Future of Sourcing - Supplier Relationship Management (SRM) https://futureofsourcing.com/tags/supplier-relationship-management-srm en What Procurement Teams Can Learn from “The Wisdom of Crowds” https://futureofsourcing.com/what-procurement-teams-can-learn-from-the-wisdom-of-crowds <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/Wisdom-of-Crowds.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/Wisdom-of-Crowds.jpg" title="Helpful tips to leverage the collective wisdom your various business teams have accumulated over the years." class="colorbox" rel="gallery-node-2205-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Wisdom-of-Crowds.jpg?itok=LiNH21yU" width="624" height="325" alt="Helpful tips to leverage the collective wisdom your various business teams have accumulated over the years." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>People, by nature, love recommendations says Edmund Zagorin, CEO and Founder of <a href="https://arkestro.com/" target="_blank">Arkestro</a>. In this article, he explores how recommendations can be incorporated into the procurement process to help team members make better decisions and provides helpful tips to&nbsp;leverage the collective wisdom your various business teams have accumulated over the years.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/a-new-approach-to-contract-management">A New Approach to Contract Management</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Today&rsquo;s procurement systems are not as sophisticated as they should be, as they fail to incorporate basic tenets of human psychology.</p> <p>What do we mean by this?</p> <p>As of now, the primary means of surfacing suppliers in the course of a search selection remains very arbitrary &ndash; qualify the suppliers then pick the lowest price. This process does very little to ensure the quality of the supplier and does not reflect what other business teams&rsquo; experience with the supplier might have been.</p> <p>The simple fact is that when making supplier selections, team members care most about who in their organization made similar purchases in a similar context. But do you know who your organization&rsquo;s most trustworthy employees buy from? There&rsquo;s got to be a way to factor this into supplier rankings.</p> <h1>Why Not Just Ask?</h1> <p>Why don&rsquo;t you just ask your fellow employees who they prefer to buy from? Well, it&rsquo;s not that simple. Humans are highly prone to a phenomenon known as &ldquo;stated preferences.&rdquo; This means when you ask a colleague who is their preferred supplier or who they&rsquo;d choose, they are likely to give an answer that <em>they</em> think would be most acceptable to <em>you</em>.</p> <p>In many ways this is like voting. When you ask someone who they are voting for, people often respond with the answer they think would be most palatable to who is posing the question. In fact, the tendency for people to lie in answering polls is well documented.</p> <p>Stated preferences are often very different from &ldquo;revealed preferences,&rdquo; or who the person is <em>really </em>planning to vote for. Just as people make their true preferences known in the privacy of the voting booth, procurement professionals tend to make their true preferences known when they actually spend money &ndash; the ultimate truth serum.</p> <h2>Leveraging Collective Wisdom</h2> <p>If you&rsquo;re making the decision on who to buy from based on stated preferences, you&rsquo;re unfortunately basing these decisions on <em>unreliable data</em>. So how do we get <em>revealed preferences from across business teams in your organization</em> factored in? In other words, how do we leverage the collective wisdom and experience from across our organizations in order to amplify the impact of the entire organization&rsquo;s best purchasing decisions?</p> <p>We may want to start by taking a lesson from Google&rsquo;s playbook. While certain elements of Google&rsquo;s search algorithm remain a mystery, we do <a href="https://backlinko.com/google-ranking-factors#userinteraction" target="_blank">know</a> that pages that are visited more often than others as well as pages that achieve &ldquo;repeat visited&rdquo; status are elevated in search rankings.</p> <p>This is how Google taps into the &ldquo;Wisdom of Crowds,&rdquo; a concept we&rsquo;ll get to in a minute. Similarly, purchasing systems need to better elevate and surface those suppliers chosen more often by an organization&rsquo;s employees. This is a vital element that needs to be reflected in supplier rankings, as this approach extends the life of the best purchasing decisions across the organization.</p> <p>This approach can drive significant cost-savings from more advantageous contracts as business dealings are consolidated down to those suppliers who are truly preferred. And these cost-savings can increase exponentially when teams incorporate such tactics as predictive pricing &ndash; leveraging AI to guide them on a fair price for a particular product or service, to initiate negotiations &ndash; and when all manual back-and-forth processes are automated.</p> <p>In his best-selling book, &ldquo;<em>The Wisdom of Crowds,&rdquo;</em> James Surowiecki explores a deceptively simple idea: large groups of people are smarter than an elite few, no matter how brilliant, and better at solving problems, fostering innovation and coming to wise decisions. The collective judgment of a diverse group can compensate for the bias of a small group.</p> <p>Surowiecki draws on examples from popular culture, ant biology, military history, politics and more to demonstrate the validity of this idea. It turns out that &ldquo;consensus culture,&rdquo; as Larry Page called it, is not always a bad thing, and can actually be quite beneficial in procurement.</p> <p>In summary, the decision-making process in procurement is and should be a team sport. People tend to make the best decisions and feel most confident about those decisions when they receive recommendations from people they trust. Therefore, the supplier surfacing process must be based on the conditions that foster the best decision-making. And the process must be fast and automatic &ndash; because when decisions are made too slowly, good opportunities might pass you by.</p> <p>The bottom line is that unless you are incorporating revealed preferences into supplier rankings, you may be using unreliable data to guide your most critical purchasing decisions. As a result, you may be failing to leverage the collective wisdom your various business teams have accumulated over the years, and that&rsquo;s clearly a missed opportunity.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/contract-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Contract Management</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="What Procurement Teams Can Learn from &amp;ldquo;The Wisdom of Crowds&amp;rdquo; - Future of Sourcing" addthis:url="https://futureofsourcing.com/what-procurement-teams-can-learn-from-the-wisdom-of-crowds"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 14 Jul 2022 02:00:00 +0000 Edmund Zagorin 2205 at https://futureofsourcing.com https://futureofsourcing.com/what-procurement-teams-can-learn-from-the-wisdom-of-crowds#comments 10 Reasons to Use Purchase Orders https://futureofsourcing.com/10-reasons-to-use-purchase-orders <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/10-Reasons-to-Use-Purchase-Orders.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/10-Reasons-to-Use-Purchase-Orders.jpg" title="Learn 10 key reasons to use purchase orders, when other acquisition methods may also apply and get helpful tips for when the CFO asks &quot;why.&quot;" class="colorbox" rel="gallery-node-2203-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/10-Reasons-to-Use-Purchase-Orders.jpg?itok=7RGlZsYK" width="624" height="325" alt="Learn 10 key reasons to use purchase orders, when other acquisition methods may also apply and get helpful tips for when the CFO asks &quot;why.&quot;" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Procurement groups are often challenged by internal Line-of-Business (LOB) groups on requiring purchase orders says Mark Trowbridge CPSM, C.P.M., MCIPS, Principal with Strategic Procurement Solutions LLC. He outlines 10 key reasons to use purchase orders, discusses when other acquisition methods may also apply and provides helpful tips for when the CFO asks &quot;why&quot;.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/happening-now-5-important-procurement-trends">Happening Now: 5 Important Procurement Trends</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The CPO for a financial services company recently asked me for reasons to use purchase orders.&nbsp;Their procurement group was receiving pushback from the firm&#39;s Finance division, which was happy to issue payments merely based on internal management just &quot;approving&quot; supplier invoices (grrr).</p> <p>In my email to this executive, I put together a list of Top 10 Reasons&nbsp;to Use Purchase Orders which I&rsquo;ll explain in this article.</p> <h1>Top 10 Reasons&nbsp;to Use Purchase Orders</h1> <p><strong>Reason One</strong>&nbsp;- Online approval prior to PO issuance ensures the expenditure is budgeted and authorized&nbsp;<em>before</em>&nbsp;a commitment is made to a supplier. With invoice-only payment processing, an organization is already liable for the expenditure even though it was never approved by management.&nbsp;</p> <p>Today&rsquo;s e-enabled PO routing and approval process ensures that only authorized company representatives can commit to supplier expenditures. This focuses supplier relationships through the procurement organization.</p> <p><strong>Reason Two</strong>&nbsp;&ndash; If a PO is a requirement before a supplier can be paid, they won&#39;t start work for a business without it. Word travels fast in the supplier community, and can be aided by an email to each supplier reminding them that a purchase order number is required on all invoices.</p> <p>This will keep control in the procurement organization and prevent suppliers from shipping products or beginning work without prior purchase order approval being in place.</p> <p><strong>Reason Three</strong>&nbsp;&ndash; Use of purchase orders greatly-improves capture of payment term discounts (i.e., &ldquo;2% 10 &ndash; Net 30 Days&rdquo;) negotiated by the procurement team.&nbsp; Contrarily, invoice-only transactions often default to the supplier&rsquo;s invoice payment terms which rarely offer cash discounts. 11% to 12% of a typical company&rsquo;s suppliers will agree to discounted terms in payment &ndash; if they are strategically asked.&nbsp;</p> <p><strong>Reason Four</strong>&nbsp;&ndash; It has been documented in many studies that material errors&nbsp;exist more than 1.5% of invoice line items billed by suppliers.&nbsp;Most of the time the error is to the benefit of the supplier (hmmm, what a coincidence...). &nbsp;Having PO/invoice matching catches a majority of the errors and does not allow them to be passed through without review. &nbsp;</p> <p>When our firm performed a review for this same financial services firm, their Accounts Payable organization was processing around 55,000 invoices a year valued around $200 million USD.&nbsp;If we assume the average invoice contains two line items, that&#39;s 110,000 invoice line items being paid each year, indicating that there are about 1,600 (1.5%) line items having material errors. Dividing annual spending by 110,000 line items results in an average line item value of $1,818/line item, thus indicating $3.0 million of questionable charges that purchase orders would properly flag for investigation.