Supply Base Management

Recent news events remind us why we need to be prepared to respond quickly.

Risk management in procurement is similar to dieting and exercise: everyone knows they should be doing it better but can’t find the will or time to actually do it. The recent hurricanes Harvey and Irma in the United States remind us that significant threats to your supply chain can come quickly and have tremendous impact. Make sure that you have what you need to respond.

The best way to do so is with a properly implemented and adopted supply management system such as Scanmarket’s SBM. With it, you can:

• Know which suppliers might be affected
• Communicate efficiently with the affected supplier
• Find quickly alternate sources of supply if needed
• Keep everything current and in one place

1. Know – One of the most difficult steps is to quickly determine which inputs and/or suppliers might be affected. In the “old days”, this meant hunting through emails, spreadsheets and databases that were, by definition, outdated the day after they were created. By using a supply management system, you can quickly determine which suppliers are at risk (e.g. suppliers located in the Houston metro area in case of Harvey) and take appropriate action
2. Communicate – Once you’ve identified a segment of suppliers, the supply management system allows you to communicate with that segment in an organized manner and maintain all the communications in one place. You will also be able to solicit structured information such a templated RFIs or questionnaires
3. Find – If you’ve had a major input or supplier impacted by a “force majeure” event, you’re going to need another source quickly. And keep in mind that your competitors will also likely be looking for the same thing. That means that moving quickly will be key to success. Starting up a supplier discovery and qualification effort after the fact is not going to work. Instead, you’ll want to have access to a pre-qualified set of suppliers who can quickly fill the void
4. Maintain – The key advantage of supply management platforms such as Scanmarket’s SBM is that maintenance of the data becomes the responsibility of the supplier, not your team. In addition to requiring less effort by your team, having the supplier “own” this data means there’s a much better chance of it being accurate. Even better, there are now multiple options to create system-to-system connections through web-services APIs to further reduce the effort required

If you’ve been advocating internally for a supply management platform at your organization but have struggled to get buy-in from executives or Finance, now’s the time to bring it up. While there’s a chance you might never need it in an emergency, Supply -and proper risk management practices should be considered in the same vein as insurance; you hope to never use it but wouldn’t dream of living without it.

For more information on these approaches or to learn more about how Scanmarket can help you achieve your business objectives, please visit us at www.scanmarket.com or contact your Scanmarket Account manager.

Scanmarket

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If you work for a large organization, you most likely have tens of thousands of suppliers and any of them, to some extent, can pose a risk to your organization's operations, brand or customers.

You and your suppliers are intimately linked and what they do affects you, for better or worse.  As a result, you need to be able to monitor, manage and collaborate with your entire supply base, not just strategic partners, more broadly and effectively than ever before. 

The benefits that come from proactive, and especially technology-enabled) management of your suppliers and their information are well-documented (CPO Rising - Supplier Performance Management):

• Improved collaboration internally and externally

• Lower annual management costs per supplier

• Better supply incident response

• Faster supplier on-boarding and time-to-market

• More efficient sourcing execution

That said, a relatively small portion of large organizations (currently estimated at 22% by Ardent Partners) have a structured, technology-enabled program for supplier management.  Why is that?  Reasons range from lack of available resources to a poorly articulated value proposition/ROI to plain ignorance.  However, recent advances in cloud technology have made effective supplier management much easier than it once was. 

Just as with any technology, HOW you use it matters at least as much as WHETHER you use it.  To that end, here are Five Easy Ways to Better Manage your Suppliers:

1. Communicate once, reach many
2. Keep all your information in one place
3. Let suppliers manage their own information
4. Integrate with your sourcing and contract efforts
5. Get the information right, and keep it right

1. Communicate once, reach many

The key challenge in effective supplier management at a large organization resides not so much in how you deal with a small number of strategic suppliers.  Instead, it is about how to best communicate and collaborate with your larger number of non-strategic suppliers.  Critical to this is having an automated system where you can address communications to specific segments of your supply base (e.g. a particular category, those with expiring certificates, etc.) without having to create individual emails.  Instead, look for a system that will allow you to target your communications quickly and easily to exactly the group you need.

