Thursday, September 02, 2010
Latest Procurement News
RELATED NEWS
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24 Aug 10 - Supply chain overhaul key to GM IPO
23 Aug 10
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KNOWLEDGE MANAGEMENT TAGS
"Risk Management"
Analysis: Using the power of crowds to understand risk
In November, the Cortera Supply Chain Index (SCI) hit its best numbers of the year. The who, what, and why of this information is significant in terms of supplier risk management, because it reflects some positive economic news, but also the statement of intent of a fresh data source giving procurement professionals actionable information.
Cortera is emerging as an interesting competitor to Dun and Bradstreet in the credit reporting and supply risk content space. It's November 2009 SCI report measured payment activities of approximately 350,000 businesses, and the results signal the speeding of payments and related cash flow throughout the overall supply chain.
The Cortera SCI tracks late payments against agreed-upon terms, measuring late accounts receivable, excessively late accounts receivable, and overall average days beyond terms. The SCI report is published monthly, but a two-year view of this data is available on Cortera's website.
Cortera's November Small Business Index report showed small businesses were speeding up payments to their suppliers and other business partners over the past month. This involved measuring payment activities of more than 200,000 small businesses.
So far, so useful, to procurement, purchasing and finance officers. But where Cortera is really developing a USP is by developing an online community-driven company rating model. It is embracing crowd-sourcing by using its members input on ranking the financial viability of the businesses they deal with. The idea is to "capture the collective insight of millions of financial transactions", and as the company's mission states, "give clients/members better, more actionable insights into the companies they interact with, without the hassle or high prices".
CEO Jim Swift says one of his goals is to supply "better information about smaller companies", then move up the food chain, and offer services for a global customer base. "The free internet is still the great frontier with vast, largely unstructured data, while traditional business information providers are expensive, slow and often limited to pre-internet ways of thinking. Businesses are screaming for the best of both worlds and Cortera's mission is to bring it to them."
In the world of supplier risk management, harnessing this kind of intelligence and exploiting it by both Chief Procurement Officers (CPO) and Chief Finance Officers (CFO) is going to be essential. Kevin Cornish, the chief technology officer of Aravo, a developer of supplier information management systems, sees 2010 as the year it's going to be essential for CPOs and CFOs to broker cooperative and collaborative relationships to succeed in the current business environment.
Cortera has caught the attention of Cornish leading him to blog about the business. As an additional data source, Cortera's offering plugs right into his vision of the need to "explore new integrated finance and purchasing processes that can help unlock tangible savings." This is especially necessary as he sees that the "opportunities for negotiated supplier discounts have virtually evaporated".
Swift too believes that for sophisticated risk and credit management organisations, Cortera has to be one of a multiple of key sources of information to contribute to making "specific business decisions".
Gathering as much intelligence about today's elongated and enormously complex supplier networks demand everyone's attention, and exploiting Web2.0 technologies to do it seem a natural way to do it.
As Cornish points out, it's time that both CEOs and CFOs woke up to the negative realities of supply chain risk, and that "significant supplier risks that are sure to be part of the 2010 business landscape".
Procurement Tag - Risk Management
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