Spend Matters readers know that supplier performance management is a topic that we believe procurement organizations do not pay enough attention to -- when it comes to reducing risk, improving vendor performance, and, of course, taking cost out of the supply chain. One of the challenges we observe when it comes to driving SPM adoption is that there always seem to be a lot of "window shoppers" when it comes to practitioners that attend events, download papers and frequent webinars on the topic. Yet only a small percentage of these interested parties ever end up pulling the trigger on a comprehensive SPM solution or program aside from investing in small, adjunct efforts to existing sourcing and supply management initiatives. I'm hoping that the findings from Zycus' recent study of 500+ procurement professionals will change this.
Zycus' research suggests a direct link between SPM technology adoption (and use) and overall supplier performance management program results. Among organizations that perform in the "high" tier overall within the supplier performance area, 51% also report a high use of technology. This number drops to 16% for mid-tier performance organizations and 2% of low-tier performance companies. Our own research suggests that companies that invest in SPM programs almost always put a technology platform first given the time involved in collecting information to drive scorecarding and KPI management/trending from potentially hundreds (or thousands) of stakeholders, suppliers and systems, often on a monthly or quarterly basis.
How does SPM technology successfully support procurement organizations? According to Zycus' research, it enables the "systematic blending of quantitative and qualitative data inputs," as well as "metrics to be customized at a spend category level but also rolled up to consistent supplier rankings that can be applied in sourcing decision making, and enabling identification, ongoing management, and communication around supplier development efforts aimed at diagnosing and correcting supplier performance problems and also driving continuous performance improvement".
These factors for leveraging SPM technology are mirrored in the survey respondents "top tactics" that Zycus sites among leading performers. Among these, 39% of top-performing survey participants (the highest number for a single tactic) report that SPM technology "makes it easy for people to participate" and 37% report that it can "communicate/ensure that people understand how their input affects decisions, actions and other outcomes. Further down the list: "communicate benefits & business case", "employ a standard, transparent and consistently executed process," and "ensure that people's input/opinions count in decision making" (37%, 33% and 32% of respondents, respectively).
One of the decisions we often wrestle with at Spend Matters is whether companies should treat SPM as a separate initiative from sourcing and supplier management (or supplier information management) programs, and the corollary to this question which is whether platforms should stand alone or be integrated with other procurement tools as part of a suite (e.g., sourcing, supplier management, etc. vs. specific SPM platforms). Regardless, it's our firm belief that it's critical to integrate SPM data back into the sourcing process. But no doubt, SPM information, viewed in the context of broader supplier management insights (e.g., supply risk, diversity status), can help us engage in better supplier relationship management and development programs.
Even though Zycus doesn't begin to thoroughly tackle the question of stand-alone vs. integrated SPM platforms in their recently published 2011 survey, it would certainly be useful to have insights in this regard in the future. In the meantime, stay tuned as we conclude our analysis of Zycus' report -- considering their findings in the sourcing area, along with our own analysis of the data.
- Jason Busch