2. Keep all your information in one place

Perhaps nowhere in supply chain and procurement is it more critical to have easy, centralized access to information.  For example, when you have a supply chain incident (think food safety or recall) you need to be able to respond quickly and thoroughly without wasting time on administrative tedium.  With segmentations ranging from line-of-business to geography to category, your information will likely be spread across many stakeholders, offices and individual computers.  It is imperative that you establish an easy way to aggregate and centralize the information without creating the dreaded "sharedrive-from-hell".  To do this, look for two things.  First, a system that easily compiles ALL your supplier in one place rather than dispersed across the organization.  Second, a platform that is easy enough for all your stakeholders that they will actually use it.  

3. Let suppliers manage their own information

If you speak with buyers, one of their key hurdles in the past to good supplier management (especially supplier information management) was the ongoing upkeep of information.  Make sure the platform you choose allows suppliers to update their own information (but in a system where it is easy for them to do so).  In this way, the responsibility for maintaining current information can rest with those to whom it is most important: the supplier.  For example, set alerts and reminders for suppliers whose certifications are expiring so that they are the ones to provide new copies rather than you having to chase them down. 

4. Integrate with your sourcing and contract efforts

Suppliers will be more likely to actively participate in your supplier management program if they know that it is integrated with your sourcing and contract management efforts, both now and going forward.  By setting expectations during the sourcing process (and via an integrated eSourcing, Contract Management and Supplier Management platform), you can let suppliers know what is expected of them ahead of time.  In addition, if suppliers know that you will most likely source again from partners actively engaged in your program, they will be more likely to participate.  Even earlier, provide potential suppliers with an easy way to register with your company and provide much of the information you would typically request in an RFI.   

5. Get the information right, and keep it right

Nothing defeats "easy" like errors and rework.  On the buy side, make sure you have an automated workflow that allows your buying team (and key stakeholders) to approve changes on elements of the supplier-provided information.  Above all, do this through an intuitive dashboard that allows the buyer / category manager to quickly see where approvals stand.  For sellers, provide them with their own platform where they can keep track of all their contracts and eSourcing events, update their profile, attach files and certificates, receive system reminders, send and receive messages.

By using these tactics, you will be able to improve both the efficiency and effectiveness of your supplier management efforts.  All while making it easier for everyone involved.     

However, as much as you understand and appreciate the benefits in better supplier management, be sure to use all the resources you can (Spendmatters.com - Supplier Management ROI) when convincing those who hold the purse strings. 

For more information on these approaches or to learn more about how Scanmarket can help you achieve your business objectives, please visit us at www.scanmarket.com.

Supplier conditioning is key to getting the results you want from your eAuctions.

We at Scanmarket like to consider ourselves experts at eAuctions. We even “wrote the book” on it. While the technology you use is important, eAuction success is as much based on process as it is on technology. A frequently overlooked part of the process is supplier conditioning. 

But it shouldn’t be. To that end, here are five things to help you improve your supplier conditioning process and eAuction results:

• Make the time
• Choose your strategy carefully
• Conditioning is not training
• Follow a process
• Build your relationships

1. Make the time – It’s easy during the hustle and bustle to want to take short-cuts. DON'T. Even though it takes a fair amount of time to conduct supplier conditioning, the improvement in results is well worth it. The conditioning will clarify expectations for the event on all sides and eliminate chances for errors. Best of all, you might even learn something from your discussions.

2. Choose your strategy carefully – The key decision to make prior to your process is what format to choose: one-to-one or one-to-many. While one-to-many sessions are more efficient, they reduce your opportunities to have candid discussions with bidders as they realize that all their competitors are present in the same session.

3. Conditioning is not training – Training is about making sure that suppliers know how to use the system. Conditioning is more about the actual negotiation and better understanding the bidding environment. To be sure, they can happen simultaneously but the goals for each process is different. 

Conditioning includes:

• Verification of terms & conditions and specifications
• Verification of start prices
• The rules of the game & the winning criteria, namely
• Does the buying company prefer best price per product or one supplier for all the lines?
• Is there any evaluation after the eAuction?
• When the final order allocation will be communicated to the suppliers
  
  

4. Follow a process – Regardless of your specific goals for the conditioning, make sure that you follow a set process so that you’re not missing any important steps. If you’re doing conditioning and training simultaneously, use these guidelines:

• Set aside one or two days to conduct the supplier trainings depending upon number of suppliers. The average time per supplier training is 20-25 minutes but make sure you have a buffer between the trainings so you don’t risk trainings overlapping. Best Practice is to place one training per hour.
• Invite suppliers to the training well ahead of the actual training to ensure that they have an open slot in their calendars.
• Take potential time zone differences into account when setting up the training sessions.
• Conduct the trainings one or two days prior to the actual eAuction, so potential questions/issues, etc. can be clarified before the live eAuction. The training should not be conducted one or two weeks before, as you risk the suppliers forgetting the details before the live eAuction.

