Supplier Performance Management: Take 1

From all the conversations I've had in the past few months, it feels to me like managing supplier performance will continue to grow in stature as a major component of Spend Management. But so far, there's not a one-size-fits all approach. From discussions I've had with companies like Apexon, Open Ratings, Ariba, and Emptoris, I've heard different perspectives and beliefs about the most effective tactics and approaches to managing supply performance.

I recently asked Emptoris what they thought were differentiators in their approach to supplier performance management. They suggested that a holistic approach to performance management that goes from pre-qualification to post-contract performance monitoring (compete with ongoing assessments) is key. In addition, Emptoris believes that insight into what suppliers have done for your company, versus others, is also critical. Specifically, they argue, the insight that matters most comes from the "end customer" in the line of business that interacts with the supplier -- rather than procurement specifically or another company.

Emptoris also believes that companies should invest in solutions based on driving change, rather than just risk avoidance. This logic argues that performance scorecards, which tend to focus on risk avoidance, are necessary but insufficient. What's needed is a pro-active problem identification and root cause analysis: "You need a solution that does not just tell you there is a problem ... it must also provide insight into why there is a problem, so you can drive change in the supplier," in their words.

Emptoris has clearly put a lot of thought in terms of what it takes to drive supplier performance management success. You can read more about these perspectives in a whitepaper they’ve authored on the subject which you can find here (registration required).

But other approaches, which focus on risk management and proactive analysis -- either from internal or external information sources -- also have a lot to offer. I’ve been struck by Open Ratings' success stories, for instance, where the vendor has helped customers predict -- and take action -- months before supplier bankruptcies or anticipated supply disruptions. Apexon also has a unique vision of supplier performance management as well. In the next couple of weeks, we'll get some more information from both companies and profile their approach and perspective at Spend Matters in more detail. We'll also have a look at what the analysts have to say as well.

While different vendors have varying opinions of -- and approaches to -- supplier performance management, one thing is certainly for sure: suppliers are becoming a more integral part of Spend Management than ever before. And managing their performance and predicting and taking action to mitigate supply risk has become front and center for many advanced procurement organizations.

Jason Busch

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