Tag Archives: supplier management

How Can Procurement Break the Chains of Sole Sourcing?

Whether its design specifications, or traditional attitudes, sometimes procurement gets painted into a sole sourcing corner.

single sourcing

This article was first published on Future Proofitable.

I am jealous of those who have never had to deal with true sole suppliers. I think IT buyers will understand me best. It’s just not that much fun. Let’s take a closer look at what sole or single sourcing is, and how best to deal with it.

I will cover the subject in two articles. The first one covers what it is, and the second will contain tips and hints how to deal with these situations.

Spot the Difference

If you there are a few suppliers in the market who you could buy from, but you choose to stick with one supplier (leaner supply chain, eliminated duplicating logistics and management, administration costs), you have a classic single source situation.

If there is only one supplier in the market, and no alternatives, you have a sole sourcing situation.

Real-life Examples?

There are many office cleaning services providers out there in the market. However, for a list of very good reasons, you choose to outsource it to one service provider. That would be single sourcing.

Now, imagine five different suppliers working on your ERP system creation and implementation at the same time, doing the same job for the same part of scope. Not fun.

Or imagine that your supplier comes up with exactly the product you need for your manufacturing process, but patents it and keeps on increasing the price at every opportunity. Even less fun.

How Does It Happen? 

For single sourcing, the option is deliberate choice. There are many advantages to it:

  • You keep the competition, because the supplier can be easily replaced. Negotiation leverage is at its maximum level like this.
  • At the same time, you spend less time for supplier management and supply chain administration.
  • You have consistent quality of items or services delivered. Or, if not, deal with it in one go.
  • You eliminate all non value-adding activities (some examples here).
  • The supplier will be more willing to work with you on various cost reduction or services improvement initiatives.
  • The threat of losing business in the future will be a big motivator to not overcharge you.

There are a variety of reasons why a sole supplier situation can form. Some are more to do with perception and resistance to change, while others are truly sole supplier situations. They can be categorised in three ways.

1. True Sole Sourcing

Where your company might depend on one supplier without any escape routes. For example:

  • Market monopoly – utilities (water, gas, electric); Governmental services.
  • Patents – technical designs; chemical formulae.
  • Lack of supply alternatives.

2. High Exit Barriers

There are situations when due to various barriers (most often financial – switching costs) competitive situations turn into sole supply situations. For example:

  • Equipment investment – when supplier provides plastic granules storage and supply systems; cleaning chemicals’ supplier provides funds for equipment.
  • Digital solutions (and their switching costs) – you may have had big leverage during first negotiations, but once the initial contract period is over you find yourself dependent. The supplier is technically not sole source, but switching costs are so painful that it gradually turns into one way street of constantly increasing maintenance bills.
  • Manufacturing supply chain integrations – this can often happen naturally, or through pre-existing relationships between different tiers of suppliers. Along the way, one supplier is sold to another, or bought out, and a partnership is ended even though production lines are tied together.
  • Industry regulations (or agreements) – for instance, in order to be able to insure cash in a safe, an insurance company might require a specific quality certificate from a very specific certification organisation. In this case, there is really only one option for supply.

3. Pseudo Sole Sourcing Situations

Frequently, evaluating the situation in the business is more about perception and will, rather than based in fact. Identifying these can bring big benefits.

  • Business users’ preferences – surprisingly, there are quite a few categories of spend where business users are permitted to have preferences. Next time you complain about resistance from stakeholders, consider the number of colleagues who work with particular safety equipment, or similar. And yes, over time, people tend to form preferences for brand name products. Implementing any change might be challenging.
  • Historical heritage – the classic “we’ve always done it this way” situation. It always been bought from this supplier, and only this supplier.
  • Business’ requirements – technical specifications, prepared by engineers. Delivery requirements, set by business users. Packaging requirements, defined by operations or logistics or marketing.

 So now you know how these situations may occur. The question is, can you do anything about it? And how? You’ll have to come back to find out more!