&nbsp;&nbsp;</p> <p>It should also be noted here that even with purchase orders being used, a typical AP recovery audit still recaptures around 1.0% of errors in the payment stream. Interestingly, the &ldquo;disruptor&rdquo; provider in this space averages 50% higher recovery than their peers through some innovative techniques and especially for clients that link purchase orders to most invoice payments (you can <a href="mailto:MTrowbridge@StrategicProcurementSolutions.com?subject=Future%20of%20Sourcing%20Article">contact me</a> for the name of disruptor).</p> <p><strong>Reason Five</strong>&nbsp;&ndash; Use of a purchase order streamlines payment processing, since the processor doesn&#39;t have to enter line item details. They should pull up the purchase order and its line item description and insert the billed quantity. The other information fills automatically into the invoice record with much greater detail than allowing different AP clerks&#39; subjective one word summary entry of the transaction.</p> <p>For example, &quot;Metal&quot; rather than &quot;4&#39; x 8&#39; Sheet of 6061-T6 Aluminum.&quot;&nbsp; For non-catalog ordering, use of POs greatly improves spend analysis data quality.</p> <p><strong>Reason Six</strong>&nbsp;&ndash; Use of a purchase order ensures the charge goes to the GL account, charge unit and project number the PO was budgeted to.&nbsp;&quot;Creative&quot; budget owners can&#39;t shift the expense to a different GL account.</p> <p><strong>Reason Seven</strong>&nbsp;- A purchase order should contain legal terms that mitigate risk in transactions. Even if it does not occur under a contract, the supplier&#39;s terms don&#39;t prevail.&nbsp;In an invoice-only transaction, the supplier&#39;s proposal/quotation legal terms could control the transaction, thus exposing the buying organization to greater risk on issues like title transfer, risk of loss during shipment, payment terms, freight costs, warranty, third-party patent infringement, ownership of work product, limitation of restocking fees, etc.&nbsp;&nbsp;</p> <p><strong>Reason Eight</strong>&nbsp;&ndash; A purchase order causes an organization to clearly articulate what they wish to buy from a supplier. If the supplier questions a description, they will usually do that before shipment/performance. But without a PO, the supplier is open to interpret a telephone or email order incorrectly, resulting in a miss-shipment. &nbsp;That results in the business unit having to facilitate a return to the supplier, and procurement will usually end up having to clean up the mess. Returns are much easier when a purchase order has been utilized.</p> <p><strong>Reason Nine</strong>&nbsp;&ndash; A purchase order allows procurement to have visibility to backorders or partial shipments, thus facilitating follow ups and expediting. Without a PO, no one knows what hasn&#39;t been shipped, just what has been invoiced.&nbsp;</p> <p><strong>Reason Ten</strong>&nbsp;&ndash; When three-way matching is empowered, a purchase order facilitates&nbsp;formal &ldquo;receiving&rdquo; to validate received shipments. Without a purchase order, you have no formal receiving process except for AP to send an invoice to the business unit asking them for approval. &nbsp;The business unit often will not dispute slightly different quantities in an invoice and procurement never is notified payment has been approved for something that wasn&#39;t actually received.</p> <h2>The Bottom Line</h2> <p>Consistent use of purchase orders will optimize the entire Procure-to-Payment process. Even contracted expenditures will be better-managed through purchase orders by ensuring spending can be properly allocated to correct contracts, SOWs and projects.&nbsp;</p> <p>Of course, not every expenditure needs to be under a purchase order.&nbsp;Use of other techniques like pCards or Evaluated Receipt Settlement (ERS) can&nbsp;be similarly valuable when used optimally.&nbsp;But purchase orders are the preferred&nbsp;tool for the majority of procurement transactions; especially when automated though a Procure-to-Pay (P2P) technology solution.</p> <p>Even more exciting today, purchase orders used with rebate-generating Virtual Card (vCard) payment processes are more secure than ACH or checks (and eliminate the need for the buying organization to possess a supplier&rsquo;s private banking information).&nbsp; The &ldquo;disruptor&rdquo; in vCard payments is neither a bank or retail card issuer; yet processes more vCard transactions annually than the Top four U.S. banks combined.</p> <p>Failure to strategically use purchase orders can allow suppliers and internal departments to bypass procurement and thus executive management.&nbsp;</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/procure-to-pay-p2p-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procure-To-Pay (P2P)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/digital-transformation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Digital Transformation</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="10 Reasons to Use Purchase Orders - Future of Sourcing" addthis:url="https://futureofsourcing.com/10-reasons-to-use-purchase-orders"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 10 Jul 2022 17:00:00 +0000 Mark Trowbridge 2203 at https://futureofsourcing.com https://futureofsourcing.com/10-reasons-to-use-purchase-orders#comments Four Resolutions for Supply Chain ESG Management https://futureofsourcing.com/four-resolutions-for-supply-chain-esg-management <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/Four%20Resolutions%20for%20Supply-Chain%20ESG%20Management.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/Four%20Resolutions%20for%20Supply-Chain%20ESG%20Management.jpg" title="In order to improve ESG performance, organizations must be more open about reporting ESG risks." class="colorbox" rel="gallery-node-2166-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Four%20Resolutions%20for%20Supply-Chain%20ESG%20Management.jpg?itok=UbcyD2kM" width="624" height="325" alt="In order to improve ESG performance, organizations must be more open about reporting ESG risks." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p>In order to improve ESG performance, organizations must be more open about reporting ESG risks, disclose ESG metrics in line with industry peers, find a way to track hard-to-find metrics like supplier diversity, and tap technology to improve ESG governance and risk management says Riskonnect CEO&nbsp;Jim Wetekamp. He shares four&nbsp;ESG supply chain considerations for every risk and sourcing leader who wants to proactively improve ESG performance.</p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/three-tips-for-dealing-with-pandemic-driven-risk">Three Tips for Dealing with Pandemic-Driven Risk</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The pressure is on to strengthen environmental, social and governance (ESG) performance. ESG factors influence a multitude of critical decisions &ndash; from where <a href="https://www2.deloitte.com/global/en/insights/topics/strategy/trust-in-corporate-climate-change-commitments.html" target="_blank">people invest</a> to where they work. Indeed, 42% of consumers say they will only buy from <a href="https://www.ey.com/en_us/consumer-products-retail/us-future-consumer-index-7-how-to-satisfy-the-sustainable-consumer" target="_blank">brands that align with their values</a>. &nbsp;</p> <p>Maybe you have taken steps to integrate ESG into operations, but what&rsquo;s next? Given that two-thirds of the average company&rsquo;s ESG footprint <a href="https://www.mckinsey.com/business-functions/operations/our-insights/buying-into-a-more-sustainable-value-chain" target="_blank">lies with its suppliers</a> and nearly 90% of greenhouse-gas emissions <a href="https://www.mckinsey.com/business-functions/operations/our-insights/the-ceo-architect-of-the-new-operations-agenda" target="_blank">come from a company&rsquo;s supply chain</a>, the answer is simple: your third parties. Even small, incremental improvements on environmental and social factors within the supply chain can significantly improve your overall ESG performance.</p> <p>Here are four ESG supply chain considerations for every risk and sourcing leader who wants to proactively improve ESG performance.</p> <h1>1. Be More Open About Reporting ESG Risks</h1> <p>Everyone is <a href="https://www2.deloitte.com/global/en/insights/topics/strategy/trust-in-corporate-climate-change-commitments.html" target="_blank">leery of &ldquo;greenwashing</a>.&rdquo; Customers and stakeholders want to know that the companies they work for and do business with are being authentic in their commitments &ndash; and transparency is critical to delivering on expectations. &nbsp;</p> <p>While most ESG reporting today is voluntary, regulations are imminent. But don&rsquo;t wait for specific requirements to shake out. Be proactive and start reporting on the ESG metrics most important to your organization. Embracing transparency sends a signal to your stakeholders that you place a priority on being a good corporate citizen, have a plan to address any issues and are dedicated to improvement. Starting early will also give you a competitive edge once regulations inevitably roll out.</p> <h2>2. Disclose ESG Metrics in Line With Industry Peers</h2> <p>ESG performance is a major force in the investment world &ndash; specifically the access to and cost of capital. Today&rsquo;s investors are demanding credible ESG data to evaluate their options. Consider providing metrics similar to what your peers are reporting to help investors compare performance and make informed investment decisions.</p> <h2>3. Find a Way to Track Hard-to-Find Metrics Like Supplier Diversity</h2> <p>Diversity, equity and inclusion (DE&amp;I) is a key part of the social element of ESG. While corporate America has increased its awareness of workforce diversity, comparable data from global suppliers can be hard to come by.</p> <p>Differing local reporting requirements and definitions of what constitutes &ldquo;diversity&rdquo; may mean the data you need is simply not there. In that case, you will have to work with your suppliers to begin collecting the type of DE&amp;I data that you need in the form you require.</p> <h2>4. Tap Technology to Improve ESG Governance and Risk Management</h2> <p>Organizations serious about improving supply chain ESG will invest in technology to streamline and standardize the complex process of ESG data collection and analysis. The data you need could be scattered across myriad departments and locations. Gathering that data, staying on top of requirements, keeping track of policies and ensuring your supply chain partners are adhering to your standards is virtually impossible with decentralized systems like spreadsheets.</p> <p>Integrated software is instrumental in bringing ESG risk insights from across the extended enterprise into one place. The right platform can automatically pull relevant data you already collect from wherever it currently resides inside or outside your organization. Any missing information can be seamlessly added via supplier portals, third-party data feeds and more.</p> <p>Having real-time information in one place enables you to understand the full scope of your exposure and proactively manage ESG metrics in a way that will positively impact your operations, brand and stakeholders.</p> <h2>Start Early and Invest Big</h2> <p>The focus and scrutiny on ESG reporting will only intensify. As ESG becomes more ingrained in internal operations, executives will increasingly expand their focus to include supply chain partners. Start now to define the ESG metrics most meaningful to your organization and your industry. You will be ready for any future regulatory requirements &ndash; and will be well on your way toward earning the trust of your stakeholders.