[Editor’s Note: We continue our “Throwback” series with a look at how improved technologies can transform procurement]
As Chief Procurement Officers (“CPOs”) and procurement practitioners move forward, they have the need and the capability for advanced technology solutions to automate and link the source-to-settle process – upstream, strategic sourcing and downstream, procure-to-pay (“P2P”). Digital, automated supply management solutions can help overworked and understaffed procurement teams scale resources and extend their power and influence throughout the enterprise.
It matters less where business leaders implement and drive technology adoption and more that they automate up (or down) the source-to-settle value chain; and that they link the chain for maximum value. Of course, even incremental automation can alleviate staff shortages and workloads and allow procurement to return more value to the enterprise. However, current technology adoption remains low up and down the value chain, leaving significant opportunities for value realization. Let’s take it from the top.
Supplier Management
Modern supplier management tools, like supplier information management (“SIM”), are additional value drivers for procurement and sourcing teams that are awash in supplier data and need to quickly and accurately access and leverage it. Like spend analytics tools, SIM tools aggregate, categorize, clean, and blend disparate pieces of data, like enterprise, supplier, and third-party data, into a single source of truth that enterprises can leverage for supplier performance management, compliance, sourcing, and financial processes. Now a sourcing or AP/Finance team can accurately select the correct supplier profile amidst hundreds or thousands of suppliers for future sourcing or financial matters.
Likewise, supplier performance management (“SPM”) tools blend multiple sources of data to help sourcing teams accurately and fairly evaluate their suppliers’ performance, which can determine the status of the supplier relationship. Teams can use supplier scorecards with established key performance indicators (“KPIs”), supplier surveys that capture qualitative elements of their performance, and can look at contract compliance and spend intelligence data to determine whether their supplier performed as planned and delivered the promised value to the enterprise. If they did, then the supplier can be rewarded with follow-on work. If not, then the sourcing team can work with the supplier to improve their performance; they can let the contract expire; or they can terminate the relationship outright. Either way, SPM tools provide sourcing teams with the means to monitor and incentivize their suppliers for maximum performance, and take corrective action if they do not deliver it.
Final Thoughts
Taken together, SIM and SPM can help procurement teams drive towards procurement performance management, which takes a holistic view of performance and value. Procurement performance management seeks to align vital stakeholders, like AP/Finance and the supplier base, on a number of attainable and relevant goals and KPIs. But each stakeholder may not have the necessary information or visibility to achieve their goals and support their stakeholders. SIM and SPM tools can bridge gaps between internal and external information sources and performance measures to present a holistic view of supplier performance and value, which, in addition to identified/realized savings, must also include compliance, cost avoidance, risk management, and service quality.
