Category Archives: Supplier Management

Supplier Discovery Should NOT Be a Kick in the Pants (Part II)

But, as clearly outlined in our last article, it still is. Big Time. You can spend weeks just trying to identify, and do preliminary identifications on, potential suppliers before you even start your supplier discovery project in earnest.

Why?

Well, as pointed out yesterday, today’s modern S2P platforms, marketplaces, and even supplier networks just don’t cut it.

And, as a result, you are left with the age old tedious process of:

  • scavenging potential supplier (names) from wherever you can
  • reviewing their product and service offerings to see if they might fit
  • trying to find real customer references to validate they are a real supplier and the offerings that caught your attention are real offerings
  • qualifying the suppliers for participation

Which, to be honest should be completely unnecessary more than two decades after strategic sourcing hit the market and almost two decades after the first supplier networks hit the market. By now you should be able to:

  • use a large, global network that contains relevant suppliers to you to identify potential candidates
  • use natural language processing and machine learning based similarity match algorithms to verify that they have products and services that are a close match to what you are looking for
  • use community intelligence on community forums from verified customers to satisfy yourself that they are a real supplier with real self-produced products that meet someone’s needs
  • use RPA to crawl open and accessible information sources to pre-populate as much qualifying information as you can find
  • use AI models to predict the likelihood that the missing information will be to your satisfaction
  • use embedded templates, automated workflows, and RPA to collect the remaining information from suppliers and third parties who maintain the needed information on the suppliers
  • use self-scoring gated models to validate the suppliers as candidates for your strategic sourcing event

and, moreover, you should be able to do all this with the press of a single button if you want to.

When you press “find suppliers”, the platform should

  • automatically query the relevant networks (both and in-platform and third parties, because one network is not enough) to find potentially relevant suppliers
  • automatically use NLP on their associated product and service listings (in the platform or on accessible platforms if you have access to Amazon Business, Alibaba, or a third party catalog provider) to insure potential matches
  • access built-in and third party community intelligence to verify they have verifiable customers who will verify the authenticity of their offering
  • use RPA to pre-fill as many of the RFI fields as possible
  • use AI on the RFI, similar suppliers, and public product specs to infer the likelihood of the missing fields being satisfiable (yes, high score, etc.)
  • present the list of candidate suppliers for the event
    and once you select the ones you want to invite
  • automatically manage the process of getting the RFI completed from the supplier and third parties with supplier information

And while no one platform does this yet, progress is being made on this front. If you choose a S2P platform that doesn’t lock you into its proprietary network and integrates with a provider of an open third party network like Tealbook with more advanced capabilities, you can

  • push a high-level description of your requirements to the third party network (3PN)
  • the 3PN will search the networks using its AI technology to find suppliers that a match the qualifications on tracked dimensions (based on the various types of metadata it extracts on suppliers and offerings and key fields)
  • the 3PN will then present the matches it finds ordered on the community intelligence it has on the suppliers (from validated third party network participants who have certified the supplier has offerings in key categories)
  • pull in the subset of suppliers you want to further qualify with an RFI with as much information that is available from the 3PN and the other third parties your S2P platform integrates with

It’s not perfect as you’ll still have to manually drive the RFI (as its unlikely your provider will have as much automation as you’ll like, a subject we’ll cover in another set of articles), still have to manually review the products and services used for the third party match (which will not be as detailed as your internal BoM), still have to review the community intelligence (just how “like you” were the organizations that recommended the supplier), and so on, but the level of automation provided is still substantial and can save you, in our estimates, up to 80% to 90% of the effort. And that’s substantial. For many organizations that had to spend a week finding potentially new innovative suppliers for their RFX process, they now have the answers with less than a day of manual effort.

And if they adopt a modern platform that automates a lot of the other tedious work in the strategic sourcing cycle (which is always 80% to 90% tedious grunt work that can’t even be classified as tactical), they can now overlap three or four sourcing events and triple or quadruple the events they push through a year — and that’s the real key to spend under management and value generation.

Supplier Discovery Should NOT Be a Kick in the Pants (Part I)

But, as may of you know, it still is.

Even if you just spent a cool seven figures on a brand new S2P system.

Why is this the case? Well, it’s basically because:

  • many vendors assume you already know the vendors you want to strategically source from and
  • the rest think you will be more than thrilled with their private network

But here’s the problem. The entire point of a strategic sourcing project is to identify the best supplier for your organization whether or not you know already know about the supplier and whether or not you have ever done business with the supplier in the past. This means that much of the time the supplier won’t be in your database and some of the time it won’t even be in your provider’s network, no matter how many (millions of) suppliers are in the network.

The reality of the situation is that a S2P provider’s supplier network is built from the suppliers of its customer base, and most of its customers tend to be in a small number of industries, serving specific markets, and sourcing from other specific markets — so unless you are in the same industry, serving the same markets, and sourcing from the same markets, the chances of the new supplier you need being in the network is not nearly as good as you might think it is, even if there are millions of suppliers in the network. (Some of which might not even be active anymore, and some of which might never have been active.) Fifty suppliers for every product or service you don’t need are fifty suppliers that are no good to you.

So you are left in the situation where you have to:

  • scavenge potential suppliers from wherever you can
  • review their product and service offerings to see if they might fit
  • try to find customer recommendations to validate the validity of their offerings
  • qualify the suppliers for participation

And all of this takes time.

Scavenging means you have to go out and look under nooks and crannies just to get a few names. Not just Google searches (because many suppliers aren’t listing their key capabilities in a manner you can easily search among millions of hits. Local associations. Co-opetition. Multiple on-line directories and marketplaces. Even the yellow pages. Not a very efficient method given that we are supposed to be entering the age of cognitive sourcing where tactical work is done for you and all you are left with is the strategic analysis of critical decisions.

But the time-suck doesn’t stop with the scavenge. Google, associations, colleagues, on-line directories, yellow-pages, and your mechanic (because you are desperate, after all) are going to know of suppliers in your industry that might be able to serve you, but they are not going to know your specific needs and the relevance of the recommendations will be anywhere from spot-on to miles away from what you need.

So you will have to review multiple products and service offerings to see if it’s even worth trying to qualify the suppliers for an invitation. This can take anywhere from a half hour (if the offerings are way off) to a few hours (if the offerings are close, but not necessarily close enough).

And then there’s the task of trying to find references that you can trust. Online reviews don’t count, those are easily faked. You need to find customers in your industry or, better yet, co-opetition that will at least certify the validity of their service offerings, if not recommend them.

And then the big time suck starts. You have to invite the suppliers to participate in a qualification RFI where you validate the basic business requirements for all suppliers, the basic industry and regulatory requirements, and the capabilities you require for the products and services you would consider them for. Depending on the industry, geography, and products in question, this could be dozens of pages of responses that need to be validated to meet all the business, regulatory, and product compliance requirements.

This can be weeks of manpower spread over even more weeks to complete — all before you can even start a strategic sourcing event! Ouch!

(And now you understand why we said in Friday’s post thatit’s not the marketplace or the network … it’s the facilitation, and supplier discovery is one core capability that modern platforms are not providing.)

It’s NOT the Marketplace or the Network … it’s the Facilitation!

Ten years ago SI ran a piece on how it’s not the portal or the network … it’s the facilitation in response to a piece in Global Logistics & Supply Chain Strategies, now on supply chain brain, that asked if supplier portals were so great, then what went wrong?

The article concluded, somewhat correct, that most suppliers who originally embraced the “portals” pushed back because they quickly realized that a “portal” offered little value and was just another way for a buyer to boost a discount. But more accurately, it turned out to be yet another system they had to access to receive orders and send invoices in a buyer’s own custom format, and instead of having to deal with a common XML or EDI format, they now had to deal with dozens. It was an amplified nightmare, even more so when they not only had to deal with a different portal for each customer, but multiple instances of each customer’s portal as early portals didn’t even have the decency to provide suppliers with centralized access to their customer requests — they had to log in separately to check the status of every customer!

The article also claimed that the survivors have evolved into networks with real value, which SI questioned, and still questions, as many networks were just searchable supplier directories with the ability to send electronic communications, and did not really enable any value for the supplier. They would have to enter their profiles in multiple networks, hope to get discovered, check and answer queries in each network and then, when selected for a contract award or PO, they would have to … you guessed it … use the portal associated with whatever Sourcing or Procurement system the buying organization used to submit the signed contract or order acknowledgement, submit the invoice, and generally interact with the buying organization.

So why are we bringing the subject up again? Because marketplaces and networks are on the rise again. With respect to marketplaces, we’re not sure if it’s because a number of the instigators see the recent M&A frenzy as an opportunity to fulfill a need and are thus trying to bring marketplaces back or if there are actually silent screams from pending customers that a select few hear. But in the case of networks, it seems that all the S2P players either believe that they need a network to compete with Ariba or that it will make their platform a lot more valuable.

We don’t agree with either. Marketplaces didn’t really work before, so there’s no reason to think that they’ll work now if nothing changes. And we don’t see anything changing. And another network doesn’t add value just by its existence as it’s just another copy of the half dozen that came before it.

If you’re going to build another marketplace or network, please, please, please remember the following:

  • no one cares about a marketplace or a network anymore, they care about doing business
  • the platform needs to make the supplier’s life easier — it should be less work to communicate, interact, and process e-documents
  • the platform should be differentiated and probably industry focussed — not another generic be-all end-all consumer-like marketplace (that’s what Amazon is for, right)

Because another copy-cat platform is just going to follow it’s brethren to the bit-bucket. That’s just the reality.

MoviePass and the Importance of Strategic Suppliers


Today’s guest post is from Bennett Glace, the primary contributor and Editorial Lead for the Strategic Sourceror. A prolific procurement and sourcing blogger, he is responsible for advocating the function’s value in podcasts, white papers, and other accessible content.

On an almost daily basis throughout this year’s summer movie season, cinemagoers have read headlines charting the struggles of MoviePass. The low-priced subscription service was intended to disrupt the traditional theatre model and get audiences excited to go to the movies once again. While initially successful, the service’s last few months now look like a cautionary tale.

In a recent Harvard Business Review essay, Eddie Yoon points out a number of flaws in MoviePass’ pricing model and approach to customer service. Using the company’s woes as an instructive jumping off point, he provides suggestions for its inevitable successors. His arguments also suggest that MoviePass and its disappointed customer base provide a case study in the importance of developing and nurturing strategic supplier relationships. MoviePass’ subscribers are right to feel burned, but it’s clear a more strategic, informed approach to assessing the ‘supplier’ could’ve saved them a great deal of exasperation and money.

To exist as a strategic function, Procurement requires a strategic approach to its supplier relationships. A key step in establishing an effective Supplier Relationship Management program is identifying suppliers who are willing and able to provide for a strategic relationship. These are suppliers who show an interest in engaging directly with Procurement, tuning into its unique requirements, and providing flexible, dependable services. When it comes to supplier selection, anything that strikes Procurement as one-size-fits-all should raise concern. Effective supplier relationships depend on personal, individualized attention. Whether this means favouring local suppliers and distributors over national options, or consolidation over dispersal, will vary based on the organization, but no supply chain professional would dispute the importance of suppliers who can offer hands-on, tailored services that enable a strategic partnership to take shape.

Over the last few months, MoviePass has shown itself to be anything but a strategic supplier to its more than 3 million buyers. Their one-size-fits all approach to pricing and customer service provided for such a massive expansion, but, in Yoon’s words, “MoviePass had to grow much faster than its customer support could keep up with.” Describing their increasingly hands-off service offering, he continues, “The constant price and product changes clearly show how little it understood what customers wanted.”

He begins by discussing the service’s much-discussed, outrageously-low price. Presented as MoviePass’ primary selling point, the $9.95 monthly subscription fee struck millions as a deal too good to pass up. Recent developments suggest it was something closer to too good to be true. Even rookie supply chain professionals know the perils of making supplier selections based on price alone. Cinema lovers, too, have now learned this lesson the hard way.

While moviegoers across the country would agree that tickets have gotten more expensive, Yoon points out that the definition of “expensive” varies considerably by region. MoviePass’ $9.95 monthly price point is a definite bargain for residents of New York or California, where ticket prices average more than $15.00, but most Kansans are unlikely to consider the service so cost effective. Yoon writes, “It is silly to think that a one-size-fits-all national strategy is the right approach for a market as technically and economically diverse as the United States.”

MoviePass’ dedication to a one-size-fits-all service offering not only left their customer base underserved, but ultimately left them struggling with unpredictable demand. As Yoon writes, “MoviePass failed to recognize how the behaviour of super-consumers, customers who are highly engaged with a category and a brand, differs from that of average consumers.” These super-consumers, attending numerous films every week are not unlike any suppliers customers of choice. Customers of choice expect and deserve value-adding incentives based on their particular needs and buying habits. It’s these extras that differentiate truly world-class suppliers and provide the foundation for long-lasting supply chain partnerships. By tailoring certain aspects of its offering to serve its loyal, high-volume buyers, MoviePass might’ve developed methods for better managing spikes in demand. What’s more, these customers would’ve felt appreciated enough to consider MoviePass a preferred supplier even through the recent growing pains.

MoviePass, for their part, seems convinced they’re here to stay. Speaking to NPR, CEO Mitch Lowe remarks, “Amazon lost money for 20 years. Netflix still loses money … our competitors are the ones who keep spreading rumours that we’re going out of business. And clearly, they’re afraid of us and would much rather have a clear playing field.” Lowe suggests that, as a supplier, MoviePass is less concerned with serving its buyers, less concerned with turning a profit even, than it is with instilling fear. The implications for the business’ corporate culture are eye-opening. Lowe paints a picture of an organization that will forsake its commitment to customer service and spread itself past the point of sustainability in order to appear intimidating. That’s not even to mention the lingering questions about how MoviePass intends to use consumer data. Back in July, Lowe (somewhat infamously) joked, “We know all about you.” While Procurement certainly desires suppliers who know its business in-and-out, these suggestions should raise red flags.

Yoon makes note of MoviePass’ troubling attitudes as well. He concludes his essay by remarking, “MoviePass’s struggles provide evidence that bullying is a bad business plan.” Here and there, Procurement has certainly impressed its peers as a cost-cutting bully. Within leading organizations, however, those days are over. The function is widely engaged in efforts to undo its negative perception, build a better brand, and contribute to a positive corporate culture. Identifying and partnering with ethical, dependable suppliers who share Procurement’s values is an important step in establishing this culture and making Procurement a strategic business partner. Continually, MoviePass has revealed itself to be a supplier of less-than-stellar character walking into a less-than-certain future. If Procurement wants to continue rehabilitating its image and protect the reputation of its organization, it can’t afford to do business with this sort of supplier – at any price.

Thanks, Bennet!

Why You Need a Master Data Strategy for Proper Supplier Management (Repost)

This post originally ran on June 24, 2013, but seeing as it’s still a relevant message five years later, it is being re-posted to educate newcomers on the importance of Master Data Management strategies in this data-centric era.

Supplier Information Management is more than just buying a Supplier Information Management (SIM) solution and plopping it into your data centre. Much more. But yet, it seems that some people — anxious to deal with the visibility, risk management, and supplier performance issues facing them — believe that merely obtaining a SIM solution will solve their problems. A proper solution properly acquired, properly implemented, and properly used will go a long way to increasing supply chain visibility, enabling risk management and mitigation, and providing a solid foundation for supplier performance management, but the mere presence of such a solution in your supply management application suite is about as useful as a drill in the hands of a carpenter holding a nail.

You see, Supplier Information will never be restricted to the SIM system. Supplier information will always be present in the ERP system used for resource planning and manufacturing, the accounts payable system, the transactional procurement / procure-to-pay system, the sourcing suite, the contract management system, the risk management solution, the performance tracking and scorecard system, the sustainability / CSR solution, and other systems employed in your organizational back-office to manage the different supply management AND business functions. Supplier data is everywhere, and without a strategy, just shoving it into the SIM system won’t help.

In order to get a proper grip on supplier information, the organization needs a master data strategy that dictates the sub-records that define a supplier record and which system holds the master data for each sub-record. What do we mean by this? For example, the ERP may hold the core supplier identifier sub-record that defines the unique supplier number in your system, the supplier name, the supplier’s tax number, and your customer number in the eyes of the supplier and be the system of record for this information. The accounts payable system, referencing the supplier by it’s supplier number, may be the system of record for the headquarters address and payment address. The contract management system may be the system of record for the list of employees authorized to sign contracts on behalf of the supplier. The CSR system may be the system of record for the suppliers’ carbon rating, third party CSR rating, and your internal sustainability rating. And so on.

If this is the case, the SIM system, to truly be a SIM solution for your organization, needs to integrate with all of these systems and encode the proper rules to resolve data conflicts as required. Specifically, three things need to happen. First of all, whenever a system of record updates data, that data must be pulled into the system and overwrite the existing data. Secondly, anytime data is updated in the SIM system for which it is the system of record, that data must be pushed out to all systems that use it. Thirdly, and this part is sometimes overlooked, whenever data is updated in a system of record, the data not only needs to be pulled into the SIM system, but it then needs to be pushed out to any system that also uses that data. The SIM solution is the centre of a hub-and-spoke data architecture — all updates flow in, and all updates flow out.

This can only be properly accomplished with an appropriate Master Data Strategy. Don’t overlook it. Otherwise your SIM solution will turn out to be a Stuck In Muck solution. An SI is not kidding about this.