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/riskonnect" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Riskonnect</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/environmental-and-social-governance-esg-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Environmental and social governance (ESG)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-diversity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Diversity</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Four Resolutions for Supply Chain ESG Management - Future of Sourcing" addthis:url="https://futureofsourcing.com/four-resolutions-for-supply-chain-esg-management"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 29 Jun 2022 02:00:00 +0000 Jim Wetekamp 2166 at https://futureofsourcing.com https://futureofsourcing.com/four-resolutions-for-supply-chain-esg-management#comments 5 Key Factors for Adopting Best-of-Breed Technologies https://futureofsourcing.com/5-key-factors-for-adopting-best-of-breed-technologies <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/5%20Key%20Factors%20for%20Adopting%20Best-of-Breed%20Technologies.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/5%20Key%20Factors%20for%20Adopting%20Best-of-Breed%20Technologies.jpg" title="Learn five factors for supply chain and procurement professionals to consider when adding new best-of-breed solutions." class="colorbox" rel="gallery-node-2192-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/5%20Key%20Factors%20for%20Adopting%20Best-of-Breed%20Technologies.jpg?itok=RK3OqqTe" width="624" height="325" alt="Learn five factors for supply chain and procurement professionals to consider when adding new best-of-breed solutions." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p>As digital transformation accelerates, Costas Xyloyiannis, CEO of HICX, shares five factors for supply chain and procurement professionals to consider when adding new best-of-breed solutions.</p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/managing-supplier-risk-and-value-making-the-most-of-supplier-information">Managing Supplier Risk and Value: Making the Most of Supplier Information</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Extensive disruption at the beginning of the decade put resilience at the top of the agenda for most organizations. Now the focus is on how digital procurement solutions can be used to boost agility.</p> <p>But as <a href="https://futureofsourcing.com/leading-procurements-digital-transformation-three-steps-to-success" target="_blank">digital transformation accelerates</a> and procurement teams look beyond their established P2P or S2P suites to address particular pain points, this should not be done in a haphazard way. To be successful, organizations need an agreed plan to identify, select and implement new software.</p> <p>So, when it comes to adopting best-of-breed technologies, what should the procurement community consider? Here are five key factors:</p> <h1>1. Stop Comparing Best-of-Breed Versus Single Suite</h1> <p>One of the greatest advantages of developing a best-of-breed stack is that organizations can benefit from vendor expertise in a given area. With best-of-breed you are accessing specialized knowledge. This means that specific issues can be addressed more rapidly and with greater success, which also translates into better user experience and adoption.</p> <p>The large P2P suites, on the other hand, can feel disconnected from the day-to-day reality of users because they&rsquo;re often restricted to a core set of use cases that apply to the broadest range of companies.</p> <p>Of course, compared to an individual best-of-breed vendor, the suites clearly have considerably more capacity to invest and innovate. However, when taking the best-of-breed ecosystem as a whole, the combination of expertise, agility and resource makes this option very compelling for a large number of use cases.</p> <p>This is not to suggest that suites no longer have their place; they address core procurement functionality for many organizations exceptionally well and indeed are &ldquo;best-of-breed&rdquo; for several scenarios in their own right. It&rsquo;s not a question, therefore, of one or the other, but rather how to identify and select the best solution today, while maintaining flexibility to adapt to tomorrow&rsquo;s challenges.</p> <h2>2. Know the Benefits of an Environment That Enables Specialist Solutions</h2> <p>A best-of-breed enabled environment means that organizations can plug-and-play different solutions into large suites or other platforms that are provided by experts in their respective fields. They can empower users to self-serve even complex changes to forms, to adapt workflows or manage integrations, while providing an accelerated time-to-value and a superior experience for suppliers.</p> <p>The best-of-breed approach yields many other advantages. For instance, it enables focused investment in solutions that address particular requirements. The approach also offers depth and scale of knowledge. Because each best-of-breed provider tends to solve a relatively narrow set of business challenges, they have significant in-depth experience in their area.</p> <p>The approach also supports agility, because it&rsquo;s far easier to make changes to the overall technology landscape if an enterprise is not locked into one specific vendor. Incidentally, the combination of these advantages results in new solutions being brought to market more rapidly, which enables access to innovation.</p> <h2>3. Make Planning a Priority</h2> <p>The <a href="https://member.procurementleaders.com/wp-content/uploads/2021/10/PL-CPO-Compass-2022_03_Operational-Revolution_web.pdf" target="_blank">Procurement Technology Landscape 2021</a> report reveals that 59% of procurement functions are targeting a best-of-breed approach to technology this year. But while best-of-breed adoption is accelerating, experts warn that randomly buying multiple software is not a strategy. Be mindful not to get carried away with new solutions that address specific pain points in an elegant and user-friendly way.</p> <p>There&rsquo;s a tendency when implementing a suite to adopt the standard workflow and practices that the suite best supports. This can be fine if it meets your requirements. However, while a best-of-breed strategy requires more upfront planning in order to decide how to assemble the various components to work together, this additional prep results in a much richer and deeper solution that more closely meet individual business goals.</p> <p>Organizations that incorporate best-of-breed into the environment in a planned manner can realize the full benefits of the approach. To be efficient and profitable in the long run, it&#39;s important to be explicit about what the organization requires and select software accordingly, in a deliberate manner.</p> <h2>4. Put Data at the Heart of Your Strategy</h2> <p>Having a plan in place also helps to prevent data silos from occurring, which need to be avoided. Underpinning any procurement process is robust data that&rsquo;s accessible across different services and platforms. With this in mind, it&rsquo;s key to have the right centralized platform configuration to enable a best-of-breed landscape.</p> <p>The route to achieving good quality data is a single entry point for information. It is much simpler to funnel data through one entry point down into different systems rather than creating multiple different systems and then struggling to bring it all together. This helps to provide a single source of truth for supplier data, which makes procurement operations significantly easier and more efficient.</p> <p>The result is visibility which otherwise wouldn&rsquo;t be possible and a foundation from which digital initiatives or automation can be run. To further avoid creating silos, ideally data should also be consolidated, integrated and governed across systems.</p> <h2>5. Futureproof Your Approach</h2> <p>Something else to account for in a best-of-breed landscape is adaptability. With the best will in the world, no business can predict what their data needs will be in 10 years&rsquo; time. The environment should remain as useful in a decade as it is on day one. Therefore, it&rsquo;s worthwhile building a supplier data model that can evolve as new systems and use cases are introduced over time.</p> <p>It&#39;s also good to consider user experience in the landscape design &ndash; both from the perspective of internal teams and in particular the supplier. For example, avoid having multiple systems each with their own accounts and credentials to support a more positive supplier experience.</p> <p>Encouragingly, large mature organizations with <a href="https://futureofsourcing.com/procurements-increasing-csr-role" target="_blank">complex requirements across Source-to-Pay</a> have initially been driving the trend towards best-of-breed alternatives. As procurement moves forward, the potential for digitization is significant. With good planning, best-of-breed provides organizations with the best mechanism to support digital transformation and future-proof themselves.</p> <p>As organizations work to build supply chain resilience through best-of-breed, the procurement community should consider the value of big suites, specialist solutions, strategic planning and centralized data management &ndash; while adopting a forward-looking mindset.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/procure-to-pay-p2p-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procure-To-Pay (P2P)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/digital-transformation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Digital Transformation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/s2p" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">s2p</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="5 Key Factors for Adopting Best-of-Breed Technologies - Future of Sourcing" addthis:url="https://futureofsourcing.com/5-key-factors-for-adopting-best-of-breed-technologies"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Fri, 24 Jun 2022 02:00:00 +0000 Costas Xyloyiannis 2192 at https://futureofsourcing.com https://futureofsourcing.com/5-key-factors-for-adopting-best-of-breed-technologies#comments Manage Suppliers With AI-Powered Negotiations https://futureofsourcing.com/manage-suppliers-with-ai-powered-negotiations <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/AI-Powered-Negotiations.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/AI-Powered-Negotiations.jpg" title="Learn how a new category of enterprise technology known as autonomous negotiations can be used to automate negotiations and mitigate supply chain, inflation and COVID-19 pressures." class="colorbox" rel="gallery-node-2156-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/AI-Powered-Negotiations.jpg?itok=o2sQbdMM" width="624" height="325" alt="Learn how a new category of enterprise technology known as autonomous negotiations can be used to automate negotiations and mitigate supply chain, inflation and COVID-19 pressures." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Bad contracts, inefficient supplier relationship management and poor negotiation strategies are costing companies millions of dollars, says Martin Rand, Co-Founder of Pactum. He shares how a new category of enterprise technology known as autonomous negotiations can be used to automate negotiations and mitigate supply chain and inflation pressures.