Why Some Supplier Relationships Are More Equal Than Others

All suppliers are equal, it’s just that some supplier relationships are more equal than others. It’s just one of the challenges facing procurement.

some supplier relationships more equal

Procurement in the public sector can provide its own set of unique challenges. Learning from the experts is one of the best ways that professionals can aim to overcome them.

Marea Getsios is the Coordinator of Procurement at Kogarah City Council in New South Wales, Australia. Marea has worked with both Local and State Government departments in Australia over the past 20 years.

This has given her an in-depth understanding of the procurement process from a strategic leadership perspective, as well as what it takes to drive procurement success.

Ahead of her appearance at the 3rd annual GovProcure 2016 conference, Marea highlighted some of the key challenges she faces in her current role, and the ways she has overcome them. She also shared some tips on the practical side of procurement, including best practice in supplier relationships and risk management.

What qualities and capabilities have you built that supported you in achieving better procurement outcomes?

I’ve used my sales and marketing background to communicate, and engage, with stakeholders more effectively, in order to achieve better procurement outcomes. It’s been important to educate stakeholders on the differences between a procurement and a purchasing role.

By communicating the procurement cycle, and discussing the importance of good procurement practice, it’s been much easier to achieve better governance and practice amongst my colleagues.

The other area I focus on is the importance of planning your procurement program. It is important at the beginning of every project to sit down with key stakeholders and work out the key objectives and risks of the project.

It sounds like you are really harnessing your strengths and experience to minimise setbacks at your organisation!

What would you say the biggest challenges you and your organisation are facing in procurement at the moment? Do you feel that these challenges translate to local government at large and why?

At the moment the most challenging aspect of my role is amalgamating two very different frameworks into one. You have to methodically go through each process and work out which method is going to work best for the new entity going forward.

It’s a good opportunity to look at what has worked in the past for both organisations and decide what will be the most effective in the new framework going forward. Many Councils are presently going through this process, and its not any easy one.

In addition to trying to amalgamate the differing key procedures and policies, the most challenging factor is the culture, and trying to break down the silo mentalities of individuals who are adverse to change.

Interesting you mention the change adverse cultures that exist in business. We know that procurement operations within local government can have far-reaching, visible impacts on the community.

Can you tell us a bit more about the key procurement trends that might impact procurement and supplier relationships at the local level? How you can make the most of these challenges and opportunities?

Obviously we are embracing cloud-based networks to streamline ordering processes. We also have lots of new technological platforms that can automate certain procurement functions, including spend analysis, contract management, and saving trackers.

I don’t believe local government has embraced enough of these opportunities, but they are beginning to play in this space. There is opportunity now to start implementing some of these platforms and managing the workflow more effectively.

The other area I believe could also be embraced better is social media, especially where the engagement of both the community and suppliers is involved.

Procurement technology with built-in social collaboration tools can encourage innovation through improved collaboration with suppliers and other stakeholders. At the same time it can minimise risk, and enable effective decision making.

Moving outside your business to your external suppliers. Do you have any advice or key lessons learned from your supplier relationships and risk management strategies?

I believe if you are fair and transparent, and allow all suppliers and contractors the same opportunities, you will be successful in developing good supplier relationships and managing any potential risk to your organisation.

I try where possible to give suppliers the best insight to the business and our requirements in order to allow them to work out if the organisations requirements are a good fit for their business. This way they don’t waste their time or our time.

It’s important to be clear at the beginning of any relationship, and to set expectations at a realistic and achievable level. I have found that problems arise if suppliers feel they have entitlements, or are basing their livelihood on anticipated revenues.

As long as the communication is clear, it enables the supplier to work out whether they are able to service or supply your organisation accordingly. If they feel they are building their business fairly, then they will do whatever they can to grow their business and in turn provide a good service to your organisation.

It’s important not to treat suppliers and contractors with contempt, or as if they owe you. This can create issues and open up the organisation to unnecessary risk.

It’s been wonderful hearing from you, your insights are extremely useful and there are many thought starters here!

How can attendees benefit from your panel participation at the GovProcure 2016 conference?

