues, showing that SRM can do more than save money, it can increase sales and revenues by finding ways to create new value that end customers will pay (more) for.

But that’s a small win compared to Ladbrokes who saved £18 M by taking the gamble out of SRM. Since beginning their SRM transformation in 2014, they hit a 3-year savings target of £ 18M a full year ahead of schedule, demonstrating the true savings potential of a well defined and well executed SRM project, which is huge in an industry where the majority of indirect spend has to go to a very small supplier base and where competitive bidding has little effect.

And the value of SRM has not been lost on the giants. For example, if Mars were a public company, it would be a Fortune 100 company as it regularly sells in excess of $ 33 Billion a year in food products (as it manufacturers more than just the iconic Mars bar). Even though it is a top procurement organization (that employs many leading supply management technologies and processes), it has recognized that SRM can help it get even bigger and better still, and that is part of the ambitious plan it has for SRM. While its initial SRM program is still in rollout, it’s starting to see a lot of enthusiasm from stakeholders and suppliers alike, which is a hard momentum to build in an organization of 77,000 employees with a dedicated commercial team of 1,200 individuals! Whereas most organizations might have a few dozen people on the commercial side, and maybe a few hundred, and can thus build enthusiasm for new initiatives and roll them out quickly, getting a thousand people on board is no easy feat. But the potential of SRM is such that even an entire organization can get behind an initiative that can cut costs, increase value, and even encourage innovation in the supply base.

In other words, there’s a lot of gold in them thar SRM hills, and any organization that doesn’t mine for it is leaving a lot of money and value on the table. To find out how much money and what kind of value might be left on the table, check out Digital SRM: Supplier Relationships in the New Technology Landscape. It’s worth your time.

It’s 2016! Welcome Back to the Industrial Age of SRM!

State of Flux just released their 8th annual supplier relationship management research report entitled Digital SRM: Supplier Relationships in the New Technology Landscape and while it reveals the handful of leading supply chain organizations are, or are moving towards, digitization, it reveals the majority of organizations are not only stuck in the past, but moving back towards the industrial age in their supplier (relationship) management processes. Scary!

So scary in fact, that I hope that the purchasing wizard Pete Loughlin of Purchasing Insight does a follow up to his piece on how we are now arriving in the digital economy – turn your watch back 40 years entitled we are moving forward in the digital economy, turn your watch back another 40 years because some of the practices many global organizations are still practicing with respect to supplier relationship management could literally be straight out of Marshall Monroe Kirkman’s classic The handling of railway supplies. Their purchase and disposition.

And I’m not joking.

Many organizations are still doing nothing more than inviting bids by public advertisement for a year’s supply and taking the advice that the pulse of the market should be continually felt and, clearly, not thinking about the importance of managing relationships after the purchase order is cut.

And while it looked like we are making progress last year, the simple facts that:

  • the number of businesses failing to invest in any SRM-related training rose from 26% in 2015 to 39% in 2016
  • 80% of companies are not achieving on-going benefits from external spending (compared to what they could be)
  • 87% of companies are still using Excel (which is essentially just an electronic version of a general ledger at most companies) as their primary SRM tool

demonstrate that, for the majority of organizations, the digital age (which for the consumer has been here for almost two decades) is still decades away.

After all, why are Purchasing Manages still panicing when they receive the 2:00 am phone call from the CFO informing them that their primary supplier in China just filed for bankruptcy and the company needs to know ASAP what the impact will be. If they had modern supplier relationship management systems, it wouldn’t take them 48 sleepless hours pouring through accounting systems, ERP systems, and spreadsheets to figure out what products come from the supplier. With modern supply management best practices it wouldn’t take them weeks to identify a new supplier and months to switch. And with good supplier relations, they definitely wouldn’t have to absorb the price doubling mandated by the receivership for continued supply of the critical product lines.

With proper supplier relationship management, you know as much about the (financial) health status of your strategic supplier as you know about your own organization. With proper supplier relationship management, you know all the products that are being provided, in what volume, in what consumer product lines they are being used, and what the impact of a stockout or termination of the line will be. With proper supplier relationship management, a company knows which other suppliers it is using that could also produce the product, how long it would take to switch, and how much it would cost. And with good relations, the last thing the supplier personnel would be comfortable with is charging their best customers an unexpected, possibly contract violating, unmitigated price increase, and would fight any suggestions by the receivership management to increase prices to any degree.

And the sad thing is there is no shortage of basic SRM systems these days. Not all are industry leading like (and not all will deliver anywhere near the value of) State of Flux’s Statess solution, but there are so many ways for an organization to enter the digital age that it’s shocking just how hard they fight to stay in the industrial age.

Hopefully, now that the results have been demonstrated for eight years in a row, they’ll finally accept SRM is not a passing fad, its the foundation for a new reality, buy in, and go for it. At the very least, hopefully they’ll check out Digital SRM: Supplier Relationships in the New Technology Landscape and realize what could be.