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/tracking-the-evolution-of-procurement-and-where-its-going-next">Tracking the Evolution of Procurement and Where It’s Going Next</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Continued pressures from supply chain disruptions, COVID-19 outbreaks and rising inflation are forcing business leaders to re-think their operations to cut costs. Business negotiations are an untapped source of value that can help Fortune 500 companies optimize their business processes while driving bottom-line value.</p> <h1>Why Current Negotiating Strategies Are Lacking</h1> <p>Recent data from KPMG shows that <a href="https://home.kpmg/au/en/home/insights/2017/03/supply-chain-capacity-management.html" target="_blank">17% to 40% of the value</a> of supplier deals is lost due to inefficient contract negotiations.</p> <p>Autonomous negotiation is an entirely new category of enterprise technology that enables Fortune 500 businesses and their suppliers to reach optimal, mutually beneficial deals at scale by leveraging AI and negotiation science. Humans have been the primary negotiators throughout history, but in fact, humans create inefficient outcomes when they negotiate. 80% of companies rely on the varying skills and biases of their managers rather than using a formal negotiation process.</p> <p>On average, enterprises have millions of dollars locked in inefficient agreements and unlocking such value is difficult. Global enterprises have thousands of suppliers and they can only actively manage 20% of them (their strategic suppliers). The other <a href="https://sig.org/managing-%E2%80%9Clong-tail%E2%80%9D-how-focusing-tail-spend-management-can-directly-impact-firm%E2%80%99s-bottom-line" target="_blank">80% are left unmanaged</a> because it would require too much manpower and be too complex to negotiate these thousands of contracts.</p> <h2>The Benefits of AI-Powered Negotiations</h2> <p>Autonomous negotiation technology provides global enterprises the ability to understand the needs of their suppliers and make offers, receive counteroffers and ultimately reach better agreements without human interaction. It also has several practical use cases for procurement teams:</p> <ul> <li>Negotiating better rates and payment terms to lower costs</li> <li>Securing shipping and freight capacity in the spot bidding market, decreasing the time for cargo to reach their end destination</li> <li>Negotiating and contracting thousands of deals in parallel to ensure supply continuity and strengthen supplier commitments</li> </ul> <p>AI has revolutionized enterprise negotiations. When combined with autonomous negotiation technology, hundreds of thousands of possible agreements can be evaluated &ndash; including every possible assumption about each party based on a combination of previous answers, external information, and learnings of earlier negotiations &ndash; to result in an agreement that benefits both parties. It is impossible for humans to comprehend this level of data, never mind having enough time to process it.</p> <p>AI automation does not replace people in the negotiation equation but rather augments the procurement team&#39;s capabilities. Autonomous negotiation technology empowers procurement leaders to focus on critical, strategic initiatives that drive their business forward instead of spending time on repetitive, low-value tasks and processes.</p> <p>Top companies worldwide, spanning industrial manufacturing, financial services, retail, consumer packaged goods, automotive and other industries utilize autonomous negotiations to unlock millions of dollars in new business value. The average Fortune 500 company has <a href="https://fortune.com/2021/04/27/a-i-startup-pactum-negotiating-software-saving-walmart-money/" target="_blank">$240 million locked in inefficient deals</a> that people can&rsquo;t renegotiate. As a baseline, autonomous negotiations can create from $2M to $11M of new value per $100 million of tail spend.</p> <p>Autonomous negotiations have revealed a new stage of development where business processes are not only conducted but also directed by a machine. Take smart cars for example. The term most often used is &ldquo;autonomous vehicle&rdquo; not &ldquo;automated vehicle.&rdquo; While every car is automated, an autonomous car can make the necessary decisions that get it to its destination.</p> <h2>The Future of Negotiations</h2> <p>As the global economy continues to be disrupted by COVID-19, inflation and the supply chain, autonomous negotiations are making enterprises nimbler. They can react quickly to market changes and employees are allowed to focus on strategy while the machines focus on implementation. People are worried that AI would take jobs in the future, but the reality is much more positive &ndash; AI helps humans do their jobs more efficiently, especially when it comes to negotiations.</p> <p>This is just the beginning of the journey. The technology can be deployed in other areas in the future, such as employment contracts, licensing or rental agreements. It also yields the potential to help people reach agreements on major challenges, especially where global cooperation is required.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/artificial-intelligence-ai" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Artificial Intelligence (AI)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/contract-negotiation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Contract Negotiation</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/pactum" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Pactum</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Manage Suppliers With AI-Powered Negotiations - Future of Sourcing" addthis:url="https://futureofsourcing.com/manage-suppliers-with-ai-powered-negotiations"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 19 Jun 2022 17:00:00 +0000 Martin Rand 2156 at https://futureofsourcing.com https://futureofsourcing.com/manage-suppliers-with-ai-powered-negotiations#comments How to Jump Off the Inflation Bandwagon https://futureofsourcing.com/how-to-jump-off-the-inflation-bandwagon <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/How-to-Jump-Off-the-Inflation-Bandwagon.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/How-to-Jump-Off-the-Inflation-Bandwagon.jpg" title="Inflation continues to be a thorn for procurement teams who want to maintain a strong bottom line without sacrificing quality." class="colorbox" rel="gallery-node-2188-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/How-to-Jump-Off-the-Inflation-Bandwagon.jpg?itok=bziaERvb" width="624" height="325" alt="Inflation continues to be a thorn for procurement teams who want to maintain a strong bottom line without sacrificing quality." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Inflation continues to be a thorn for procurement teams who want to maintain a strong bottom line without sacrificing quality says TealBook CEO Stephany Lapierre. She analyzes what&#39;s causing the latest inflation increases and shares three ways to combat it.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/battling-inflation-strategies-for-cost-containment">Battling Inflation: Strategies for Cost Containment</a></div><div class="field-item odd"><a href="/strategic-sourcing-in-a-hyperinflationary-environment">Strategic Sourcing in a Hyperinflationary Environment</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>It&rsquo;s a word that everyone from high-ranking executives to the average grocery-store shopper dreads hearing: inflation. As the world continues to experience <a href="https://www.tealbook.com/resource/how-will-you-weather-the-next-storm-building-a-stronger-supply-chain/">supply chain disruptions</a> caused by a number of factors&mdash;the ongoing COVID-19 pandemic, political crises, changes in production patterns and more&mdash;we&rsquo;re seeing prices for goods and materials climb faster and higher.&nbsp;</p> <p>According to the <a href="https://www.worldbank.org/en/news/press-release/2022/04/26/food-and-energy-price-shocks-from-ukraine-war">World Bank</a>, many commodities are currently priced well above the past five-year average. The increase in oil prices over the last two years haven&rsquo;t been this high since the 1973 oil crisis, and the increases in the price of food commodities are the highest they&rsquo;ve been since 2008. Unfortunately, the same report indicates that we won&rsquo;t see prices drop in many areas until 2023 or 2024.</p> <p>While this is creating stress across various kinds of businesses, it is particularly troubling for procurement teams who have worked for decades to achieve higher cost savings. They are now faced with one of two options: maintaining profits using materials from current suppliers and increasing costs to consumers; or maintaining current consumer prices and spending more to produce the same products.</p> <p>As CPOs work to battle the challenges of inflation, there is a path that offers a solution to problems across the board, giving organizations the opportunity to achieve lower costs, produce the same quality products or services, and avoid heavily raising costs on consumers. By focusing on supply chain resiliency, supplier diversity, pricing negotiation and innovation, you can combat the challenges of inflation and maintain a strong bottom line without sacrificing quality.</p> <h1>What is Causing the Latest Inflation Increases?</h1> <p>While the world is no stranger to inflation and the effects it has on the economy and consumers alike, this latest increase and the speed at which costs are rising requires a strong understanding of how we arrived at this point.</p> <p>According to the <a href="https://www.uschamber.com/economy/econ-101-inflation-is-caused-by-supply-and-demand" target="_blank">United States Chambers of Commerce</a>, we saw such a drastic increase in inflation for several reasons:</p> <ol> <li><strong>Supply and Demand</strong>: In the last two years, spending on goods has increased by 30% while the spending on services has only increased by 5%.</li> <li><strong>Supply Chain Problems</strong>: Many organizations and supply chains have not fully recovered from the constraints the global pandemic placed on their supply chains, pushing production costs higher.</li> <li><strong>Worker Shortages</strong>: With more workers demanding higher and fair wages, companies are experiencing higher operating costs.</li> </ol> <p>International factors have also placed further strain on supply chains. Commodity costs have risen in the energy and food sectors, as a large portion of these are produced in Russia and Ukraine, and the continued war has led many organizations to divest from these countries and seek goods elsewhere.</p> <p>Additionally, stringent COVID policies globally have caused a number of issues in supply that have fueled the rise in inflation, as cited by a number of procurement professionals in a recent <a href="https://fortune.com/2022/04/22/china-covid-lockdown-shanghai-supply-chain-crisis-ports-disruption/" target="_blank">Fortune article</a>. Shipping costs have sharply risen, there has been a reduction in the production of vital raw materials and with China <a href="https://fortune.com/2022/04/23/china-lockdowns-inflation-supply-chain-nightmare-shanghai/" target="_blank">accounting for 18% of all U.S. imports</a> &ndash; 35% if we focus specifically on computers and electronics &ndash; there is great concern over the impact this will have on supply chains.&nbsp;</p> <p>With all these factors affecting inflation costs, how will focusing on supplier diversity and supply chain resiliency help to combat the current state of affairs?