The GovProcure conference is a good opportunity for procurement professionals to get access and exposure to a variety of principals and processes that operate across the three levels of government.

It’s interesting to see where there are alliances in the various government sectors and it’s a good opportunity to share ideas and network with other likeminded procurement professionals.

My contribution will have a strong Local government focus, but I also try and talk about how my sales and marketing background has helped me promote procurement in my sector. Much of my procurement practice focuses on the engagement of stakeholders, which I believe is the foundation for success in the procurement sector, and all other sectors for that matter!

Too find out more or to download a brochure, visit the event website.

The Human Side of Procurement Decision Making

No matter the sources available, procurement professionals trust above all else peers when it comes to information and supplier intelligence.

Peer Recommendation Supplier Intelligence

Earlier this year, I participated in research that explored current trends in supplier intelligence. More specifically, tealbook wanted to know what sources of information are the most trusted when finding new suppliers.

Here is what they learned:

Procurement professionals trust their peers, whether internal or industry colleagues, over any other source of information or intelligence.

In fact, 83 per cent of the survey participants held this opinion. Not only does this finding indicate that procurement should find and invest in efficient ways to access and centralise the knowledge of their peers, it offers procurement a secondary lesson about our own stakeholders and the best way to reach them.

Procurement can be an ‘acquired taste’ for some functions and business units. We can put out mission statements, tie our objectives to theirs, and endlessly share positive results and sometimes they still don’t come around to our way of thinking.

Are We Effective Message Carriers?

Maybe the problem isn’t the thought process. Perhaps, as we learned in the research about trusted sources of supplier intelligence, the issue is the messenger.

If that is the case, how can procurement go about finding other, more effective carriers for our message?

I am a huge fan of the town hall meeting format. Town halls are an effective way to speak to the organisation at large about strategic sourcing and procurement and emphasise that we are a collaborative partner ready and willing to add value.

About 6 months after I joined FORMA, I had a procurement town hall I presented as a ‘Lunch and Learn’. People either called in, participated via video conference, or sat in the auditorium area.

Our main messages to them were: “Here are some of the things that procurement has done. Here is how you can engage with us. Here is how you work with procurement.”

The Power of Testimonials

By far, the most impactful statements in the town hall were not made by procurement at all. They were testimonials made by procurement’s key internal stakeholders directly to their peers.

I had invited five key stakeholders at the VP level and Senior Director level, very high level representatives in the organisation, to come up and talk about what their experience had been with procurement.

They shared where they had found benefit, how had procurement helped them, and under what circumstances they would actively engage us again.

Those testimonials spoke louder, and reached further, than anything that I, or my team, could have said to help us with stakeholder engagement.

Once the audience members began to hear and understand the different ways procurement was able to provide support, they became more creative in their thinking. “Well, you know what? I have this project that’s coming up next week, or two months from now…”.

Or, “Here’s an initiative I never thought you could help me with, but I guess you can…”. It created a lot of momentum and opened a lot of doors. It was an extremely positive way of enticing engagement from our stakeholders.

Trusted Sources of Supplier Intelligence

Mary Kachinsky
Mary Kachinsky

When a town hall meeting isn’t a possibility, technology can often be called in to bridge the gap. This is why platforms such as tealbook fill a unique gap for many procurement teams. They offer a place where teams can store supplier provided information with their own notes and opinions.

This sits alongside commercial data from Dun & Bradstreet’s global database and aggregated intelligence on suppliers from industry peers. Having all of this information in one place is like being able to call a town hall to order anytime and any place. And there’s the additional bonus of not having to provide lunch!

The fact of the matter is, people want to get information and opinions from the people they know and trust. It is true in the case of procurement and it is also true with our internal stakeholders.

At the end of the day, we are all people that put more faith in recommendations from our peers than we do in a distant process mandate or firm that says, “This is the supplier to work with” or “Procurement has your best interests in mind – trust us”. We ultimately want to hear from our peers.

If you are interested in more about tealbook’s research into supplier intelligence, knowledge and discovery, you can download it here.

