Do You Really Know Your Suppliers? Why companies need to understand their supplier networks.

By Louis Berard, Senior Research Analyst, Global Supply Management -Aberdeen Group

As a result of increased pressure to enhance control of supplier relationships, procurement executives are beating the drum for their organizations to improve their supplier management efforts. However, the drum beat is not isolated to procurement, but is also coming from several other areas in the organization such as finance, supply chain, manufacturing, social collaboration and the sustainability office. Each one of these areas comes with its own set of vendors and suppliers. But how often does each department chat with each other too understand who they use and why? Those companies who are able to create a 360-degree view of their supplier base will rise to the top and be able to build as streamlined organization. This combined look at suppliers will help uncover past business relationships, and allow for a deep dive view into their public records and legal findings. When an organization invests properly in doing its due-diligence and gaining greater visibility into its supplier network, superior savings can be found. Based on research Aberdeen Group conducted in January of 2013, Best-In-Class companies are creating supplier management initiatives and building that 360-degree view of just what's going on within their organizations. Check out the breakdown in Table 1 of Best-in-Class versus the rest.

Table 1: Top Performers Earn Best-in-Class Status

Definition of Maturity Class

Mean Class Performance

Best-in-Class: Top 20% of aggregate performance scorers

85% - Percent of suppliers demonstrating on-time delivery or meeting commit / project completion dates
12% - Average percent of cost savings achieved since implementing a supplier management initiative
13 days - Average time to on-board suppliers in the enterprise

Industry Average: Middle 50% of aggregate performance scorers

67% - Percent of your suppliers demonstrating on-time delivery or meeting commit / project completion dates
8% - Average percent of cost savings achieved since implementing a supplier management initiative
23 days - Average time to on-board suppliers in the enterprise

Laggard: Bottom 30% of aggregate performance scorers

38% - Percent of your suppliers demonstrating on-time delivery or meeting commit / project completion dates
6% - Average percent of cost savings achieved since implementing a supplier management initiative
27 days - Average time to on-board suppliers in the enterprise
Source: Aberdeen Group January 2013

When it comes to supplier lifecycle management, the crux of the issue is and has always been the ability to obtain a common view of suppliers based on supplier data that is generated both internally and from external sources. The backend challenge for many organizations is the number of internal systems that contain supplier-related data. Over the years, companies build what they need NOW not thinking about how this will be growing for the future, and as a result, everyone has a different system in place. To combat this, 40% of Best-in-Class possess the ability to access a "single source of truth" for all supplier information from point of supplier on-boarding through supplier auditing. This groups all the supplier information in one spot right from the start, providing one point of contact (or at least one set of folks who manage this process). Best-in-Class are also 88% more likely than Laggards to have implemented a master data management solution, which helps to provide a consistent view of suppliers across all systems, ultimately allowing for corporate oversight and responsibility (Source: Aberdeen Group January 2013).

What truly separates the Best-in-Class from their competitors is in the use of supplier information dashboards. Best-in-Class companies are 2.5 times more likely to be using supplier dashboards than all other organizations. Supplier dashboards are the nerve center for any supplier management program.

Given a world where most individuals are inundated with data, dashboards become a critical link to the larger enterprise by providing the big picture view with benchmarking information and the ability to drill-down on who and what type of organization you're working with. Who are they working with: could there be a conflict of interest there or is it a partnership that needs to be leveraged or invested into? Dashboarding also allows for rank exception alerts and access to business user comments and thoughts related to suppliers. They also provide insights with intuitive visuals. This is particularly critical for the ability of executive management to get a quick view of performance and risk drivers relative to supplier management. If you plan on implementing one item discussed here today, this would be the one to start with, build that dashboard and open those lines of communication within the organization to share what's going on.

The adoption of newer platform technologies and increased utilization of data (internal, third party, supplier) are helping companies establish a 360 degree view that is essential in today's global economy where activity on the other side of the globe could impact your bottom line immediately.

Your next steps? Here are 3 places to start when getting that 360 degree view:

  1. Ask yourself, where is the best place/who is the best team to store all the supplier information? Do we need to create a team to run this initiative?
  2. Dig into the past; are there duplicate vendors? Look for places to cut costs after you've got your suppliers organized.
  3. Dashboards: Think about what metrics are important to you, what you want to track and what you want to share with the organization and set it up.

 

In speaking with different solution providers, LexisNexis has developed a creative dashboard to address these challenges. You can check it out at www.lexisnexis.com/en-us/products/smartwatch.page.

    Discover ways to proactively assess risk, evaluate suppliers and more.
    Video tutorials, tips and tricks from LexisNexis Business Insight Solutions.
    BIS User Site
    Solutions
    Industries
    Store
    Support & Training
    Communities & Blogs
    Contact Us