</p> <h2>Strengthening Your Supply Chain to Combat Inflation</h2> <p>While there is no &ldquo;quick fix&rdquo; to handle inflation, there are steps you can take to make sure your supply chain is ready to handle any impact it may have on your day-to-day and long-term operations. ​​By building resiliency through diversifying your supply chain and working with new, potentially smaller or underserved suppliers, you can leverage the benefits of a more diverse supply base.</p> <h3>Ensure Your Supplier Records are Accurate</h3> <p>To ensure resiliency within your supply chain, every decision needs to be made using strong, dynamic supplier data. Knowing the accurate price, location and diversity factors (among other things) of your current suppliers ensures that your organization can accurately track production, shipping, and distribution processes and pivot to account for inflation-induced challenges when necessary. What&rsquo;s more, having this supplier data intelligence allows you to build a stronger contingency plan and maintain resiliency to avoid costly mistakes.</p> <h3>Create Competition and Allow for Price Negotiations</h3> <p>There are a number of factors that procurement teams take into consideration when choosing a supplier, such as a supplier&rsquo;s cost, product quality, price, etc. By diversifying your supply chain and going past the initial pool of suppliers you typically work with, you can introduce competition into your sourcing event, giving your team the chance to better analyze these factors and decide what exactly is in your best interest to focus on.</p> <p>It also gives existing and potential suppliers a greater incentive to better negotiate pricing and do what they can to earn your business, driving down costs on the buyer side. Additionally, by adding competition, you can better negotiate long-term spend forecasts and pursue non-pricing levers to keep costs lower for customers, which <a href="https://www.mckinsey.com/business-functions/operations/our-insights/responding-to-inflation-and-volatility-time-for-procurement-to-lead" target="_blank">McKinsey</a> cites should be a high priority for tackling inflation.</p> <h3>Drive Innovation and Reduce Operating Costs</h3> <p><a href="https://www.jaggaer.com/blog/5-advantages-of-having-a-diverse-supplier-base/" target="_blank">Research</a> conducted by The Hackett Group revealed that procurement organizations that work with a diverse supplier base also had lower overall operating costs and spent 20% less on their buying operations</p> <p>While procurement teams constantly strive to lower general operating costs, this goal has become even more important as inflation continues to affect supply chains and organizational operations. By leveraging supplier diversity, you can achieve higher cost savings at the operational level. Building a wider supplier base also allows for new ideas to be implemented into procurement processes so teams can leverage innovation to reduce costs and find workable solutions to inflation-related problems.</p> <p>For example, consider moving away from a larger, off-shore supplier who traditionally has supplied your firm with a certain product and onboarding a diverse supplier closer to home. You may be able to reduce shipping costs and get the product faster, reducing the risk of it getting stuck in a port and costing your company even more time and money, and find you&rsquo;re greatly improving your bottom line.</p> <h2>Jump Off the Inflation Bandwagon</h2> <p>Inflation has impacted and will continue to impact procurement teams across the globe for years to come. By expanding your supplier base and <a href="https://www.tealbook.com/blog/global-supplier-diversity-revenue-influencer/" target="_blank">leveraging the benefits of supplier diversity</a>, organizations can combat additional challenges caused by inflation while still hitting goals and working to keep costs low both internally and externally.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Inflation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/teal-book" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Teal Book</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="How to Jump Off the Inflation Bandwagon - Future of Sourcing" addthis:url="https://futureofsourcing.com/how-to-jump-off-the-inflation-bandwagon"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 12 Jun 2022 17:00:00 +0000 Stephany Lapierre 2188 at https://futureofsourcing.com https://futureofsourcing.com/how-to-jump-off-the-inflation-bandwagon#comments As the Threat of Lost Business Erodes, Supplier Hostility is Emboldened https://futureofsourcing.com/as-the-threat-of-lost-business-erodes-supplier-hostility-is-emboldened <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/The-Threat-of-Lost-Business.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/The-Threat-of-Lost-Business.jpg" title="Fortune 1000-sized firms feel they have no choice but to retain incumbent suppliers under less than favorable terms." class="colorbox" rel="gallery-node-2187-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/The-Threat-of-Lost-Business.jpg?itok=e-0oQr8D" width="624" height="325" alt="Fortune 1000-sized firms feel they have no choice but to retain incumbent suppliers under less than favorable terms." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Businesses, especially Fortune 1000-sized firms, feel they have no choice but to retain incumbent suppliers under less than favorable terms says <a href="https://www.finetuneus.com/" target="_blank">Fine Tune</a> CEO Rich Ham. With this power imbalance dramatically favoring sellers over buyers, he discusses how industry consolidation, anti-competitive supplier behavior and a lack of customer resources to fight back have come to exacerbate the &ldquo;threat of lost business&rdquo; dilemma.</em></p> <p><em>This article is part of the ongoing series examining &ldquo;</em><a href="https://www.finetuneus.com/insights/the-emergence-of-hostile-supplier-behaviors-what-to-do-about-it/" target="_blank">The Emergence of Hostile Supplier Behaviors &amp; What to Do About It</a>.&rdquo;</p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/how-to-fix-procurements-fake-savings-problem">How to Fix Procurement’s Fake Savings Problem</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The threat of lost business.</p> <p>Without it, even the largest customer lacks any real power in the marketplace. When a supplier doesn&rsquo;t feel any plausible threat of lost business, it can adopt&mdash;figuratively, of course&mdash;the sales tactics employed by Vito Corleone in <em>The Godfather</em>, as relayed by Michael to Kay:</p> <p>&ldquo;<em>&hellip;my father assured him that either his brains or his signature would be on the contract.&rdquo;</em></p> <p>For a range of reasons, in 2022, businesses&mdash;<em>especially</em> Fortune 1000-sized firms&mdash;are struggling more than ever to portray a plausible threat of lost business to their vendors, and as such, feel as if they have no choice but to retain incumbent suppliers under less than favorable terms.</p> <p><a href="https://www.finetuneus.com/insights/the-emergence-of-hostile-supplier-behaviors-what-to-do-about-it/" target="_blank">A massive&mdash;and growing&mdash;power imbalance dramatically favors sellers over buyers in this landscape.</a></p> <p>Why is the threat of lost business so elusive in 2022? Naturally, the answer is complex and hugely varied, but a few stark realities constitute a significant portion of the answer:</p> <ol> <li>Industry consolidation</li> <li>Anti-competitive supplier behavior</li> <li>Lack of customer resources to fight back</li> </ol> <p>Let&rsquo;s take a closer look at each of these phenomena and how they&rsquo;ve come to exacerbate the &ldquo;threat of lost business&rdquo; dilemma, starting with&hellip;</p> <h1>Industry Consolidation</h1> <p>It should go without saying that if there are fewer supplier options, then there are fewer places to threaten to take your business. And in one industry after another, only two or three viable national options remain (at most), where as recently as a decade ago, four to six might have prevailed.</p> <p>Participants in the American economy for the last 100+ years have generally felt they had the ability to &ldquo;take their business elsewhere,&rdquo; protected against cartels, price fixing, monopolies and monopolistic behaviors by our federal antitrust laws, chiefly the <a href="https://www.archives.gov/milestone-documents/sherman-anti-trust-act#:~:text=Approved%20July%202%2C%201890%2C%20The,U.S.%20Congress%20to%20prohibit%20trusts." target="_blank">Sherman Anti-Trust Act of 1890</a>, the <a href="https://guides.loc.gov/this-month-in-business-history/october/clayton-anitrust-enacted" target="_blank">Clayton Antitrust Act of 1914</a>, and the <a href="https://www.ftc.gov/legal-library/browse/statutes/federal-trade-commission-act" target="_blank">Federal Trade Commission Act of 1914</a>.</p> <p>This fundamental accordance of power to the buyer has since been a critical underpinning of our economy, and an entire industry of purchasing practitioners has evolved with the expectation that this would remain the state of play as they learned to use the marketplace to advance their business&rsquo; interests. But in 2022, those very practitioners have seen their marketplace power lessened by massive consolidation across essentially all industries from which they buy.</p> <p>Just a few months ago, the Federal Trade Commission (FTC) and the Justice Department&rsquo;s antitrust division launched a joint inquiry seeking ways to prevent illegal and anti-competitive mergers and acquisitions. Assistant Attorney General Jonathan Kanter cut to the heart of the matter saying, &ldquo;We need to understand why so many industries have too few competitors, and to think carefully about how to ensure that our merger enforcement tools are fit for purpose in the modern economy.&rdquo;</p> <p>With dwindling options in the marketplace stripping customers of their power, increasingly emboldened suppliers are, only naturally, attempting to grab more and more power, including through progressively&hellip;</p> <h2>Anti-Competitive Supplier Behaviors</h2> <p>The FTC has been looking into this area, too, opening a <a href="https://www.regulations.gov/docket/FTC-2021-0036" target="_blank">portal</a> last fall seeking public comment on unfair and anti-competitive contract language. <em>Access to Markets</em> <a href="https://accesstomarkets.org/the-latest/potentially-unfair-or-coercive-business-contract-terms/?emci=534f9361-a406-ec11-981f-501ac57ba3ed&amp;emdi=7ce5db34-a806-ec11-981f-501ac57ba3ed&amp;ceid=3055180" target="_blank">nicely summarizes</a> the emerging threats to buyers in this realm.</p> <p>When options are limited to begin with, it&rsquo;s easier for suppliers to get away with asking for more and more onerous commitments from their customers, and with today&rsquo;s technologies and a robust information ecosystem, it&rsquo;s far easier for the ever-shrinking pool of supplier options to follow each other&rsquo;s lead in this regard.</p> <p>And of course, these anti-competitive behaviors aren&rsquo;t limited to contractual terms. In the indirect services arena, hostility to audits and hostility to third-party management have increasingly become the norm for an emboldened universe of suppliers, regardless of whether the governing contracts allow for these strategies or not.