Supplier Performance and Operational Management — The Technology Fundamentals (Part 2)

In the first post in this series, I shared some insights from a presentation I did with Sherry Gordon on "Core Risk and Performance Technologies You Can't Afford to Be Without" at the ISM event in Orlando. We framed our discussion around the key requirement of technology to drive efforts in these areas. In fact, I told the audience that I'd sooner do without e-sourcing tools than automated supplier management and SPM capabilities. Using the argument that "herculean efforts may be valiant, but like manual labor in developing economies, they often come up short of creating scale and sustainable results," we suggested, "there are simply things you can't do in an efficient manner when it comes to managing supply risk without technology." Yet simply diving head first into an automated approach to supplier performance and operational management is a recipe for technology that sits on the shelf.

Sherry suggests that part of the challenge is that companies focus on the tools instead of the business process first. This results in not having a real business process in place before deploying tools that can then lead to an overt focus on metrics instead of end results. This can cause organizations to develop scorecards but not a supplier communication process that allows them to be effective. And worst of all, without process, organizations may identify areas of improvement and KPI deviations, but will fail to follow through and take action.

What should companies look for in SPM capabilities from vendors as a foundation? For one, organizations supplier survey and assessment development and deployment capabilities are key. It's also essential to enable the systematic collection of assessment results, stakeholder satisfaction surveys and 360° evaluations. From a KPI perspective, organizations need to be able to create formulas, import KPIs and performance data from other systems, and roll up KPIs to scorecards and share scores and results with suppliers. In addition, systems should enable organizations to conduct trend analysis while receiving alerts when performance issues arise (based on their own, specifically designed thresholds. Supplier performance and operational management capabilities should also enable procurement, supplier development and supply chain teams to measure suppliers against contract terms and service level agreements while providing a means of tracking corrective actions and improvement plans, including data collection and automation collection capability for site visits and audit support.

For further reading on the subject, check out our Compass Research as well (all downloads are free):

Leveraging Supplier Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR

Supply Risk Management – Segmenting the Technology and Content Landscape and Choosing the Right Category of Solutions

Beyond Basic Scorecarding – Supplier Performance and Development Approaches to Drive Competitive Cost and Risk Advantages

Jason Busch

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