Our “Summer of Sourcing” is picking up steam, we hope you’re enjoying it. One apex this summer will be when we cap off this week’s stories with the publication of our new report, The State of Strategic Sourcing 2013. We’ll highlight some key findings from that report next week as we continue our focus on sourcing throughout the summer. Today, we begin the first of a two-part deep-dive into supplier management by highlighting a variety of strategies that top sourcing organizations are using to take this function to the next level.

Engaging with and managing suppliers is a key component of any Chief Procurement Officer’s priorities and focus. The procurement function’s relationships with suppliers is typically the foundation of how effective sourcing efforts and programs perform, and any fresh takes on supplier management can be a catalyst to a series of processes that have a risk of becoming stagnant and repetitive over time.

Ardent Partners’ research has defined Best-in-Class sourcing performance by identifying the top 20% of groups in the marketplace based upon both their annual reported savings levels and the percentage of addressable spend that they source each year. With this analysis, we have discovered a slew of “next-generation” supplier management capabilities that are currently leveraged by these top-performing organizations:

• Best-in-Class enterprises realize the importance of driving top performance across their supply chains and are almost three times as likely (Best-in-Class do this 2.89 times more often) to extend their six sigma, lean, or other process/quality initiatives directly to their suppliers. These organizations know that their goods and services are improved when their suppliers are operating at an optimal level and are therefore significantly more likely to share intellectual property and invest in improving their suppliers’ capabilities.
• Best-in-Class companies are more than twice as likely (Best-in-Class do this 2.15 times more often) than all other organizations to undertake initiatives to improve planning and forecasting with suppliers. Spend analysis, as we’ve discussed time and again here on CPO Rising, has become one of the top tools available to procurement organizations to drivable value. What’s interesting about this capability is that the very concept of analytics can be applied to other procurement and sourcing processes. Top-performing organizations are leveraging analytics and reporting to improve their forecasting with suppliers; the “forward-looking viewpoint” produced by supplier forecasting can help enterprises understand both future pricing and future demand – factors that will certainly assist in overall corporate financial planning. (Ardent Partners’ research director, Christopher Dwyer hit home this point in his “Future of Supply Management” webcast delivered earlier this month when he stated that anything that procurement can do to take the function into a new stratosphere, including providing true intelligence to other C-level execs, is beneficial in the future of the function.)
• Top-performing organizations are more that twice as likely (Best-in-Class do this 2.12 times more often) to host a “supplier day” at their headquarters or conference location (some do this via a virtual platform), an event that can take several shapes / forms. A supplier day typically follows a full agenda of topics in which the procurement team can interact with their suppliers to discuss ongoing challenges, corporate goals, plans, and priorities (and how those suppliers can bet support those areas), ways to increase and improve innovation, and the means for improving their communication and overall relationships for the mutual benefit of both sides. Supplier days are becoming a popular way for enterprises to improve collaboration with their key suppliers. Here’s an old article on how one top CPO ran a Supplier Day.

Next time, Best-in-Class Supplier Management, Part II

Tagged in: Ardent Partners Research, Spend Analysis, Summer of Sourcing, Supplier Information Management, Supplier Relationship Management, Suppliers