</p> <p>But the erosion of the threat of lost business can&rsquo;t be understood solely through the lens of industry consolidation and anti-competitive supplier behaviors. No, dramatically exacerbating the problem is the fact that just as marketplace battles have become more demanding than ever, the vast majority of corporate procurement and expense management departments face a glaring&hellip;</p> <h2>Lack of Resources to Fight Back</h2> <p>As we&rsquo;ve <a href="https://www.finetuneus.com/insights/the-elephant-in-the-procurement-room-under-the-radar-expenses/" target="_blank">covered extensively</a> in the past, corporate procurement and expense management functions have found themselves increasingly vulnerable as they&rsquo;ve seen their departmental resources dwindle or fail to keep pace with overall company growth. We&rsquo;ve discussed the <a href="https://www.finetuneus.com/insights/the-revolving-door-of-corporate-procurement-resulting-bottom-line-vulnerabilities-part-i/" target="_blank">range of vulnerabilities</a> this leanness has created, and among the most acute is the erosion of the threat of lost business.</p> <p>This explanation for the phenomenon is especially vexing for the largest organizations. These multi-billion-dollar companies, which have always fancied themselves the power brokers in their supplier relationships, now find themselves grappling with the reality that their suppliers know they frequently lack good options&mdash;and even where good options may exist, <em>they don&rsquo;t possess the resources to manage time-consuming and distracting supplier transitions.</em></p> <p>In many cases, the corporate-level expense owners&mdash;tasked with &ldquo;managing&rdquo; $100MM in annual spend across a dozen or more categories&mdash;simply can&rsquo;t marshal the cross-departmental bandwidth required to transition away from an incumbent supplier. Just as critically&mdash;the incumbent supplier senses this, and simply does not feel any plausible threat of lost business.</p> <p><em>All too often, the corporate expense owner faces a &ldquo;triple whammy&rdquo; in this regard: very few options, barriers to using the marketplace due to anti-competitive supplier practices and lack of resources to effectively fight back.</em></p> <p>Stay tuned as we dive further into the other challenges entangled in the emerging landscape of hostile supplier behaviors and the power shift from customers to indirect suppliers, each of which was briefly introduced in the opening article on this topic, <a href="https://www.finetuneus.com/insights/the-emergence-of-hostile-supplier-behaviors-what-to-do-about-it/" target="_blank">The Emergence of Hostile Supplier Behaviors &amp; What to Do About It</a>.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="As the Threat of Lost Business Erodes, Supplier Hostility is Emboldened - Future of Sourcing" addthis:url="https://futureofsourcing.com/as-the-threat-of-lost-business-erodes-supplier-hostility-is-emboldened"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 08 Jun 2022 02:00:00 +0000 Rich Ham 2187 at https://futureofsourcing.com https://futureofsourcing.com/as-the-threat-of-lost-business-erodes-supplier-hostility-is-emboldened#comments Insights on the Evolving Role of Supply Management https://futureofsourcing.com/insights-on-the-evolving-role-of-supply-management <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/Insights%20on%20the%20Evolving%20Role%20of%20Supply%20Management.png"><a href="https://futureofsourcing.com/sites/default/files/articles/Insights%20on%20the%20Evolving%20Role%20of%20Supply%20Management.png" title="Insights on the Evolving Role of Supply Management" class="colorbox" rel="gallery-node-2065-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Insights%20on%20the%20Evolving%20Role%20of%20Supply%20Management.png?itok=GWXZEAyl" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Insights on the Evolving Role of Supply Management</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/the-three-pillars-of-successful-supply-chain-risk-management">The Three Pillars of Successful Supply Chain Risk Management</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The global COVID-19 pandemic put supply chain management and procurement in a very bright and positive spotlight for keeping life moving as normal as possible during all the shutdowns, disruption and general uncertainty.</p> <p>It also highlighted that business and supply chain disruption are ongoing facts of life &ndash; such as ongoing extreme weather events globally and a megaship blocking the Suez Canal for weeks, to name just two. And the impacts created a snowball effect on other industries:</p> <ul> <li>Automakers don&rsquo;t have enough chips to build cars, leading to shutdowns</li> <li>Construction companies don&rsquo;t have enough wood to build homes, and the prices are skyrocketing</li> <li>Cargo is sitting waiting to be unloaded at ports around the world, creating shortages</li> </ul> <p>There are many factors at work behind these and other situations the world finds itself in right now, and will continue to find itself in the years ahead. But one thing is for sure, the role that supply management plays will have to adapt to meet a fast-changing future.</p> <p>A recent article on the Institute for Supply Management explored the shifting and evolving discipline of supply management and the professionals in it, and what the future may/can/will/should hold for the function and job roles. Here we take a look at some of those roles more closely.</p> <h2>The Role of Technology</h2> <p>The <em>Gartner Predicts 2021: Supply Chain Technology</em> report highlights a very revealing key finding: &ldquo;While the pace of change in supply chain accelerates, only 42% of supply chain organizations have adopted agile methodologies, breaking projects into smaller increments and allowing quicker realization of failures and reallocation of efforts.&rdquo;</p> <p>That shows a real lag in SCM digital transformation efforts, in everything from visibility to data analysis and predictive forecasting. Those aspects are mutually critical, because as supply management professionals and Procurement get better at leveraging tech and data, there will be increased demands on suppliers for transparency. This will impact relationships and collaboration &ndash; see more on that below.</p> <p>Technology adoption is mandatory to effectively leverage all the massive data that is increasingly inundating companies from multiple sources, and to better inform strategy and decision-making. As Procurement gets better access to data and better tools to leverage it, more day-to-day activities will center around the insights it provides that are not possible today.</p> <p>In the case of supply management, these include outside sources like weather, global news, supplier financial health, etc., to gauge how global changes will influence spend/supplier relationships.</p> <p>With the continuing advancements in the areas of <a href="https://futureofsourcing.com/how-organizations-are-driving-value-from-procurement-with-ai">Artificial Intelligenc</a><a href="https://futureofsourcing.com/how-organizations-are-driving-value-from-procurement-with-ai" target="_blank">e</a> (AI), Robotic Process Automation (RPA), block chain, IoT, and so forth, the role of technology in supply management will become even more useful for predictive analytics, forecasting, compliance, agility and other areas.</p> <p>This reliance on technology doesn&rsquo;t mean that Procurement and SCM practitioners need to become data scientists, but those who are the most familiar and capable with the tools are going to have the most advantages. This is something to bear in mind as supply management recruits new (and probably younger) teams.</p> <h2>The Role of People&nbsp;&nbsp;</h2> <p>As supply management itself morphs and changes, so too will the role of people within it. In the years ahead it&rsquo;s easy to see that, in addition to the tech skills mentioned above, that SCM professionals will need an increased focus and broader perspective on disaster recovery and supply chain risk, especially for Tier 2 and 3 direct materials, as well as indirect commodities that have the ability to shut down supply (such as N95 masks and cleaning products). Everyone in the field now has been living this since the start of the COVID-19 pandemic (and probably earlier, if not to the same degree).</p> <p>The increased need for diverse skillsets goes together with digital transformation if organizations are to achieve the highest levels of agility in staying ahead of natural shifts in demands, as well as during disruption. With that comes the need for improved business cases for technology investment.</p> <p>There will be a greater institutionalization of knowledge and management of key categories, as well as a renewed emphasis on supplier relationship management, especially multi-supplier cooperation. Whether or not current roles expand to encompass a broader skillset, or new roles need to be created remains to be seen. Most likely, some combination of the two as supply management attains greater importance (and value) within organizations.</p> <h2>The Role of Relationships + Collaboration</h2> <p>As mentioned, one of the key &ldquo;benefits&rdquo; for Procurement and supply management teams during the pandemic was the increase in perceived value they bring to an organization (and the public). It became blindingly obvious that without Procurement and the supply chains they manage, businesses, societies and economies come to a standstill.</p> <p>A lot of the success in keeping things moving has to be attributed to managing relationships with suppliers, and what that process actually entails. These relationships are gaining in importance and are (or should be) becoming much more collaborative. Getting beyond the traditional buyer/supplier dynamic certainly has its challenges, but a shift toward mutual success and reliance (for innovation, time-to-market, agility) is going to provide enormous advantages to both sides.</p> <p>Procurement and supply management teams will also need to have an increased focus on internal stakeholder education and collaboration. This naturally includes the C-suite, which is critical for not only strategic planning, but for nuts-and-bolts support in terms of digital transformation/IT budgets and human resource needs.</p> <p>Improving information sharing and collaboration across business silos and systems and working more closely with stakeholders at all levels in the organization puts Procurement in a position to achieve greater agility/flexibility collectively, rather than trying to drive it independently.</p> <p>It will also facilitate other goals like diversity and sustainable sourcing. This is akin to internal marketing of Procurement, which all Procurement groups need to be good at, but also will need to be a priority for Procurement managers and leaders to increase influence.</p> <h2>The Role of Risk</h2> <p>In the same way that &ldquo;leadership&rdquo; means &ldquo;technology leadership&rdquo; today, &ldquo;supply management&rdquo; means &ldquo;risk management.&rdquo; As disruption becomes a way of life, staying ahead of the risk curve will involve a real focus on everything from geopolitical threats and natural disasters to the increasing problem of global cybersecurity. Ironically enough, this is a direct result of the expanding reliance on technology.</p> <p>Since every industry, business, department and location increasingly leverages technology, this exposes enterprises to more vulnerabilities from more sources. Internally, there is greater opportunity to try and control these cybersecurity risks, but external control is going to take a more concerted and creative effort.</p> <p>Procurement and supply managers specifically need to be better educated in vetting suppliers (and <em>their</em> suppliers) during the sourcing process, as more and more projects will involve some technology touchpoint with the suppliers if the buy doesn&rsquo;t include technology itself. This goes back to the role of people in the future, as this will involve training, <a href="https://sig.org/sig-university/about">certifications</a> or increased role specialization.