Ardent Partners is pleased to announce the publication of The State of Strategic Sourcing 2015: The Four Pillars of Sourcing Success report. Interested readers can download this exciting and informative annual research report by clicking here.
Every year, the pace of business continues to accelerate, forcing enterprise sourcing teams to adapt to changes and shifts within global markets in order to stay competitive. Although workloads and responsibilities continue to increase, sourcing teams remain understaffed with little relief in sight. As a result, collaboration, early engagement, process linkage, and automation have become valuable force multipliers to help extend a sourcing team’s impact throughout the enterprise, even as it remains stretched to its limits. This article series, based on the annual State of Strategic Sourcing report, will examine the pressures and challenges facing sourcing leaders today, as well as the capabilities and technologies that they bring to bear. It will conclude with a discussion of Best-in-Class performance, followed by recommended strategies that sourcing teams can employ to accelerate their souring game into 2016.
Supplier Management
Broadly, supplier management refers to a collection of strategic sourcing sub-processes that hold at its core the optimal performance of the supplier base in order for it to deliver the maximum value to the enterprise. The sub-processes include supplier information, performance, relationship, and risk management. Although all four are critical in their own right and are worthy of further discussion, we will focus on the first two elements – supplier information management and supplier performance management – as reflected in this year’s State of Strategic Sourcing research report. Let us review:
- Supplier Information Management: Suppliers generate reams of information that must be wrangled, stored, and accessed in order for it to be useful. Supplier information management, or SIM, is the process of aggregating, cleansing, storing, and distributing supplier and third-party information about suppliers, to include contact, contract, pricing, service-level agreements, terms and conditions, third-party risk identification and rating information, and so on. Without having a standardized process to manage and a centralized location to store supplier information, enterprises risk conducting a host of interactions with the wrong supplier, or being left in the lurch when the one person in the organization who is most familiar with a supplier departs or is otherwise inaccessible.
- Supplier Performance Management: There are several ways to monitor, rate, and help a supplier improve its performance. There is an art and a science to it, and in fact, Chief Procurement Officers (CPOs) and their teams have a number of tools at their disposal to facilitate this process – from supplier score cards and surveys, to establishing and monitoring key performance indicators (KPIs), to incentivizing and rewarding supplier performance. Ultimately, this combination of supplier performance management (SPM) processes and tools can help CPOs and their staff maintain a high-performing supplier base, improve lagging suppliers, and or identify suppliers that are beyond remediation.
These two strategic sourcing sub-processes are critical for ensuring a smooth-running and high-performing supplier management program. There are many moving parts in the modern business environment; but there are not many hands in the modern procurement organization to turn the gears and keep the supplier engines running. Process automation tools, like automated SIM and SPM solutions, can be force multipliers and game changers for overworked and understaffed procurement teams that are looking to scale their operations. However, current adoption levels are abysmal. For starters, just 19% of sourcing teams currently adopt automated SIM tools, while 28% of them currently adopt automated SPM tools. Only contract authoring tools fared worse for adoption this year. Sourcing teams can do much better.
Final Thoughts
Automated SIM and SPM tools can centralize and standardize supplier information, close process gaps from spend analysis to supplier performance analysis, and help procurement teams ensure that they are working with the best suppliers in the market. Yet so few teams currently leverage these resources, leaving significant opportunity to enhance operations and performance. With 46% to 48% of CPOs and sourcing leaders planning to automate SIM and SPM processes, respectively, in the next two-to-three years (up slightly from prior years), there is reason to be cautiously optimistic about the future of supplier management.
Does your supply management program have “the right stuff”? NASA’s sure does. Learn how they “propel” their supplier base at Ardent Partners’ CPO Rising procurement executive summit, which will be held at the Harvard Club of Boston in March 2016. Preview and register for the event by clicking here!
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