Category Archives: Supplier Management

Supplier Solutions – All About the Space … (Repost)

… 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.

Supplier Management Is Not Enough. But Neither is Enablement. So What Is?

Very good question.

As per our post two years back on how it’s time to go beyond supplier management (which has been a thing every since Aravo burst onto the scene way back in 2003), supplier management is a lot more than just information tracking, performance metrics, and simple compliance requirements.

As per our last post, it’s also:

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

and

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

but it doesn’t stop there. There’s also:

  • Supplier Discovery
  • Supplier Financing
  • Supplier Marketplaces
  • Supplier Networks
  • etc.

And then there’s the fact that the organization needs strategic and high performing suppliers, and most won’t make the cut until they are enabled. But just enabling a supplier to do better (one time) is not enough — you have to be able to take advantage of that enablement. Which means you have to be able to monitor, plan for, track, utilize, and respond to the changes made by the supplier. That requires a fairly advanced system.

And, as per our previous article, you need visibility (into the supplier and its supply chain); value-driven design (that produces a product a consumer wants); and verocity (for real time spend insight). But that’s not everything. You also need vetting (so that you can insure regulatory and compliance requirements are met); variability (as different suppliers require different levels of management and insight); and vindication (objective measurements over time that you made the right choice). And so on.

We still don’t have the answer, but we do know that the platform must be more than just information management, checkbox tracking, and messaging with audit trails. It must be collaborative, open, flexible, and evolving. Then, maybe in a few years, we’ll have a better idea of what the right answer is really is.

When Managing Supply Assets, Don’t Forget …

Last year we brought up a very important point when managing supply. Specifically, we reminded you that sometimes supply comes from within the four (virtual) walls of your business — a fact that is often overlooked by man BoB (Best-of-Breed) S2P (Source-to-Pay) modules and even suites.

When we are talking about MRO, the goods and services you need might be in a storage room in another building. If we are talking about consumables, like what you might need for a new hire, everything you need might be one floor down, left behind by another hire who, after the probation period, didn’t work out. As a result, inventory and asset management are key to successful Supply Management, and to successful Procurement.

But Asset Management is more than just keeping track of assets, moving them from one location to another, and making sure employees choose existing assets in inventory before ordering new assets from suppliers.

Asset Management is not just tracking assets and deploying them when they are needed, it is making sure they are used when they are usable. Assets have a value, a value that almost always depreciates when they are not used. Add this to the extra cost of having them in inventory, and that’s a lot of wasted capital.

In other words, good asset management requires a platform that can

  • track and improve forecasts … especially if demand or utilization timeframes start to shift
  • optimally manage inventory levels … there should be enough to last to the next, optimal, restock window with a bit of buffer, but not so much that the excess inventory grows at every restock
  • re-assign internal assets that should be utilized as fast as possible, and even allow for internal upgrades to delay unnecessary spending (e.g. the new machine bought for a new hire that didn’t work out after 3 months should be reassigned to an engineer 3 months away from a hardware upgrade)
  • manage leasing of assets that are going to go unused for a while (e.g. the organization has an expensive piece of construction equipment that it will not use for the next three months — lease it out)
  • identify when extra inventory or newly retired assets should be sold off to minimize loss

… or at least integrate with a platform that does.

Asset management is frequently overlooked, but very important to successful supply management.

How Do You Identify A Truly Stellar Supplier? Part III

Assuming one exists …

Five years ago we first asked this question and a few answers we gave was a stellar supplier was a supplier that

  • actively self manages
  • measures, tracks, and even reports its own performance against SLAs and KPIs
  • accepts — and even helps to identify — the corrective actions it needs to take
  • actively works to not only meet expectations but exceed them
  • communicates as soon as something happens that could threaten a KPI, SLA, commitment, or expectation.

And if multiple suppliers met these requirements, you wanted one that is willing to

  • collaborate
  • jointly identify opportunities for efficiency improvements and cost reductions

But then last year we noted that we missed something important. Most importantly, none of this mattered unless the supplier was willing to

  • open its books
  • expose its supply chain and jointly identify tier 2 risks

But this is not everything that makes a stellar supplier. While its critical that any strategic supplier open its books and expose the risks that affect you, one more thing is critical.

  • platform adoption

If you’re using modern S2P platforms, they all rely on data to deliver their value. And a lot of the data they require is supplier (-related) data that needs to come from the supplier. And since there is no way you can enter all of the data you need from all the suppliers, you need them to use the portal you provide them. You need them to adopt your platform. If they won’t, they are not the stellar supplier you need.

Be Wary of FREE Supplier Discovery

As per our recent pieces on how supplier discovery shouldn’t be a kick in the pants, at least today, it shouldn’t be free either — because a good supplier discovery solution costs a lot of money to maintain.

A number of vendors are now offering, or considering an offering of, free supplier discovery bundled with their Sourcing or Procurement Solution because, just like it shouldn’t cost suppliers to do business on a network, it shouldn’t cost you anything to do searches (when search engines are free), in their view.

And while it sounds great in theory, at least today, it’s not practical in practice. Computing power, storage, internet access, and electricity costs money … as does a lot off the software used to enable this FREE supplier discovery (as there is no free software, someone still has to compile it, integrate it, maintain it, etc. And this resource time is costly as well). Google only enables free search because it makes money on ads and services that it sells, which subsidizes the internet search.

This means that the only way a provider could really offer free discovery is if it was subsidizing that search with other software offerings (which means you’re still paying for it as it could charge less for those offerings if it was not subsidizing supplier discovery). And if it this is its main offering, you need to ask how it’s making money as it costs a lot of money to maintain a good supplier discovery solution, and if the provider tells you it is cheap (and some providers are making this argument), then the solution is not good.

I’ve heard some providers argue that since there is so much supplier information out there freely available on public directory sites (paid directories that are open, supplier associations, government registries, investment sites, etc.) that it would be cheap to scrape and combine all off this information if you have a good AI engine and all you really need is just a lot of storage and fast internet access, which can be relatively low cost. And while this sounds good in theory, it’s not good in practice.

First of all, the majority of all supplier listings are micro-businesses, and most of these aren’t big enough to serve a corporation in any capacity. Many have never done any substantial business and there’s not enough information to assess risk or capability. Many listings are outdated and incorrect and many more are for out of business suppliers. Many listings don’t have enough information to determine products or services to any level of accuracy. In other words, the majority of free information is bit-garbage.

In order to have a good supplier directory, you have to have information that has been manually validated to a reasonable extent. Which means that either the vendor needs to spend a lot of expensive manpower validating or start with third party databases that have been manually validated, which cost money to access. Either way, good information costs money, which means that a supplier discovery vendor can’t create or maintain anything good for free.

Which also means that if the information is good, it’s likely also limited to a directory supplier discovery vendor has built up over time from its customer base, which will only be good for you if there are like organizations doing business in like geographies already in that customer base.

So, just like there’s no such thing as a free lunch, there’s no such thing as a good, free supplier discovery service. At least not today or tomorrow.