</p> <h2>Where Does Supply Management Go From Here</h2> <p>As ISM concluded in their research, &ldquo;Mobility, improved data sets and a focus on supply risk for both direct and indirect materials will evolve today&rsquo;s supply chain professionals into tomorrow&rsquo;s operational business leaders.&rdquo;</p> <p>Procurement and supply chain management are better placed than most other functions within organizations to have visibility of and control over spend, costs, savings and risk. With the adoption of advanced Procure-to-Pay and data/spend analytics solutions that integrate AI and other advantages, teams will be able to achieve greater proactivity, agility, and be more analytical and business focused in order to do their job effectively to bring more value to the enterprise.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/digital-transformation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Digital Transformation</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/corcentric" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Corcentric</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/artificial-intelligence-ai" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Artificial Intelligence (AI)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Insights on the Evolving Role of Supply Management - Future of Sourcing" addthis:url="https://futureofsourcing.com/insights-on-the-evolving-role-of-supply-management"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 26 May 2022 17:00:00 +0000 Joe Payne 2065 at https://futureofsourcing.com https://futureofsourcing.com/insights-on-the-evolving-role-of-supply-management#comments 9 Benefits of Supplier Performance Management Software https://futureofsourcing.com/9-benefits-of-supplier-performance-management-software <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/9%20Benefits%20of%20Supplier%20Performance%20Management%20Software.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/9%20Benefits%20of%20Supplier%20Performance%20Management%20Software.jpg" title="Procurement professionals are concerned with addressing supplier performance management." class="colorbox" rel="gallery-node-2173-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/9%20Benefits%20of%20Supplier%20Performance%20Management%20Software.jpg?itok=J2g73D73" width="624" height="325" alt="Procurement professionals are concerned with addressing supplier performance management." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Procurement professionals are concerned with addressing supplier performance management (SPM) and understand the value it brings to their overall excellence, but almost 50% of teams don&rsquo;t actually follow up on supplier KPIs, says Sam Jenks, Chief Growth Officer at Kodiak Hub. He shares nine benefits of utilizing SPM software and seven quick tips to get started.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/procurements-dirty-little-secrets">Procurement’s Dirty Little Secrets</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>About 65% of innovations are sourced through external suppliers and partners (ISM).&nbsp;This makes supplier and partner contributions to a supply chain&rsquo;s production and profitability rather pivotal.&nbsp;</p> <p>Put into simple math: Good supplier performance = good supply chain performance.</p> <p>Supplier performance management (SPM), when done right, can help your procurement organization to harness supplier performance and innovation to positively impact your business&rsquo; top-line value creation.&nbsp;</p> <p>SPM is an area that can be challenging for global procurement teams, as supply chain complexity continues to grow.&nbsp;</p> <p>Unfortunately for many procurement teams, gaining basic buyer insights from their supplier base, such as contract, spend, performance, risk and compliance data isn&rsquo;t so easy to get a hold of or begin to analyze. Even in the most mature of procurement organizations evaluating and managing a supplier base&rsquo;s performance can be difficult.&nbsp;</p> <p>Kodiak Hub surveyed 526 procurement and supply chain professionals on LinkedIn asking what focus in supplier management is their biggest area of concern? As seen in the graphic below, 40% of respondents listed supplier performance as their top area of concern.</p> <p><img alt="Supplier performance is the top area of concern for procurement" src="https://futureofsourcing.com/sites/default/files/Supplier-Performance-Survey.jpg" style="width: 504px; height: 283px;" /></p> <p>At the same time, nearly half of procurement professionals who responded in the 2021 Supply Chain Resilience Report by BCI&nbsp;<em>(below)&nbsp;</em>said that they don&rsquo;t harness any kind of technology to follow up on supplier performance KPIs.&nbsp;</p> <p><img alt="Procurement teams use supplier performance technology." src="https://futureofsourcing.com/sites/default/files/SPM-Technology.jpg" style="width: 504px; height: 283px;" /></p> <p>These two statistics highlight a clear yet confusing discrepancy.</p> <p>Procurement professionals are concerned with addressing Supplier Performance Management and understand the value it brings to their overall excellence, but almost 50% of teams don&rsquo;t actually follow up on supplier KPI&#39;s.&nbsp;</p> <p>Maybe this stems from a lack of time, overly complex supply chains or a simple lack of resources. No matter the reason, one harsh truth remains: you can&rsquo;t manage what you can&rsquo;t measure.&nbsp;</p> <p>If you&rsquo;re still reading it means we&rsquo;ve made it this far in the article together. That means the above statistics may resonate with you. No need to worry. We&rsquo;re not going to utilize this article as an opportunity to reprimand or scold you for a lack of SPM. Quite the contrary.&nbsp;</p> <p>You likely know the importance and benefits of supplier performance management.&nbsp;</p> <p>But maybe you&rsquo;ve gotten discouraged along the way or don&rsquo;t know where to start.&nbsp;</p> <p>We will use this opportunity to inspire you to get back on the horse and provide some tips to get started with supplier performance management.&nbsp;</p> <h2>9 Supplier Performance Management Software Benefits</h2> <ol> <li><strong>Enhanced Supply Chain Visibility </strong>&ndash;&nbsp;Better supply chain visibility brings you closer to the pulse of your supply chain, giving you a better means to forecast and avoid costly supply chain disruptions.&nbsp;</li> <li><strong>Supplier Accountability</strong>&nbsp;&ndash; Supplier performance management systematically and implicitly expresses expectations and KPI acceptance criteria to your suppliers. This in turn allows the supplier to take accountability for their own performance and activities as partnerships are entered with a transparent framework for ideal performance, from the start.</li> <li><strong>Supplier Led (Enabled) Innovation</strong>&nbsp;&ndash; As stated in the first line of this post, 65% of innovations are supplier and partner-led (ISM). Communicating the importance of performance and innovation ambitions to partners welcomes them to more openly share their unique insights, industry-specific competency and capacity for innovation. Remember: your suppliers are experts in their field! That&rsquo;s why you started working with them in the first place. An SPM process will help you systematically listen to and absorb what they have to say!&nbsp;</li> <li><strong>Quality Performance (Product &amp; Services)</strong>&nbsp;&ndash; Follow-up on product and service quality is a straightforward win from SPM. Systematic measurement, reporting and analysis of supplier quality (deviations, complaints, claims, project quality, etc.) will help you to cut out suppliers that aren&rsquo;t making the cut and bring better quality products and services to your end customers.</li> <li><strong>Easy Follow-up on SLAs </strong>&ndash;&nbsp;A service-level agreement (SLA) defines the level of service you expect from a vendor and lays out the metrics by which service is measured, as well as remedies or penalties should agreed-on service levels not be achieved (CIO.com). SPM aids definition, measurement, follow up and actions for agreed-upon SLA&#39;s. Contract compliance can be challenging, but solutions for SPM make it cut and dry.&nbsp;</li> <li><strong>Increase Buyer-Supplier Collaboration&nbsp;</strong>&ndash; SPM software provides a common platform to enhance buyer-supplier relationships and collaboration. As said before: simple things like beginning a supplier relationship with clear expectations can prove to build trust, respect and mutual goals.</li> <li><strong>Spot Best and Worst Suppliers Faster&nbsp;</strong>&ndash; Utilizing technology to measure and analyze supplier performance KPIs will provide your team with a better means for data visualization and therefore a better means to spot <a href="https://www.kodiakhub.com/blog/do-you-know-your-best-supplier">best and worst performing suppliers</a>.</li> <li><strong>Make Sourcing and Procurement Decisions Data-Driven&nbsp;</strong>&ndash; Make systematic and data-driven decisions a priority. SPM will give you the insights you need to make more data-driven decisions, but if you choose to act upon them, it will still require the EI (Emotional Intelligence) and HI (Human Intelligence) that makes you a talented procurement professional in the first place.&nbsp;</li> <li><strong>Align Team on Business Goals&nbsp;</strong>&ndash; Sometimes broader business initiatives can feel very distant. Aligning within your procurement team on a supplier performance management framework, system and process will allow your team to have a more holistic understanding of how greatly supplier performance impacts the broader business (such as how performance creates an opportunity for savings, innovation, brand-value creation, competitive edge and more).&nbsp;</li> </ol> <p>Change can be overwhelming. Sometimes, that feeling can become the barrier to jumpstart change at all. But, in order to apply&nbsp;supplier performance management tools&nbsp;and adopt a&nbsp;framework&nbsp;that will make an impact in your organization, change is inevitable. That&rsquo;s why I&rsquo;ve laid out these tips below on how to get started:</p> <h2>7 Quick Tips To Get Started With Supplier Performance Management Solutions</h2> <h3><strong>1. Align on KPI&#39;s</strong></h3> <p>Workshop with your team to determine how you&rsquo;d like to evaluate supplier performance.</p> <p>You can break up supplier performance KPI areas into six parameters:<br /> supply chain, quality, commercial, collaboration, innovation and sustainability performance.</p> <p> Locating these key performance parameters is important to build sub-parameters and eventually find individual data feeds to structure your performance evaluations properly. See the graphic below to understand how these KPI trees can be built:&nbsp;</p> <p><img alt="Supplier performance management KPI tiers." src="https://futureofsourcing.com/sites/default/files/SPM-Performance.png" style="width: 504px; height: 280px;" /></p> <p>As you begin to define the content of these various KPI tiers, you&rsquo;ll need to align stakeholder expectations, requirements and preferences. Team members will likely have strong feelings about what should be measured and how it will be measured, but it&rsquo;s important to remember that the end goal is a common one: to improve your supplier performance management.</p> <h3><strong>2. Take a Broader Stakeholder Perspective</strong></h3> <p>In order to align on KPI&#39;s and have robust criteria for supplier performance evaluation, you need to locate KPI&#39;s that are outside of the scope of solely procurement, sourcing and supply chain.