Mary Kachinsky is a member of the tealbook Advisory Board, and Vice President of Strategic Sourcing and Operations for FORMA Therapeutics

She brings over 25 years’ experience as a strategic partner and business leader in the research, development and manufacturing procurement functions spanning across the pharmaceutical, biotech and consumer electronics industries. Mary is a Certified Professional in Supply Management (CPSM) and a Lifetime Certified Purchasing Manager (C.P.M.).

How Does it Feel to Be a Supplier to You?

Being a customer of choice in procurement is important. Ensuring your supplier feels part of the team is also important.

Supplier to You

As procurement professionals we care about the quality, delivery, cost, innovation and sustainability performance of our suppliers. These are usually wrapped up in Key Performance Indicators (KPIs), a key tool within the procurement community.

Now that we as a population are facing resource scarcity, what sort of questions should we start asking ourselves to ensure that we continue being the ‘customer of choice’, and make the supplier feel that they are a prime source of value to our organisation?

Why ‘Customer of Choice’ is Important

Every day, news headlines and scientific reports reflect a world increasingly impacted by unsustainable trends and catastrophic climate events.

Oceans are becoming more acidic, with devastating results on coral and connected ecosystems. The air in major cities is full of dangerous particulates. Crop-growing regions for key commodities are shifting. Sea levels are rising.

All this could potentially lead to resource constraints and risk in the supply chain which procurement, amongst others, should mitigate.

The essential questions procurement should be asking itself are:

  • How can organisations possibly develop a ‘single point of truth’, which is reliable and up to date?
  • How can they manage contracts and monitor KPI’s?
  • How can they handle data and information and avoid rework and duplication and look at the relationship from the supplier’s perspective?

Key Questions for Your Supplier

It starts with the sourcing process where the supplier is evaluated, perhaps even audited, and then at the end when a contract is developed with them. Suppliers will evaluate whether these selection processes run fairly and competently.

In the on-boarding and the execution part of the relationship, the supplier will most probably evaluate how the communications went, how easy it was to create and implement changes to the administrative routines, and how the on-boarding was tackled.

When the relationship starts out, the evaluation will typically be how time consuming or complicated it is to deliver goods and services, and whether the same information is requested by different people.

When it comes to the strategic relationship, a key question to ask yourself is whether you ask your suppliers their opinions about issues that might affect them, including issues around risk.

And then, when you ask them, are you then open to new ideas, new products, and new ways of doing things?

Organisational Benefits

How would this benefit organisations? The time it takes to manage the relationship should become more effective. So should the visibility from spend analysis to sourcing exercises to strategic relationship management.

As a result it should help drive better relationships and help achieve competitive advantage for both parties. And this should of course be linked to your company’s sustainability journey.

The Pareto Principle Has An Expiry Date

Has the Pareto Principle finally reached its expiration date after 110 years? Why the tail wagging the dog heralds the end of the 80-20 rule in procurement.

Pareto Expiry Date

This article was first published on EBN Online.

When Vilfredo Pareto observed in 1906 that 80 per cent of the land in Italy was owned by 20 per cent of the population, little did he know that this 80-20 rule (or Pareto Principle) would be enthusiastically embraced by the procurement profession and still be applicable 110 years later.

The term was popularised in the 1940s by the engineer Joseph M. Juran, who famously wrote of “the vital few and the trivial many”.

In procurement terms, the Pareto Principle means that 20 per cent of the average organisation’s suppliers account for 80 per cent of spend, and vice-versa. I’m a big fan of explaining procurement concepts with relatable imagery, so let’s picture your supplier base as something that we’re all familiar with – a dog.

The Tail Will Soon Be Wagging The Dog

Picture a Labrador. Or an Alsatian, or a Sheep Dog if you prefer – whatever takes your fancy. The head of the dog could be said to represent your top 1 per cent strategic suppliers. This is where you commit most of your time and energy.

Your procurement systems are optimised to work with the head of the dog. You make a significant effort to communicate face-to-face, and you spend a large amount of time worrying about what’s going on inside that head.

