Category Archives: Supplier Management

Scorecards Have Value … But Only If They’re Constructed Right

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There’s been a lot of buzz around scorecards over the last few years, but, as noted in a recent article in the Supply Chain Management Review, only a handful of companies have effectively utilized them to drive value. Wal-Mart is one example … Canada Post is another.

To be effective, scorecards need to be simple in concept, with metrics that are clear and easy to assemble, yet measure the few, truly impactful supplier actions. The biggest mistake companies typically make is designing overly complex metrics that are confusing to suppliers. A good scorecard selects a handful of the most important metrics that will allow the supplier to focus on the most important factors. These operational metrics, that focus on cost compliance, service performance, quality and damages, and administrative efficiencies, allow the supplier to monitor is performance and improve over time.

And to be truly effective, the scorecard needs to be:

  • used frequently
    once or twice a year isn’t enough … they should be reviewed monthly
  • ranked in a weighted fashion
    as this allows a supplier to get an overall picture of its performance
  • monitored
    the article recommends a dashboard … but a report that calls out the most important issues will do just fine
  • improved collaboratively
    if the supplier is doing well on the scorecard, but not meeting your needs, then the scorecard needs to be refined
  • implemented in three phases
    for details, see the article on “unlocking value through the supplier scorecard”

Roll Out to Your Community with RollStream

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RollStream (acquired by GXS) is a new entrant to the emerging SIM-centric (Supplier Information Management – centric) subspace of Supply Chain Management that has taken a Web 2.0 inspired approach to its solution. At the core of its “Enterprise Community Management” solution is the belief that collaboration is the missing critical component in many of today’s supplier management solutions.

As a result, when it comes to ease of use and supplier on-boarding, it has developed one of the best, as well as one of the easiest to use, solutions for Supplier Information Management as many people today are familiar and comfortable with the Web 2.0 and social network like interfaces it has developed for supplier, partner, and contact profile management as well as for survey creation and information gathering. It’s scalability and ease of use has allowed one of its largest customers to on-board their roughly 13,000 suppliers and manage roughly 150,000 points of contact. The solution has assisted this customer in credentials capture, compliance, training and enablement, and new technology rollout.

But, as you know, SIM is only the first component of Enterprise Management, whether you call it Supplier Central (CVM Solutions), Extended Enterprise Management (Hiperos), or Enterprise Community Management. There’s also, depending upon your outlook, risk, performance, compliance, sustainability, diversity, dispute resolution, initiative management, and collaboration for innovation.

The RollStream solution addresses, in its own words, basic Supplier Information Management in the form of on-boarding and profile management, Dispute Resolution by way of on-line collaboration, Compliance and Risk Management by way of task-managed projects and web surveys, and Performance and Feedback Management by way of a workflow-based community dashboard and collaborative scorecarding process.

The Supplier Information Management component, which is what they started with, is mature, and as I said above, one of the best and easiest to use solutions that you’re going to find for SIM on the market today, used by a number of global Fortune 3000’s to manage supplier bases of over 10,000 suppliers and 100,000 contacts in a number of verticals. The collaboration components, with complete conversation and audit trails, simplify the online dispute resolution process and make it much friendlier than the alternatives.

The Performance and Feedback Management is good for simple surveys and on-line discussions, but don’t expect to be able to build any complex scorecards within the system at this point in time. If you have a solution that generates your scorecards as spreadsheets or PDFs, you can automate the retrieval and attachment of the scorecards within the platform and then create tasks around the discussion of the scorecards with the relevant individuals at each of your suppliers, which could be quite helpful, but you can’t yet build complex scorecards within the system or attach comments to individual sections. This should not be an issue for most companies in most verticals, but if you are very metric-focussed or use collaborative scorecarding and need to retrieve inputs as well as send them and integrate all of the scorecards into a common collaboration tool, you’ll need to evaluate the solution carefully.

This brings us to the last component — Compliance, Risk, and Sustainability Initiative Management. Their solution, which allows you to build as many virtual sub-communities as you want within the application, and then create as many task-managed projects around those communities as you want, is quite powerful in its simplicity when it comes to the management of these projects, but most projects will require data collection and the degree of data collection will determine its fit within your organization. If you primarily do indirect sourcing or simple commodity sourcing, the solution should be more than enough for your needs as most of the regulatory requirements can be captured in simple yes-no questions. But if you do direct manufacturing, where you have to deal with RoHS, REACH, and or WEEE, the simple survey-monkey style web-form survey capability isn’t going to cut it when you have to capture not only whether or not thousands of chemicals are present in your products, but to what extent they are present. Similarly, if you have adopted, or foresee the need to adopt, complex carbon measurement calculations which depend not only on if-then logic (which the forms support) but also complex built-in calculations, then you’ll find their solution is not ready for prime time.