5. Build your relationships – Especially if you are doing one-on-one sessions, take the time to build a relationship with the bidders. You will discover market intelligence on the phone that bidders would never communicate via an RFI or bid response. Remember that the bidders understand the category better than you do because they are in it all day, every day

eSourcing platforms are specifically designed to increase efficiency and allow you to get more done faster. The time you save can be devoted to more strategic actions like talking to your bidders, learning about the market, and getting better results.

For more information on these approaches or to learn more about how Scanmarket can help you achieve your business objectives, please visit our section about eSourcing Services or contact your Scanmarket account manager.

Scanmarket

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Do you have a structured supply risk management approach? If not, you need one. Here’s how to start.

Supply Risk Management typically becomes a hot-button issue in the procurement world when there is an economic shock or financial crisis. By the time that happens, it’s too late. Instead, you need to use periods of relative tranquility to get ready. If the last time your organization had a serious talk about supply risk was 2010, use these simple steps to “start the conversation”.

What is Supply Risk?

While using “anything bad” as a definition for supply risk may be concise, it doesn’t get you very far. Instead, understand that there are three primary types of risk, each with its own set of causes, impacts and mitigation approaches:

• Disruption Risk; “Where’s my stuff?” Disruption risk is the one we typically think of first. A crop fails, a manufacturing plant is shut down, shipping company goes out of business, etc. (Hanjin Shipping to Pay Handlers to Unload U.S.-Bound Ships). Your production line (and ability to serve customers) is shut down and you need to react quickly.
• Brand Risk; “We’re in the newspaper? Why?” This is a risk that primarily impacts your top-line and the one that can get the attention of the C-suite most quickly. Safety recalls generally fall into this category and are sure to make headlines (GM to Recall 4.3 Million Vehicles for Software-Related Airbag Defect). Quickly finding the appropriate suppliers is key to managing these events
• Price Risk: “We’re paying what?!” Least associated with supply risk but having an out-sized impact on procurement are price risk events where something happens to cause a material impact on the prices you’re paying for key inputs. The most famous of these comes from the oil and fuel markets. If you ever think oil prices have settled down, just wait a bit.

For each of these risks, your first challenge will be identifying who specifically in your supply chain is part of the issue. Doing so without automated information systems is nearly impossible and certainly time-consuming. However, you can’t fix a problem if you don’t know where it’s coming from. 

By classifying your potential risks within this framework, you’ll be better prepared to understand, respond and, hopefully, prevent them. 

Are you ready?

To determine how well-prepared your organization is to manage supply risk, ask yourself the following questions:

1. Do you have an established supply risk management program in place today?
2. What percentage of your supply base is involved? No one? Strategic? Everyone?
3. What information do you track about your suppliers? What information do they maintain on your behalf?
4. How do you identify and quantify the risks associated with any one supplier?
5. Do you know what kinds of risk your suppliers face in their own supply chains? How are you managing for these?
6. What percentage of your supply base is at risk of bankruptcy as of today?
7. Is the risk in your supply chain concentrated in a particular commodity, region or industry? Which ones? How do you track and manage?
8. Do you have a contingency plan if you lose a supplier and how will you measure a new supplier's ability to meet your needs?
9. Do you have a public relations plan in case your company’s name ends up in the newspaper tomorrow? For what kind of crises? Which are most likely given your organization and industry?
10. Who within your organization is responsible for identifying, evaluating, prioritizing and mitigating supplier risk? Who are they accountable to?

How will you prepare and react?

Lastly, have an approach for addressing the different risks you’re facing. We’ve found the following framework helpful for organizing your approaches.

• Find: Determine where the problems are
• Fix: Put mitigation efforts in place now
• Follow-through: Keep at it, especially when things are quiet

While this is certainly not meant to be a comprehensive guide to managing your supply risk, we hope it serves as a helpful guide for organizing your approach.

No matter what, think about risk now, before it’s upon you.

For more information on these approaches or to learn more about how Scanmarket can help you achieve your business objectives, please visit us at www.scanmarket.com.

Scanmarket

Easy. Proven. Results.