</p> <p>To achieve a broad range of stakeholder perspectives you&rsquo;ll need to include production, quality, sustainability, finances, even sales and marketing in order to truly capture the various supplier KPIs that exist within the broader value chain. This will help you to bridge functional gaps and gain perspective for the necessity of supplier performance within various functions. This may require a development and program manager or a project owner to align supplier KPIs, targets and goals cross-functionally.</p> <h3><strong>3. Typify/Segment the Supplier Base</strong></h3> <p>Supplier performance management and evaluation should be adapted based upon a supplier&rsquo;s characteristics or a supplier type. It&rsquo;s important to evaluate supplier performance in line with supplier typification. This could be based on category, country, spend, criticality or other typifications.&nbsp;</p> <h3><strong>4. Don&rsquo;t Forget About Governance and Risk Parameters</strong></h3> <p>A supplier that lacks quality management will likely not excel in quality performance. If they show high-quality performance but lack management capability this discrepancy could also cause issues.</p> <p>Taking Governance and Risk into consideration will give you a 360&ordm; picture of a supplier&rsquo;s overall performance and it will ensure that your supplier partners won&rsquo;t negatively impact brand or shareholder value.</p> <h3><strong>5. Know What&rsquo;s Going On</strong></h3> <p>We&rsquo;re living in a new reality where the value of a brand is directly linked to and impacted by the operational activities of a global supply chain and its many tiers. Consumers aren&rsquo;t sympathetic to supply chain complexity.</p> <p>If something happens in the world, you need to know about it.</p> <p>If you have a global, complex or large supply chain, then media monitoring of some sort is suggested to stay on top of current events, news, happenings, updated sanctions, blacklists and more.</p> <h3><strong>6. Locate the Right Data</strong></h3> <p>Do you need to send a performance evaluation to an internal stakeholder or a supplier or both? Do you need to send a performance evaluation to multiple stakeholders? If so, do all stakeholders need to respond to every area of the evaluation? Most importantly, do you already have the responses to the evaluation in another business solution, such as an ERP or quality solution?</p> <p>Take the time to locate where your supplier performance data can be sourced from, and it will streamline the process of gathering information. This will save your team time and headaches.</p> <h3><strong>7. Adopt a Rating Methodology</strong></h3> <p>Supplier ratings will help you spend less time with your nose in an excel spreadsheet and give you more time to drive value with the right suppliers at the right time.</p> <p>Much of performance evaluations are based upon qualitative experiences and evaluations of a supplier&#39;s performance. Focus on quantifying the qualitative. Create opportunities to make your supplier evaluation criteria into a multiple-choice format. The more you can turn into multiple-choice options, the more you can weigh the questions you ask, and automate the scoring of responses, which will also serve as a time saver.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/key-performance-indicators-kpis" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Key Performance Indicators (KPIs)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/kodiak-hub" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Kodiak Hub</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/governance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Governance</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="9 Benefits of Supplier Performance Management Software - Future of Sourcing" addthis:url="https://futureofsourcing.com/9-benefits-of-supplier-performance-management-software"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Fri, 06 May 2022 02:00:00 +0000 Sam Jenks 2173 at https://futureofsourcing.com https://futureofsourcing.com/9-benefits-of-supplier-performance-management-software#comments Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits https://futureofsourcing.com/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/Supplier-Led%20Innovation%20%281%29.png"><a href="https://futureofsourcing.com/sites/default/files/articles/Supplier-Led%20Innovation%20%281%29.png" title="Supplier-Led Innovation" class="colorbox" rel="gallery-node-2081-axYB1kV4EmY"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Supplier-Led%20Innovation%20%281%29.png?itok=jH9iV1fa" width="624" height="325" alt="Supplier-Led Innovation" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/using-procurement-analytics-to-become-an-agent-of-change">Using Procurement Analytics to Become an Agent of Change</a></div><div class="field-item odd"><a href="/the-three-pillars-of-successful-supply-chain-risk-management">The Three Pillars of Successful Supply Chain Risk Management</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Today, a lot of the low-hanging fruit has been picked by CPOs. But one area where there is significant scope for procurement to deliver value is supplier-enabled innovation (SEI). With 25% to 45% of revenues coming from product innovation and up to 65% of innovations sourced externally through external partners and suppliers, SEI represents a treasure trove of opportunity.</p> <h2>Why is Supplier-Enabled Innovation Important?</h2> <h3>1. Expand Organizational Capabilities</h3> <p>By tapping into the capabilities and innovations of the supplier community, procurement can dramatically increase the nature and volume of research and development (R&amp;D) work being done on their behalf. In the process, an organization can tap into the skills and knowledge base of other parties who are experts in their specific fields, leveraging their learnings to help drive the business forward.</p> <h3>2. Greater Cross-Organizational Collaboration</h3> <p>SEI, by necessity, involves multiple functions within a business, such as procurement, R&amp;D and product development working together. It therefore encourages stronger cross-functional collaboration across business groups, driving internal efficiencies such as alignment of core goals, integration toward common results and more effective knowledge transfer. This both accelerates the overall innovation pipeline and reduces risk in the process.</p> <h3>3. Stay Ahead of the Competition</h3> <p>Picking supply partners that support finding new ways of doing things and doing them faster can help companies stay ahead of the competition. One study shows there is a 40% faster route to commercialization for externally sourced innovations. An effective, well-considered approach to SEI enables organizations to push beyond the competition in ways that couldn&rsquo;t be delivered from a purely internal approach without considerable time and expense.</p> <h2>Choosing the Best SEI Partners</h2> <p>As organizations look to their suppliers to collaborate and jumpstart product and process innovation, insight and intelligence are key for understanding unmet customer needs, emerging technologies and capabilities that fill these gaps, and evolving market trends.</p> <p>Diving into your existing supply base to identify the right partners will be tempting, and this approach often yields value. But the right suppliers are not always the ones you know. As such, a structured process for identifying the right partners is essential, with assessment for each of the following:</p> <ul> <li>The right skills, such as technological, quality, industrial and financial</li> <li>Collaboration ability, conveyed by strategic alignment around product/service goals, an agreement on the key values of collaboration and governance pertaining to innovation projects</li> <li>Fit, both the strategic commitment of top management and the cultural compatibility of supplier and client corporate cultures</li> </ul> <p>Demonstrated results is another selection criteria, but answers will not always be found in plain sight. In fact, one very effective, yet under-used source of information for identifying innovative suppliers is patent research. This can help a function find and benchmark companies who are innovating in strategic areas of interest for a business &ndash; from finished product to packaging components, to unique ingredients to manufacturing process innovations. Equally, the performance of existing suppliers can be assessed &ndash; are they investing and innovating as one would expect?</p> <p>Finally, it&rsquo;s worth noting that the right choice of a supplier partner is not necessarily dependent on size or breadth of offering. Oftentimes working with a specialist company that will work more collaboratively and put more at risk for a share of the long-term spoils is worthwhile.</p> <h2>Ironing Out Bumps in the Road</h2> <p>For successful SEI, several factors need consideration during the due diligence process, when selecting suppliers:</p> <h3>Start at the Top</h3> <p>Invite the executive leadership to get their buy-in. It&rsquo;s a cliché but it&rsquo;s true: Executive-level sponsorship is critical for any initiative to succeed. As an example, <a href="http://blog.bravosolution.com/us/supplier-enabled-innovation-pathway-procurement-value-creation/" target="_blank">Johnson &amp; Johnson</a> has an SEI team of 12 people who are tasked with sourcing cross-function innovations. All roles within the team are high-level (VP and above), which fosters a culture emphasizing innovation, tied directly to outcomes.</p> <h3>Sort Out the Intellectual Property Rights Ownership Upfront</h3> <p>When jointly generating ideas, it is important to decide in advance on a dedicated contract that sets the collaboration rules, primarily in terms of intellectual property (IP) and risk sharing. Many innovation attempts fail or are problematic due to unclear terms of collaboration contracts.</p> <h3>Articulate Your Innovation Goals</h3> <p>Innovation workshops are processes that require planning, cautious selection of ideas, IP management and decisions concerning resource allocation. Make sure the goals align for both parties right from the start and innovation workshops are treated as such, rather than as a sales channel.</p> <h3>Build Resources Internally to Support SEI</h3> <p>Companies typically create dedicated innovation teams or establish new roles and job functions specifically dedicated to driving collaboration. In addition, developing online innovation platforms that facilitate knowledge exchange across the supply chain, from startups to large companies, helps businesses partner more closely.</p> <h2>Reap the Rewards of Looking Out and Bringing Innovation In</h2> <p>There is a growing recognition of the value of broader partnerships and hybrid models that integrate insource with outsource, especially in areas as important as innovation. Indeed, in today&rsquo;s complex, global ecosystem, choosing the right, innovative partnership is becoming ever more critical for success. And procurement sits at the perfect point &ndash; right at the confluence and in a position to drive transformative value for the corporation.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supply-base" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supply Base</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits - Future of Sourcing" addthis:url="https://futureofsourcing.com/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 01 May 2022 17:00:00 +0000 Omer Abdullah 2081 at https://futureofsourcing.com https://futureofsourcing.com/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits#comments