So what’s the verdict? I think many companies will find that the solution meets their SIM-Centric Enterprise Community Management needs, especially when you consider that even the best solution will take at least a year to roll-out to thousands of suppliers and get them proficient on the solution. In that timeframe, you’ll see more capability added to the Performance Management and Compliance, Risk, and Sustainability Management components as RollStream continues to implement their solution roadmap.

The Best Vendor Selection Checklist the doctor Has Ever Seen

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Integrated Solutions recently ran a fantastic article that had a very simple 3-point “Vendor Selection Checklist” that is undoubtedly the best I’ve ever seen for determining whether or not a vendor should make your short list. Although you should go through a long and detailed solution review before initiating a long term relationship with any vendor where enterprise software and services are concerned (due to the amount of money involved and the fact that your business could literally be riding on the success or failure of the systems and services you’re contracting for), you don’t want to go through that process unless there is a very good chance that the vendor is stable, in it for the long-haul, known for good solutions and service, and willing to work with you.

Although I would not have believed it before recently, I have to admit that this very simple 3-point checklist is sufficient to weed out many of the vendors who would not make your final cut if you went through a longer process. So without further stalling, here it is.

  • Do They Advertise?
    The author of the article asks would you purchase a new car or HDTV from a company you never heard of? (No.) So why should you buy software for your business from a company you never heard of? (You shouldn’t.) Well, even more relevant is the fact that in tough markets, there is a strong correlation between those companies who are constantly advertising (especially on new media) and those companies who are doing well, and an even stronger correlation between those companies who have not been advertising for the past year or two and who are now in a difficult financial situation. A significant number of the smaller companies in this space (including some of the more innovative companies that have been profiled on this blog) are not in the best financial shape right now. A number have not only had to cut NPD budgets, but had to layoff staff (and, in a few cases, between 30% and 50%.) Most of these companies have not been advertising (either because they thought their money was better spent on NPD, because they thought they couldn’t afford it, or, in some cases, because they thought they didn’t need to) over the past two years. Right now, where this space is concerned, if they’re not advertising (in the trade pubs, through professional organizations, on the blogs, etc.), I’d say there’s a 4/5 chance that either they’re not that strong financially, or at risk of becoming not that strong financially with even a small shift in the market breeze. Out of sight, out of mind is never more true than it is in a down market (where everyone is overworked or operating in panic mode and without the time to search out for solutions they haven’t heard of).
  • What do your peers say?
    Find out who their customers are, narrow the list to those in related verticals who have been customers for at least a year or two (so the “blush” has left the rose), and talk to them. If the general consensus is not reasonable satisfaction, chances are, in this economic climate, some of those customers won’t be renewing, and in these times, that will probably put the vendor in a tough financial situation, which will make it difficult for the vendor to support you.
  • What do the experts say?
    Advertising tells you that they’re likely stable (but be sure to ask focussed questions during your detailed review), and your peers tell you that you’re likely to receive good customer support (as long as you insure they have the expertise you need), but you still need to insure that the solution is solid before you spend a lot of effort investigating it. Look at what your favorite bloggers and analysts have to say before investing too much time on a detailed analysis. If it’s a good solution, it should have at least a few rave reviews from trusted experts in the space.

Like I said … it’s a great list that can save you a lot of time as you can use it to weed out vendors who aren’t worth a detailed analysis.

Is it Time to Get Hip with Hiperos?

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Hiperos is a relatively new entrant in the space focussed on what they call “Extended Enterprise Management”, which is their term for what you get when you amalgamate (what I call) Enterprise Contract Management, Compliance, Performance, and Sustainability into a single 360° solution platform.

The goals of the platform are to provide you with:

  • Supplier Information Central
    • collect all supplier information in one application
    • allow it to be entered and reviewed by suppliers, third parties, and internal staff, according to roles and permissions
    • allow for the creation of quick and easy monitoring reports that can be displayed in a dashboard
  • Cross-Enterprise Supply Chain Risk Assessment
    • allow risk to be evaluated against any supplier or service provider
    • allow risk to be evaluated by category / product line
    • allow risk management programs to be created based on whatever supplier / risk segmentation criteria you select
  • Supplier Performance Management
    • allow for the easy definition of surveys and scorecards
    • allow suppliers to be evaluated based on the type of product being delivered or service being performed
    • allow for internal and external feedback, subject to approvals
  • Regulatory Compliance Management
    • support any and all compliance regulations your organization is subject to (RoHS, HIPAA, ITAR, etc.)
    • allow requirements to be easily communicated to suppliers
    • monitor responses and flag non-compliance for exception based monitoring and resolution
  • Sustainability Initiative Support
    • allow sustainability guidelines to be captured
    • allow them to be communicated across the supply chain
    • monitor adherence to implemented programs

