Technology is playing an increasingly critical role in enabling organisations to manage their supply chain relationships.
A report by Oxford Economics, The Future of Procurement, last year highlighted the important that executives place on working with suppliers in a strategic way.
The report was based on two surveys conducted by Oxford Economics with SAP Ariba. One went to more than 500 senior procurement executives around the world, while the other went to more than 500 non-executive procurement practitioners such as category manager, buyers and procurement operations specialists.
Executives were asked about which areas they would like their organisations to be most focused on, both today and in two years’ time.
Some 41 per cent said that today they would like their organisation to be most focused on working one-to-one with suppliers in a strategic way – outscoring all the other areas which included managing supply chain risk, optimising the procure-to-pay process, and conducting category management and sourcing.
And looking two years ahead, this scored even higher – with 46 per cent saying they would like to see their organisations focusing on one-to-one working with suppliers.
When the practitioners were asked which activities took up the majority of their working time, 55 per cent said working one-to-one with suppliers on strategic and administrative issues.
The survey looked at which key performance indicators were used by members of the executive group, as well as the value that they placed on each of the KPIs.
Not surprisingly, perhaps, the most commonly used KPI was cost saving and cost avoidance (70 per cent), followed by supplier quality/performance (49 per cent).
But a number of KPIs which were seen as valuable were less well used. For example, 54 per cent identified the percentage of touchless transactions as a valuable KPI but only 14 per cent said they were using it.
Similarly, 50 per cent identified the number of suppliers with automated collaboration as valuable, while only 34 per cent said they were using it.
Companies are increasingly looking at their supplier relationship strategies. And Gopal Iyer, sourcing & supply chain consultant at 4C Associates, is clear that a proper IT supplier relationship strategy starts not with the supplier, but internally within the firm.
“There needs to be some level of alignment across the functions – especially when multiple functional groups can have similar needs but different way to manage and work with suppliers.”
He highlights a number of factors that a firm needs to take into account while developing its IT supplier relationship management strategy.
Executives need to be clear about where is the firm headed to? What are the short term and long term goals? What does the firm inspire to be?
Quality of service and delivery as required by the internal operations and the customers is another important factor – as is the commercial element of the relationship.
The development of extended supply chains means companies need to give more weight to risk management. Recent years have seen a number of natural disasters that have disrupted supply chains globally, while the heightened threat of terrorist activity also needs to be taken into account. But supply chain risk also includes issues such as fraud.
Earlier this year, a poll of industry professionals by Deloitte across a range on industries found that almost one third said that their company had experience fraud, waste or abuse in its supply chain during the previous 12 months.
Iyer says that firms need to be vigilant of the risks they face across the supply chain.
Innovation is also a critical issue. This includes internal issues such as benchmarking, process improvements, economies, and external – what can the suppliers bring to the table).
Sustainability, environmental friendliness and focus are also key concerns.
There are a number of key functions that a supplier relationship management system should provide.
Clearly, it should help manage the entire procure to pay process flow, give a good and dynamic visibility of spend and help with supplier performance management.
Iyer points out that technically this should help in improving overall spend management, improving global operations, and managing compliance and policy audits.
Important features include supporting a user friendly procure to pay process, including catalogue management and a procurement module; usability across platforms; connectivity to other supplier databases; contract management; and transaction processing.
He highlights the importance of category management framework creation – supporting industry insights, identifying market forces and other intelligent stuff; as well as operational and management reporting, including spend, procurement activities, supplier performance.
“Though there are standard supplier relationship management systems in the market, organisations typically would need a combination of technologies to help develop an effective supplier relationship management strategy,” says Iyer. In particular, he points to spend data tools, procure to pay systems, an sourcing tools.
“However, there will always be a need of expert inputs from various functions (like logistics and marketing) and use of optimisation tools like CAST, which would support the changing business requirements. Also, the importance of getting market intelligence through manual inputs cannot be underplayed.”
And, he says, although it is difficult to measure the benefits of a system separately to the process it supports, some of the assessments could be around: total cost reduction, product innovation and time to market, process quality improvement, quality of supplier relationships, service and quality levels, and improvement in alignment between procurement and other organisational functions.
