In this guest blog, Declan Kearney of 360° Supplier View presents a vision for the future and looks at how a dedicated supplier management team might look and what effects it could have.
The various inefficiencies mixed with evolving best practice displayed by large corporations during 2013 have fuelled my passion for exploring the importance of positioning supplier management as a commercial discipline that incorporates the requirements of stakeholders from all supplier-facing functions.
With 2014 ahead, let’s outline the ideal principles of a notional organisation, trading with thousands of suppliers, that represents the ultimate strategy for supplier management.
Led by a dedicated ’supplier management’ team and sponsored by senior executives from across the functions most impacted by supplier activity (e.g. operations, IT, supply chain, procurement, QA/sustainability, finance, sales & marketing), supplier management embraces the opportunities and addresses the threats presented by the multiple interactions across the supply base.
In this vision, suppliers are effectively segmented based on qualified, consensus-based criteria - reviewed and updated frequently to facilitate supply base change. Specific supplier management strategies are defined for each segment - potentially varying by category, by geography and by business unit reflecting varying market conditions.
Strategy is communicated both internally and to the supply base – for example, suppliers of strategic importance (who have been part of the process to validate that they view the relationship in the same way) are informed of the corporate supplier management strategy and their resulting role. Supplier understanding of the company’s strategy is recognised as being essential to the mutual success of the business relationship.
With a structure and strategy in place, each component of supplier management is aligned across fully integrated supplier management processes – components to include supplier information management (a central enabler supported by supplier self-administration), spend analysis, sourcing and contract management, risk & compliance, relationship & performance management, P2P/ transactional, e-Invoicing and supply chain finance, logistics, trading networks, social media and enterprise collaboration and the emerging area of supply management data analytics.
Enabled by complete, proactively and dynamically maintained information (structured and unstructured) and underlying processes, information and analysis are delivered to the fingertips of business users from category managers, supplier relationship managers, buyers, operations, finance and other supply-impacted functional staff.
The role of technology is recognised as fundamental to delivery of real competitive advantage. ERP vendor data has been cleansed and categorised to a common company-wide classification system. New vendor approvals and vendor data set-up and administrative controls are tightly managed with clear segregation of duties. Supplier records are identified by a common corporate identification system and mapped by corporate linkage to enable consolidation and spend leverage. The transactional focus of ‘ERP/vendor data’ is recognised as only one element of what has been defined as ’supplier information’. ERP systems are therefore complemented by best of breed systems across all components listed above.
Data analytics capabilities enable the three fundamentals of descriptive (the ’as is’), predictive (the ’what may happen’) and prescriptive (the ’what will we do when this occurs?’) analytics. To ensure that analytics are leveraged for key decisions, staff are ‘analytically literate’ in line with corporate objectives.
The technology environment is fully aligned with directly related corporate initiatives and supporting systems such as governance, risk and compliance – for example, supplier governance is not treated as a silo of GRC or enterprise risk management in isolation of supplier risk management strategy.
Individual dashboards are presented to senior executives from the COO, CIO, CPO and CFO to senior managerial staff and to all relevant business users. Such dashboard insight is configurable based on the specific requirements of each user. While many decisions will be based on dashboard intelligence, technology will enable the user to drill into the detail whether it’s spend by line item, sourcing event selection criteria, supplier accreditation documentation or specific contract terms.
The result: the ultimate in supply management efficiencies that address the requirements of both the customer and suppliers in a way that provides complete intelligence, optimises supply-related financial management, mitigates risk, enables rapid response to issues and provides tangible competitive advantage. The strength of supplier management, now a highly respected function, is such that the sales teams proudly include an overview of supplier management in their customer value proposition.
The most progressive organisations embrace the principles of this vision – the challenge is how to realise the vision – it will take time and will require the imperative positioning of supplier management as a strategic, potentially standalone, commercial discipline - not as ‘something that procurement takes care of’.
And with that, best wishes for a successful 2014!
Declan Kearney is founder of 360° Supplier View.