For those of you in a rush, I’ll tell you right now that the application (which is now on R3) does precisely what Hiperos says it can do, that it’s relatively easy to configure and use (and a couple of clients have self configured it without any help at all), and that it can be configured to report on precisely what you want it to report on, and display this information in real time on every login. Furthermore, if you use it’s capabilities to augment data collected internally with data in your other entprise systems and external data sources and integrate 3rd party risk and financial data, such as what you would get from Equifax, Lexis Nexis, or D&B (using their new “D&B Inside” offering), you can truly get a 360° view. Furthermore, if you define your risk assessment and monitoring metrics accordingly (and / or select the right templates for your vertical and organizational risk management needs), my assessment is that you can be just as confident in the risk assessments as you would be if you outsourced it to a specialist consulting firm (especially if you bring one of them in to help you define your risk assessment program and insure you set up the feeds, applications, and reports appropriately).

The application allows you to define what fields you want to track, what metrics you want to use, the calculations that define those metrics, and the reports the metrics appear in. It also allows you to define as many roles as you need (buyer, manager, approver, CPO, third party auditor, supplier, etc.) and define access permissions and capabilities based on those roles. In addition to the standard supplier, contact, contract, and (enterprise) program entities, it also allows you to define “relationships” and define the data you want to capture, track, and measure against those relationships. For example, a relationship will be with a supplier, managed by a local account manager and supplier account manager, against a program type and have it’s own status and risk measurements. Collectively, these measurements and statii can be rolled up to give an overall status and risk picture, which, of course, can be drilled into at any time. You can also define as many levels of details as you need in your surveys and scorecards, which, of course, frees you from the limited capabilities of a 3-dimensional spreadsheet workbook. And it comes with template libraries for standard compliance (HIPAA, RoHS, REACH), risk management, and sustainability (carbon tracking) initiatives that can be used to jumpstart configuration for your enterprise.

The one weakness is that while the application has been configured to be extensible and accept an unlimited number of external data sources, at this point in time, only RSS Feeds and a couple of 3rd party financial feeds are configured out-of-the-box. This means that you will have to do some integration with appropriate 3rd party data sources to get a 360° view, which is vital because, if you don’t have someone on the ground, or a good relationship with a 3rd party auditor you can trust, you can’t trust self-submitted supplier surveys alone. (And, these days, some of the best leading indicators are those you get from financial risk data consolidators like D&B — who acquired Open Ratings — and Equifax — who acquired Austin Tetra — and from import/export visibility companies like Zepol, Import Genius, and Panjiva.)

The application is one that is definitely worth looking at, because the only other providers offering integrated solutions of the same breadth are Aravo, CVM Solutions, and, if you’re in the health-care industry, Vendormate.

Jim Lawton on Avoiding Supply Chain Disruption

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Jim Lawton, Sr. VP & General Manager of D&B Supply Management Solutions, who guest posted on winning the battle on risk: information and technology here on Sourcing Innovation recently penned a great article for Industry Week on “understanding risk and avoiding supply chain disruption”. According to Jim, avoiding supply chain disruption basically boils down to three steps:

  • get the data,
  • go beyond the finances, and
  • proactively manage the supplier base.

The first challenge of supplier risk management is compiling all supplier information into one centralized location. Since supplier information in most companies exists across dozens — if not hundreds — of systems, this is never an easy task. However, once the data is centralized, it can be used to drive predictive indicators that give insight into supplier viability as far out as 12 months in the future. Furthermore, manufacturers can determine the criticality of each supplier (and determine which suppliers need to be monitored most closely) by asking the following questions:

  • What need does the supplier fill?
  • How essential is the supplier to overall supply chain operations?
  • How does the supplier fit into the corporate plan for supplier diversity and sustainability?
  • What would happen if we lost the supplier?

Then — because risks come in many shapes, including operational, managerial, and geographic — manufacturers can go beyond the financial assessment and look at other factors that could be a cause for concern, which might include:

  • changes in the supplier’s management team
  • quality issues
  • noticeable lags in inquiry response time
  • EPA violations
  • OSHA incidents
  • OFAC violations

Finally, they can actively manage the supplier base to minimize risk, starting with forward-looking supplier scorecards that are designed to detect risks before they materialize and help the manufacturer work with the supplier to improve their operations and prevent disruptions.

Good stuff.