Let’s move down the neck to the dog’s body. Think of this as the next 19 per cent of your strategic suppliers. While the body isn’t nearly so important as the head, you recognise that this group accounts for the majority of your spend and deserves almost as much attention. As such, you dedicate time and resources to ensuring the body is in optimal health, and these “vital few” are being properly looked after.

Finally, the tail. Depending on the amount of suppliers you have, this could be a short stubby tail, or an extremely long one that tapers to a tip. Into this tail you’ve crammed 80 per cent of your suppliers – Juran’s “trivial many” who represent only 20 per cent of your spend.

You’re so busy looking after the dog’s body (and especially its head), that you’ve adopted a set-and-forget approach to the spend tail. You automate what you can, and call upon the smallest suppliers only when you need them.

And that’s a mistake, because in terms of innovation potential and risk profiles, the tail will soon be wagging the dog.

Procurement Systems Optimised For Large Suppliers

At ProcuriousBig Ideas Summit in May this year, Coupa Software’s Gabe Perez told the assembled group of Procurement thought-leaders that there are untold millions of suppliers in the world.

And yet most of our systems, or proprietary networks, only give us visibility of a few hundred thousand. We need to develop open networks to give unhindered access to all these suppliers who could potentially be the source of game-changing innovation.

The problem is that our processes and systems are set up to work with the big players at the expense of SMEs. “We can’t have our bureaucracy, our complexity, our layers of organisation impact suppliers’ businesses,” says Perez. “The cost of business goes up”.

Yet, that’s classic procurement, and it takes a culture shift to change the way we do business and encourage a truly open network. Think about the hurdles your organisation is putting in place for SMEs; whether they’re prohibitive insurance requirements, or crippling contractual terms that could bankrupt a small player.

Are they really necessary? Are you closing the door on opportunity because you see yourself as too big to play in the small supplier space?

Building Culture Of Agility And Innovation

Have you ever requested a last-minute change from a large supplier and watched in frustration as the creaky wheels slowly begin to turn? By the time the suppliers’ emails have bounced around to tick all the bureaucratic boxes, a smaller supplier may have found and implemented a solution.

What you want is agility. And small suppliers will expect you to be agile in return.

In her workshop on innovation in procurement, former Deutsche Telekom CPO, Eva Wimmers, stressed the need for nimbleness when working with SMEs. She discovered that the existing processes at her organisation were skewed towards the largest suppliers. 

Processes were changed to encourage innovation through diversifying the supply base to include more SMEs and start-ups, cutting new contracts down to a maximum of five pages, and holding supplier meetings exclusively around innovation.

Eva also implemented what she called “dialogue-rich procurement”. This encouraged her team to greatly increase their communication with both internal stakeholders and with suppliers. Her team discovered that SMEs, in particular, were very eager to share their ideas when they found that procurement was willing to listen and learn.

In Eva’s words, “We do not care how big an organisation is, as long as both the solution and the organisation are scalable and financially solid.”

She used Dropbox.com as an example of a small organisation with fewer than 50 staff that wouldn’t even have shown up on many organisations’ radar. And yet now it has world-wide take-up.

Compression Of The Supply Chain

Paul Markillie, Innovation Editor at The Economist, talked at the Big Ideas Summit about the compression of the supply chain driven by recent technological megatrends.

Robotics, 3D printing and computer-aided design are demolishing the old economies of scale, and separating a big supplier from an SME. This is ushering in no less than a “Fourth Industrial Revolution”. What this means for procurement is that third or fourth-tier suppliers can find themselves rapidly rising to first-tier producers of end-products.

“There will be huge opportunities for companies further down the supply chain to innovate,” Markillie said. “Second-generation robots are more affordable for medium and small companies; 3D printing processes are less wasteful of raw materials and allow greater production flexibility at lower volumes.

“I think we will see some companies grasp these opportunities, which could re-order supply chains, and lead to some companies that were previously suppliers of components making the leap to become producers of final products.”

