Business in 2018 is remarkably different than it was five years ago and it will be remarkably different five years from now. Product lifecycles are collapsing as are the windows available for businesses to charge a premium for their products and services. Maintaining a market leadership position across an entire business cycle has never been more difficult. To thrive in such a fast-moving environment, industry leaders are placing greater trust in their partners and suppliers as they attempt to turn every market swing to their favor. These enterprises know that no organization, group, or individual has cornered the market on innovation and that their goods and services are improved when their suppliers are operating at an optimal level.
Accordingly, it is no surprise that Ardent Partners’ research has shown that supplier collaboration is one of the top strategies used by Chief Procurement Officers (CPOs) to drive more value in 2018. But true supplier collaboration requires a change in mindset for most procurement teams and professionals who must reclassify key suppliers as business partners and begin to invest time and resources in improving their partners’ capabilities. The resulting shift in traditional buyer-supplier relationships has created a new set of operating principles and best practices that emphasize collaboration, agility, and innovation that should be modeled across the entire supplier relationship.
90° – Supplier Identification
The best supplier management processes in the world will be for naught if the sourcing team fails to identify the highest-value supplier(s). Ardent Partners defines strategic sourcing as “the automated process of identifying, evaluating, negotiating, and implementing the optimal mix of goods and services that best support the objectives of the enterprise.“ Sourcing has long been procurement’s path to greater influence and savings and the impact from sourcing has been a ‘game-changer’ for many CPOs and their departments. But, as a sourcing organization matures, it must shift its focus from simply sourcing more to sourcing better if it is to maintain its momentum and drive more value in the future.
180° – Supplier Information Management
Effective supplier relationships are nearly impossible without first having detailed and accurate supplier information as well as enterprise-level visibility into it. From product design to invoice payment, supplier information (which includes among other things quotes, contracts, contact details, locations, remittance information, certifications, performance ratings, risk scores, capabilities, and category coverage) serves as the underpinning across all supplier-related communication and activity. When done efficiently, the ability to collect, verify, cleanse and actively manage supplier information can drive significant cost savings, when done strategically, it can be a game-changer that fosters supplier collaboration and innovation.
270° – Supply Risk Management
Globalization has made geography and time less important to sourcing decisions and opened up new competition in many markets that sorely needed it. But the global expansion of a supply chain generally exposes it to more and different types of supply risk. Ardent Partners defines supply risk management as the program or series of strategies used to identify, define, quantify, mitigate and manage potential risks to supply and the resulting impact they can have upon the enterprise. Similarities in supply risk exposure can be seen across industry, geographic, and demographic factors, but in sum, each enterprise’s supply risk is uniquely its own, making it difficult to take a “templatized” approach to this area.
360° – Supplier Performance Management
Supplier Performance Management (“SPM”) programs help enterprises rate and grade a supplier’s performance across all aspects of its products, services, and contractual obligations. Standardized processes help drive efficiencies and enable teams to leverage knowledge and best practices across business lines while users of automated SPM systems can develop supplier surveys and scorecards that track performance and collaborate with internal stakeholders and suppliers to improve performance.
Conclusion
Best-in-Class procurement departments understand that suppliers should be viewed as a source of knowledge and expertise that can be leveraged to competitive advantage and mutual gain. How procurement departments approach their 360° supplier relationships and the results derived from them will have an increasing impact on enterprise operations and overall performance in the months and years ahead.
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