Seeing the value in supplier relationships

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The trend to outsourcing and the forging of closer collaborative relationships with suppliers is significantly increasing the dependency organisations have on their supply base. In a growing number of instances a company’s success is now highly reliant on the performance of its suppliers and on the efficient workings of those relationships. However, the information on suppliers available to buyers is often, fragmented, erroneous, incomplete, insufficient and frequently duplicated across the enterprise. In the vast majority of instances there is no single source of supplier information.

Findings from Aberdeen Group’s recently published ‘Year of the supplier’ report highlight the wide gap that exists between organisations that are best-in-class for their ability to leverage supplier relationships – by improving supplier visibility, tracking supplier performance and enhancing the ability to avert supplier risks – and those that are lagging. According to the report, which draws on survey results from over 150 organisations globally, best-in-class companies have one per cent of suppliers duplicated across the enterprise as compared to 27 per cent among laggards.

Best-in-class were also found to have 88 per cent of their suppliers demonstrating on time delivery/project completion versus only 48 per cent with laggards. And two per cent of suppliers to best-in-class companies reported catastrophic failure as compared to five per cent for laggards.

Interestingly, the Aberdeen report showed that companies enjoying best-in-class performance were 38 per cent more likely to use tools for supplier risk analysis and mitigation than all other organisations – industry average and laggards combined. Also, 24 per cent of best-in-class companies were more likely to use supplier analytics and visibility tools for modelling and predicting supplier costs than all other organisations.

However, one of the greatest challenges facing buying organisations appears to be the use of disparate systems for tracking supplier information, where a combination of solutions have been used from contract management, procurement solutions and ERP systems. Hardly surprising, but still shocking, is the finding that 77 per cent still use spreadsheets.

If buying organisations are going to correctly manage the relationships they have with their suppliers – in order to drive up performance and success – then clearer visibility of accurate, accessible and up-to-date data on suppliers is absolutely necessary. A good starting point would be to create a single source of supplier information. But then, as Aberdeen’s report points out, a series of actions need to be followed, starting with standardisation of supplier management practices, improving the overall quality of supplier data, developing and enhancing metrics with supplier risk management tools and establishing a single supplier selection process and workflow.

Clearer visibility of supplier data will enable buyers to see the value in their supplier relationships.


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