By Jason Busch and Peter Smith
My colleague Peter Smith recently penned a primer in the area of supplier management, which will be especially useful for those just coming up to speed on the topic and seeking to implement programs to address supply chain risk management and supplier performance management, among other areas. The paper can be downloaded from our research library:
Supplier Lifecycle Management: Reduce risk, Improve Performance and drive Supplier Value. Peter frames his analysis by suggesting that the performance of a supplier has a huge impact on an organization's success and will ultimately determine how the procurement function and its leadership will be regarded by the business. Moreover, suppliers that provide an excellent product and service can provide real value -- regardless of the quality of the sourcing process or contract.
Further, a brilliant category management process and best practice contract will amount to nothing if the supplier simply fails to perform. In other words, supplier lifecycle management (SLM) is a key missing link in procurement for a number of reasons. At the same time, Spend Matters readers are well aware that the risk of supplier or supply chain failure should also be of vital interest to procurement, yet it's only risen up as an area of focus in recent years. Whether driven by natural disasters, economic or political developments, or regulatory and compliance issues in the supply-chain, supply risk is growing in importance by the day.
To wit, managing suppliers in a joined-up, integrated and consistent manner throughout their life as a supplier should be at the very heart of everything procurement professionals do and care about. This seems sensible, although we often see a paradox; Procurement executives will often complain that their own organizations do not fully appreciate the importance of suppliers and their contribution to business success, yet it is clear that those same executives do not reflect this importance in the way they and their procurement functions think, organize and work.
Peter's argument is that SLM addresses this central role of suppliers and although a relatively new concept, picks up on well-known procurement themes, such as value, risk and performance. This holistic approach is becoming increasingly important in the world of procurement solutions and technology with some vendors now putting SLM at the heart of their latest product suites. Peter also differentiates SLM from supplier information management (SIM), a term we use quite frequently in our research on this side of the Atlantic interchangeable with SLM and supply base management.
In this regard, Peter suggests that SIM usually focuses on data and information about the supplier and is an important subset of the SLM process. Specifically, SIM generally covers initial information gathering and on-boarding stages and may also extend to include risk management and ongoing contract performance information management. It generally does not include the sourcing elements of the broader SLM process. From our perspective sitting at Spend Matters HQ in Chicago (not the offices of Spend Matters Europe, Ltd.), we think the actual definition and differentiation here matters less than what Peter describes.
More important, procurement organizations must take a leadership role in acting as stewards of process and supplier information tied into managing broader relationships and engagements, from initial qualification to ongoing development, risk reduction and joint cost take out. Call it SIM, supply base management or SLM -- monikers are the last thing that matter here. Most important, in this paper, Spend Matters UK/Europe explores the key cycles in procurement processes and dives into what is meant by SLM and all of its different elements. In the analysis, we further flesh out the benefits that arise from putting a strong focus on managing the supplier in an integrated and focused manner. If we've piqued your interest with this thinking and approach to engaging suppliers, we would encourage you to download Supplier Lifecycle Management: Reduce risk, Improve Performance and drive Supplier Value today.
If you're curious about the subject, check out our other research in the area of supplier management (and SLM), including the following titles: