Category Archives: Supplier Management

ClientLoyalty – Ironic Name, Straight-Laced Solution

Supplier Relationship Management is quickly becoming the “hot topic” among progressive Procurement organizations that want to advance on their supply management journey, and materializing as a slew of checkboxes that are appearing on product selection and evaluation checklists. But Supplier Relationship Management, while a hot topic among buyers, and a hot topic among marketers, is not a hot topic among developers. While many suite suppliers have supplier management solutions, the reality is that the majority of these fall into the classic Supplier Information Management or the slightly more modern Supplier Performance Management buckets.

The reason that SRM is a “hot topic” but not a common offering is that to truly support the relationship “R” in SRM, the software has to go beyond simply tracking information, performance metrics, and action plans. It has to track, measure, and manage feedback — from the organization and the supplier, monitor measures that track the evolution of the relationship — and not just performance, and allow for the collaborative creation of action plans to improve the relationship.

While many platforms will track all relevant supplier information — such as locations, contacts, products; and all performance metrics — such as on time delivery, defect rate, and target cost performance; few will go beyond that. Only true best of breed SRM platforms will address the relationship aspect. One of these, and possibly the newest entrant to the SRM arena, is ClientLoyalty.

ClientLoyalty was founded with the desire to bring true relationship management to companies that realized that in order to get the most value for their money, and the best performance from their suppliers, they needed to actively measure, manage, and improve the relationship. Therefore, they built a tool that allows an organization to track, measure, and manage performance, experience, risk, and reputation and integrate this more holistic 360-degree view into a single relationship strength indicator using net promoter scores.

The net promoter score is a customer loyalty metric developed by Fred Reichheld, Bain & Company, ad Satmetrix Systems, and introduced by Reichheld in a HBR article in 2003. Calculated as the difference between positive responses and negative scores, the net promoter score is positive if the overall experience is generally positive and negative if the overall experience is generally negative. If the relationship is improving, then the net promoter score will improve over time and if the relationship is degrading, then the net promoter score will degrade over time.

The ClientLoyalty NPS Loyalty metric is the (possibly weighted) average of performance, experience, risk, and reputation. Performance is calculated using a net promoter score over hard performance metrics calculated and tracked by the organization and hard performance metrics submitted by the supplier. These metrics will generally differ as both parties will generally have different definitions and calculation parameters. For example, the buyer might define on time delivery as the truck in the yard at 8 am and the supplier might define on time delivery as the driver reporting a delivery on the same date. Because of this, the buyer might have an on time delivery rating on the supplier of 80% and the supplier might have an on time delivery rating for the buyer of 98%. In this situation, the supplier would have a negative NPS due to the buyer’s lower appraisal of the situation – and this discrepancy highlights an issue. In addition, the platform comes with over 90 built in KPI definitions that the organization can use to get started, and more appear with every release.

The platform also supports extensive document management capability. Users can upload and tag critical documents in a central storage system for easy search, reference, and tracking. Contracts can be specially tagged as contracts and additional metadata and tags defined for contract status tracking and monitoring. Attachments can be correlated as well.

It’s a rather unique offering as it appears to be the only one with true, 360-degree, NPS scores and a home-grown sentiment analysis algorithm that can monitor social media sources and news sites to identify relevant comments and stories and extract the sentiment from the sites and stories and integrate it into a consistent score and one of the first platforms built from the ground up with full data import and export capability through CSV, XML, and APIs and extensible document capability.

But, like any new platform, it does have its weaknesses. There is no out of the box support for major procurement and ERP platforms; no ability for automated meta-data identification and extraction; and no innovation management. An action plan is a corrective action plan, not an innovation management solution.

However, especially given the relative dearth of true SRM providers compared to SIM providers and Sourcing/Procurement suites, ClientLoyalty is still one to watch and one to likely put on the shortlist, especially in North America.

For a deep dive into this wily provider, check out the recent in-depth coverage by the doctor and the prophet over on Spend Matters Pro [membership required]. (Part I, Part II, and Part III)

It’s Time to Go Beyond Supplier Management, But Where is That?

Supplier Management has been a thing ever since Aravo burst onto the scene back in 2003 and made it a thing with their Supplier Information Management solution. Since then we’ve progressed from just tracking contact information and associated documents to tracking and managing performance metrics to putting in place the foundations of relationship management.

But’s that just the beginning. As per a recent Primer on “What is Supplier Management” post over on Spend Matters Plus [membership required], the following overlaps Supplier Management:

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

But even this is just the tip of the iceberg. There’s also:

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

Supplier Management is a difficult subject because it is key to Supply Management, and that’s what it’s all about. And we know where Supply Management is, and has been, but where does it need to go. It’s a hard call, but three things we can say for sure are:

Visibility. In order to manage your supply chain, you need to see beyond your supplier. Especially if you are buying contract manufactured goods and not taking the time to understand where your suppliers parts, components, and raw materials are coming from.

Value-Driven Design. These days, it’s not just the lowest cost product that wins the game. There is corporate social responsibility in making sure there is no slave or abused labour in the supply chain. Sustainability both in terms of materials used and in their production and harvesting. Carbon footprints. Reclamation and recycling laws. And so on. You need to go beyond design for supply and even design for three Rs and design something that captures value to each segment (supplier, consumer, and regulatory body) that the product touches. And that’s almost impossible to do on your own.

Verocity. Organizations these days need more than traditional historically focussed spend analytics that tell them, weeks or months after, what was spent, on what, from whom, by whom, from where, to where, and in what quantity. You need to know what is being spent, by whom, on what in real time … and where the dollars are trending towards. Is a new supplier taking all of the spot buy spend, or even worse, spend that is supposed to be on another contract? Are product and services tastes changing? Are market costs changing? The application has to not only be able to keep up, but identify the most pertinent trends and options for dealing with them … it has to have advanced predictive analytics that, at the very least, identifies the most relevant changes (and ranks them by value or statistics or outlier distance from the expected norm), if not offering prescriptive analytics on how to take advantage of changes, minimize losses, or control them in (historically) well understood situations.