Lots Of Risk In That Spend Tail

The dilemma many procurement professionals face is that although you can’t afford to spend much time with suppliers beyond your top 20 per cent, every single vendor in your supply chain presents a significant risk to your brand, reputation and bottom line.

Think about a small supplier that you only use sporadically. Have you investigated their suppliers to ensure compliance to standards? What are their second-tier suppliers up to? What about the third, fourth and fifth tier?

Even though your spend with this supplier may be minimal, it can cause just as much damage to your organisation as the top 20 per cent. Child labor, slavery, cyber security, unsafe practices – the list is endless, and frightening.

My point – apart from trying to scare you – is that your risk mitigation and audit processes that are in place for the top 20 per cent, should be extended to the remaining 80 per cent.

End Of The Pareto Principle?

So, does this mean that the Pareto Principle has finally reached its expiration date after 110 years? In my opinion, yes it does.

If you measure the importance of suppliers purely by spend (and that’s very old-fashioned thinking), then you should indeed spend the majority of your time with the 20 per cent.

But modern CPOs know how badly a bottom line can be hurt by a risk event, and the huge potential of disruptive innovation to grow a business. And both of these factors reside in suppliers of every size, including those in the tip of the tail.

5 Key Trends Driving Supplier Management and Due Diligence

Can you afford to take the risk? We assess the key drivers behind increasing supplier management and due diligence activities in supply chains.

Supplier Due Diligence

This article was first published on Greenstone.

First, we would like to take the opportunity to thank the Procurious members who took part in this survey. Your input is very much appreciated.

In the current non-financial reporting landscape there is a heightened focus on understanding your supply chain. As a result, organisations are increasingly evaluating the performance of their suppliers against a wide spectrum of non-financial criteria and monitoring the associated risks.

In order to better understand what is driving this behaviour and how companies are identifying and mitigating supply chain risk, Greenstone conducted the ‘State of Supplier Management 2016 survey.

We asked 1000 senior decision makers from mid-to-large organisations about the perception of supply chain risk and due diligence at their organisation. We also asked about the drivers for collecting supplier information and key factors in shaping their supplier engagement programmes.

We have identified five key insights into the state of supplier management from this study. These are listed below and expanded on in this report.

  • Supplier due diligence processes are a growing requirement for most businesses.
  • The majority of businesses are collecting non-financial information from their suppliers at some level.
  • Regulation and reputational risk are the strongest drivers for collecting supplier information and help to shape supplier engagement programmes.
  • Procurement teams are much more likely to be responsible for the collection of supplier data than Sustainability teams.
  • There is a growing trend of companies adopting online solutions to gather and analyse supplier management data.
Supplier Due Diligence

As you might expect, given the increasing global focus on supply chains, more than three quarters of respondents see supply chain risk, and the resultant need for supplier management and due diligence processes, as a growing requirement in their business.

Supplier Management Survey - Fig 1

In line with this perception, 72 per cent of responding companies are already trying to address supply chain risk by collecting non-financial information from their suppliers.

Supplier Management Survey - Fig 2

Data Collection

The necessity to collect non-financial information from suppliers appears to have become accepted across multiple sectors. However, the level of detail, method, and frequency of data collection differs greatly.

It was found that 43 per cent of respondents only collect supplier information as part of a tender process, or in the initial stages of supplier contracting. Therefore, these organisations are not conducting ongoing supplier due diligence. They cannot be sure that suppliers remain compliant throughout the period in which they deliver services.

However, a similar number of organisations do keep track of ongoing supplier performance. 17 per cent are sending out questionnaires by email or post, and 22 per cent are using an online supplier management tool.

Where supplier information is being gathered, there are common topic areas of compliance focus. Environment, health and safety and commercial information (e.g. insurance certification etc.) are the top three areas covered in supplier questionnaires.

However, what the study also shows is that a wide range of information is being requested.  As a result, increasingly diverse areas of both the buyer and supplier organisations are required to engage in the process and have access to the data. 

Supplier Management Survey - Fig 3

Drivers for Supplier Engagement

The research demonstrated that non-financial supplier risk and compliance have become key topics for organisations but what is driving this shift in behaviour?

