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Do you really know your suppliers? Why companies need to understand their supplier networks

June 06th, 2014 - Posted by Louis Berard, Senior Research Analyst, Global Supply Management -Aberdeen Group in Procurement And Supply Chain

As a result of increased pressure to enhance control of supplier relationships, procurement executives are beating the drum for their organisations 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 organisation 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 to understand who they are working with 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 grow as a streamlined organisation. 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 organisation invests in a comprehensive due-diligence process to gain better visibility into its supplier network, great savings can be made. Based on research that Aberdeen Group conducted in January of 2013, Best-In-Class companies are creating supplier management initiatives and building a 360-degree view what is going on within their organisations. See the breakdown in the table below.

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

Best in Class table 

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 organisations is the number of internal systems that contain supplier related data. Over a period of time, companies build what they need at the time often not thinking about how this may develop in 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 supplier information in one location right from the start, providing one point of contact (or at least one team to 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 the use of supplier information dashboards. Best-in-Class companies are 2.5 times more likely to be using supplier dashboards than all other organisations. Supplier dashboards are the nerve centre 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 organisation you are doing business with. Who are they working with; could there be a conflict of interest or is it a partnership that needs to be leveraged or invested in? Dashboarding also allows for rank exception alerts and access to business user comments related to suppliers. They also provide insights with intuitive visuals. This is particularly critical for executive management to get a quick overview 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 a dashboard and open lines of communication within the organisation to share what is going on.

The adoption of newer platform technologies and increased utilisation 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.

Next steps? Start building a 360 degree view:

  1. Assess the best location to store all the supplier information and who is the best team would be to manage this. Do we need to create a team to run this initiative?
  2. Dig into the past; are there duplicate vendors? Look for places to streamline costs once you have a more organised view of your suppliers.
  3. Dashboards: Think about what metrics are important to you, what you want to track and what you want to share with the organisation and set it up.

In speaking with different solution providers, LexisNexis developed a creative dashboard to address these challenges. Take a look at our solution

 

What do you think?