As any lean practitioner knows, if you can't measure it, you can't manage it -- or improve it. Many supplier management tools, including ones that Nike and other leaders in the market are taking advantage of in enabling CSR and related programs, had common origins in five specific areas that formed the nucleus of the original supplier management market. These were:
- Supplier on-boarding tools focused on bringing suppliers into a transactional system (e.g., the need to efficiently electronically enable suppliers for P2P)
- Supplier portals (basic portal capability designed to capture supplier information for a range of initiatives: supplier diversity, green/CSR, e-sourcing)
- Supplier performance and quality management (i.e., tracking both qualitative and quantitative supplier performance metrics such as on-time performance, escapes, PPM; surveys such as ISO, QS, TS to qualify suppliers and ensure claimed credentials were real)
- Supply risk management (i.e., the monitoring of supply risk factors including financial data, operational data, compliance information)
- Spend visibility/supplier enrichment at the item level (creating a common or virtual vendor master with detailed and accurate information into spending data to drive sourcing strategies as well as basic enrichment in financial risk data, diversity, etc.)
In managing vendor risk, many organizations we've researched and worked with over the years initially embarked on their supplier management journeys leveraging the above categories to manage specific compliance areas including finance/financial (TIN, OFAC, denied parties list, FCPA, etc.), core financial risk (e.g., supplier financial risk) and supplier diversity (e.g., MBWE, indigenous employees). More recently, we've seen a greater increase in monitoring not only these areas, but also environmental, health and safety (EHS) and related CSR areas in suppliers more broadly. However, on a specific bill of material (BOM) basis for direct materials suppliers, a very broad range of areas have captured the interest of organizations for proactive monitoring and compliance to supported targeted vendor management programs.
We'll explore these in the next post in this series.