When asked which factors are driving the collection of supplier information, 43 per cent of all respondents point to regulation and legislation being the strongest motivating force, followed closely by reputational concerns (32 per cent).

Supplier Management Survey - Fig 4

When asked what factors were important in shaping the structure and focus of organisations’ supplier engagement programmes, risk reduction, corporate sustainability, reputational risk and regulation were all sighted as significant motivating forces.

Specific legislative and reporting framework drivers mentioned by respondents included: Bribery Act, the UK Modern Slavery Act, UN Global Compact and ILO Core labour Standards as the top four frameworks or guidelines used to inform their supply chain practices and reporting processes.

Responsibility for Supplier Risk and Compliance

While non-financial reporting has long been the responsibility of CSR or sustainability teams, the increasing momentum of supply chain reporting is engaging new areas of organisation.

This is partly due to the outward looking nature of this issue and the need to engage with multiple supplier organisations. It is also due to the breadth of topics covered by the requests for information.

The study shows 83 per cent of respondents stated that procurement is the area that manages the entire process, from contacting suppliers, through to analysis of the data.

This is most likely due to the fact that procurement ‘own’ the relationships with the suppliers, have a clear idea of contract status and the commercial scale of the contracts and can therefore identify which suppliers meet the buyers defined risk and compliance criteria.

The level of resource allocated to supplier programmes varied significantly with 40 per cent saying that managing this process was the part-time responsibility of a full time employee and 38 per cent saying that multiple individuals in the business have full time responsibility.

What this does show is that there are clearly defined responsibilities within organisations for identifying third party risk and dealing with non-compliance.

Moving Beyond Manual Processes

The complexity and scope of collecting, analysing and reporting supplier information often calls for solutions beyond the manual processes and repository functions of lifeless spreadsheets.

For those organisations that have not yet automated the process, 61 per cent say they are considering adopting an online solution to gather and analyse supplier information.

It is evident organisations recognise the need for automation in the process, as it is not feasible to manually evaluate hundreds or thousands of supplier responses, and monitor their ongoing compliance.

In addition, the increasing legislative and reporting requirements place an additional emphasis on transparency and audit capabilities.

For more on the ‘State of Supplier Management 2016‘, visit the Greenstone website.

Greenstone’s SupplierPortal solution enables buyers to effectively manage supplier risk and compliance through a secure and private online platform. Buyers have the flexibility to distribute standard framework questionnaires, as well as proprietary questionnaires, to their suppliers and can then manage and analyse this information through a comprehensive suite of analytical tools.

Big Ideas Summit 2016: Big Idea #5 – Eliminating Supplier Enablement

Gabe Perez believes that procurement needs to move towards real-time services, and eliminate traditional supplier enablement processes.

At the Big Ideas Summit 2016, we challenged our thought leaders to share their Big Ideas for the future of procurement.

From ideas that have the potential to change the very nature of the procurement profession, to ones that got the assembled minds thinking about the profession’s impact outside of the organisation, the response we received was amazing.

Gabe Perez, Vice President, Strategy & Market Development at Coupa Software, believes now is the time for procurement eliminate supplier enablement, and move towards the real-time services we have in our personal lives.

Gabe also believes that it’s now time for procurement, and the wider corporate world, to refocus their objectives to place value at the centre of all activities, as well as create and participate in open networks where collaboration can thrive.

Catch up with all the thought leadership and ours delegates’ Big Ideas from the 2016 Summit at the Procurious Learning Hub.

If you want to find out more about Big Ideas 2016, and what we have planned for 2017, you can visit our dedicated website!

If you like this (and you haven’t done so already) join Procurious for free today, and connect with over 15,500 like-minded procurement professionals from across the world.

Are Your Suppliers Treating You Like a Cash Cow?

Businesses are at risk of being treated like a cash cow by their suppliers if they are not managing their supplier agreements and contracts with complete visibility.

This article was written and has been shared with Procurious by Daniel Ball, Director at Wax Digital.