Technologies to support supplier management
Spend360 uses artificial intelligence to enable users to reduce costs and manage suppliers more effectively by providing detailed all-round insight into procurement spending.
Earlier this year Spend360 was awarded a £250,000 grant by Innovate UK. The AI engine, known as ORAC, enables Spend360 to analyse unstructured spend data using all of its historical work and knowledge, and then apply this to new customer data sets. By developing ORAC, Spend360 is aiming to open up the spend analysis arena so smaller businesses can also gain the advantages that understanding company spend and analysing data can deliver.
Rosslyn Analytics offers a range of supplier relationship and procurement tools with its RAPid platform. Tools include spend analytics, supplier performance management, contract management.
Coupa Software offers cloud-based spend management including invoicing, procurement, expense management, sourcing and inventory.
The software works with any ERP system such as SAP, Oracle or NetSuite.
Coupa’s network encompasses customers and suppliers doing business in more than 100 countries. Customers have connected and done business with more than two million unique suppliers through Coupa’s Open Business Network.
“We use Coupa to connect electronically to thousands of suppliers,” said Rone Luczynski, managing director procurement and supply chain at Service Corporation International. “We depend on a variety of businesses from large strategic suppliers to small local ones to help us deliver value to our customers. Coupa’s supplier connectivity processes have been critical to our business cost reductions and savings.”
“While others question how to make supplier enablement easier, we question how to eliminate the need for supplier enablement,” said Donna Wilczek, vice president strategy and product marketing at Coupa. “We’re celebrating this milestone because it validates our vision, our business model and most importantly, the value the network is delivering to our customers. At the end of the day, the only thing that matters is how easy a network is to connect to it (either directly or via inter-operability with other networks).”
Earlier this year it released version 15 of the software including a “hyper-localised” language feature designed to allow businesses to personalise their application language to their business vocabulary, collect end-user translation suggestions and make language changes instantly.
Release 15 includes two patent-pending language configuration innovations. Hyper localised languages allows each Coupa customer to real-time modify any of Coupa’s 20+ languages for their own purposes.
And “Suggest-a-Translation” allows employees to suggest a better translation that can be real-time applied by their system administrator. Once submitted, the Coupa Administrator can check a box to apply and all employees immediately see the new translation.
Coupa has also improved its spending insights by Expense Management transactions to its real-time sourcing recommendations engine. It now recommends sourcing savings initiatives based on predicted trends in Expenses spend.
There is also a new supplier risk recommendations engine that monitors supplier data and instantly makes recommendations based on a variety of supplier risk triggers such as inactive, expiring certificates and out-dated information.
SAP Ariba connects users to the Ariba network enabling them to view up-to-date profiles of all suppliers; monitor and manage supplier performance; assess compliance and manage supply risk; identify and assess new sources of supply; and on-board new suppliers.
The company recently set out plans to integrate SAP Ariba’s procurement solutions with Microsoft Office 365.
“Today’s professionals have little tolerance for complexity,” said Alex Atzberger, president, SAP Ariba. “They expect technology to make things easy and want to work in the applications where they live without having to switch between them to get things done. Together with Microsoft, we can deliver on these expectations and enable our customers to operate with the simplicity and speed their businesses demand.”
The aim of integrating the two products is to enable users to create, share and collaborate around procurement-related documents in real time?
For instance, when purchasing goods and services through SAP Ariba where a Statement of Work is required, users will be able to automatically access the Microsoft Office 365 suite and be guided to a template for creating it using Microsoft Word. This will also work for contracts.
BravoAdvantage, BravoSolution’s strategic procurement platform, offers Procure-to-Pay and Savings Management functionality. It uses supplier-centred approach that integrates supplier lifetime value throughout the entire procurement process.
ScanMarket is a cloud-based tool for identifying, evaluating and selecting new vendors, with multiple formats for RFI/RFP/RFQ including cherry-picking, list, cherry-lot, bid matrix and so on. It provides for supply base management, spend analysis, project management and contract management.