More requirements will surface as markets move, but this should help you understand that supplier (relationship) management is not enough.

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.

So Why Do You Want To get a Grip on Supply Dynamics?

Simply put, because when you do, target costing becomes a reality. And with target costing, you can not only set, but achieve, realistic cost goals for key products. This is only achieved when you have good insight into end to end cost components from a raw material, energy, labour, and overhead perspective. And this is only achievable when you have the systems that allows you to gather real cost data right down to the raw materials, and not just average cost data from across buying organizations (that are used to feed statistical models).

Seven years ago today SI ran an article on how Target Costing Works and You can Do It Too! We quoted an article from the now-defunct Purchasing magazine on how purchasing learns cost modelling which noted that smart buyers are working with engineers, finance and suppliers to identify cost drivers in product development and eliminate them and that Whirlpol was able to close a gap of 30% between the target cost for a module on one product and the initial design cost.

We also noted that new players in the market, like Akoya (which was puchased by I-Cubed in 2014) and Apriori (which Whirlpool selected as a provider in 2013 [Source]) could be used to help set target costs as Akoya’s market intelligence and statistical models gave a decent target range and Apriori’s production cost models, when populated with raw material, energy, and overhead costs, gave an expected production cost.

But one thing these providers couldn’t necessarily do was figure out how low costs could go if the costs could be traced right down to raw material providers, which can only be done if the input component costs can be traced through the supply chain. But with a solution that allows all costs to be collected and correlated, aggregation and streamlining opportunities to be identified and captured, and high production / overhead costs to be identified, aggressive, but realistic target costs can be set and realized as the organization knows where to focus its cross functional teams. And that’s one of the big reasons why you want to get a grip on supply dynamics!

Supply Dynamics: Tackling The Dynamics of Supply Head On! Part II

In our last post we introduced you to Supply Dynamics, a new direct procurement solution provider with a mature solution that was developed over the last 15 years, first as a skunkworks project inside, and supporting, O’Neal Industries, and then recently spun off into a new completely independent standalone best-of-breed offering.

We described their ability to collect relevant data feeds on the full product life cycle from raw material to finished product, correlate that data, track the product lifecycle from raw material to buyer warehouse, and, most importantly, to determine which data needs to be tracked in the first place using their efficient and inexpensive automatic extraction software that processes (CAD/CAM) blueprint files and builds up the appropriate bill of materials and manufacturing process overview automatically.

But their software can do more than that. Much more.

Their solution also tracks (contract) demand and sales forecasts and not only allows an organization to predict a 12-month rolling forecast at any time, but do so at the product, part, or raw material level — broken down by category, region, or other dimension of interest. Since the platform keeps such detailed records, it can do such detailed predictions.

Their solution also cross references all product data across not only all bill of materials but all suppliers. This means that you can see holistic metrics around each component and raw material. More specifically, for any given raw material, you can see the total forecast across all products for a year, how many assemblies it will be used in, how many BoM records it appears in, how many vendors are supplying, how many processors are working (if the raw material passes through a processor on the way to a component manufacturer), how many different processed forms it takes, etc. For steel you can see how many lbs the organization is expected to use, how many fasteners (or other primary component categories of interest) it will be used to create, how many raw material vendors supply it, how many processors process it into its various allows, how many alloys the the organization uses, how many grades of those alloys it employs across the product line, and how many individual specifications for various grades it has used over the years.

And the platform doesn’t just support bill of materials for an assembly or component, it also supports much more detailed bill of resource for individual parts that specify the material inputs in detail at a fine-grained level. For example, not just “steel” but “X52 Carbon Steel, API 5L Standard”. Also, any processing requirements. These are extracted from the part level blueprints, verified by the suppliers, and the entire process verified by Supply Dynamics’ in-house team of US experts.

From this combination of bill of resource data and forecasts, the platform is able to automatically identify aggregation opportunities across a raw material type (steel) or instance (stainless) type by looking at total weight / volume, vendor count, and demand split. The user simply specifies the business unit of interest; any restrictions on vendor, conversion process, form, spec, and time period; and the max % of allocation to a single vendor, the minimum number of current vendors providing the raw material, and/or a minimum volume / weight / spend requirement for it to be considered and the system reports on the top potential opportunities, which the buyer can quickly drill into to determine the real potential. Maybe the demand is too geographically disjoint, maybe the top suppliers are satisfying the majority of regional demands, or maybe the prices from the top suppliers are at market and no opportunity is there, but maybe the demand is centralized, too many suppliers are supplying the same location, or prices are above market and there is a great opportunity. Regardless of the truth, it’s very easy for a buyer to drill in and find out.

It also has geographic visualization capability so that, for any raw material, you can see where it’s produced, where it’s consumed, and whether the distribution looks right geographically. This makes it very quick to visually identify awards that just don’t make sense and figure out where effort should be focussed. The same is true for machine shop locations, processors, and suppliers. You can visualize your supply chain by raw material, part, component, assembly, or vendor. And you can cross reference this against D&B scores and disaster mapping to visually see which suppliers are ranked poor and which suppliers, processors, or manufacturers might be impacted by a disaster.

The Supply Dynamics platform is very powerful and would support any platform focussed more on the strategic sourcing or day-to-day procurement activities of a supply management organization with a large direct procurement need quite well. It’s a rather innovative new offering and one that SI expects we’ll be hearing more about as well in the new year. Especially since they are about to launch a new capability that might turn the marketplace on its head. Stay tuned.