We’ve all done it. Stuck with the same old suppliers year after year, because they’re doing the job and, let’s face it, it’s far less hassle to stay put than to make a change. Whether it’s for banking, car or home insurance, or even utilities, as long as prices haven’t risen too significantly, and you’re getting what you pay for, why go to the effort of changing?

For the consumer, a failure to review supplier agreements means that, at worst, you’re potentially missing out on a more competitive deal (and a complimentary Meerkat). For a business it can have much more serious consequences.

A large organisation will typically have hundreds or even thousands of contracts in place. A lack of management of these contracts can have a huge impact on business performance, bottom-line and risk. So what can organisations do to make sure they’re not milked like the proverbial cash cow?

Lack of Clear Visibility

Auto-renewing ‘evergreen contracts’ are a problem we see frequently, and they cost organisations millions of pounds in wasted budgets or unintentional spend. With no system in place to effectively manage contracts, they can easily get ignored or forgotten about, and without realising it, you’re locked in for another 12 months.

Worst case scenario, a high value contract has auto-renewed just as you sign another with an alternative supplier offering a similar service, or decide that you no longer need this service at all. It’s easy to see how missed renewal dates, contract overlaps, timely supplier reviews or intended supplier terminations can be overlooked.

This can be an inconvenient truth for large organisations whether they have a procurement function or not, left grappling to manage the contracts they have in place without clear visibility of them.

Aside from wasting money, with no control over contract terms, how can you be sure that your contracts are delivering what was originally agreed with the supplier? If you’re not in the habit of reviewing or monitoring your supplier contracts, the service you are receiving may have gradually moved away or deteriorated from what was originally intended.

The supplier may have been providing alternative quality products (substitutes), changed services levels or personnel (in the case of professional services), or altered other factors from the original terms agreed. All of this could potentially reduce the value of the original agreement.

Factoring in Change

It’s also necessary to consider the changes that will undoubtedly have occurred in your business since your contracts were first put in place. Throughout the lifecycle of a contract, it’s highly likely that your business will have changed in some way, whether that’s changes to pricing, or other things which may affect the terms of the original contract, or your organisational needs.

For example, the sum you spend with a supplier may have quadrupled since the start of your contract, putting you in a far stronger buying position. This of course should mean you are in a better position to negotiate discounts or lower rates, but it is difficult to do this without having the facts at your fingertips.

The first step towards managing contracts effectively is to have a clear and in-depth understanding of them. This won’t happen if they’re stuffed in the top drawer of a filing cabinet, or indeed held by each department that owns the supplier relationship.

The last thing any department head wants is to be going into a new budgetary period with a legacy of unwanted supplier costs to justify and accommodate. It’s one thing to have to field tricky conversations with your CFO, but another entirely using up valuable budget on historical services that are no-longer essential to you.

Your suppliers’ contracts themselves hold the answers to many of the key things you need to know in order to effectively manage them. How often do you actually review your suppliers’ contracts? And how do you get the information you need to effectively monitor, manage and measure the value they are delivering to your business?

Avoid Being a Cash Cow

Contract control gives you sight of which contracts are up for renewal in the next few months. If you’re unhappy with that supplier then you have the time to put them on notice, or appraise their performance and renegotiate a better deal. Or if you wish to invite new suppliers to bid for the contract, you have time to factor in this work and consider your options.

Effective contract management is an essential part of the supplier management process. It is only made possible if they are held in a central repository so that they are accessible for all key stakeholders.

Such a repository enables all contracts to be reviewed periodically to determine if changes are needed or even if it should be renewed at all. The growing realisation for this process to be automated has led to the adoption of contract management systems.

These systems deliver a simple and secure way to store contracts which are easy to audit and provide automated alerts and reminders if an agreement is due to expire. A full contract management system within an integrated source to pay process can further streamline the process by automatically adding newly sourced suppliers’ contracts to the repository for future tracking.

So don’t risk becoming a cash cow to your suppliers because contracts were signed and filed away years ago. A structured and more formalised approach to contract management is the key to unlocking operational efficiencies, compliance and savings.