Spend Matters: What will the catalyst be for supplier management to "cross the chasm"?
Constantine: The catalyst is twofold. The first, as I already mentioned, is around risk and compliance concerns. This will always be on top of everyone's agenda in the foreseeable future.
Second, there is a view that procurement needs to evolve beyond just being the "lemon squeezers." More and more CPOs are realizing that managing supplier relationships in an integrated way is not dissimilar to a sales manager managing customer relationships. It is clear that these types of skills and processes are the next area that needs to be exploited for ensuring that savings can be delivered once the "low hanging fruit", (e.g. spend consolidation) has been exhausted. Thus organizations are increasingly becoming aware that their whole supplier management process, starting with supplier onboarding, requires a modern approach for facing upcoming supplier challenges.
Spend Matters: What is supplier management's biggest challenge today?
Constantine: Supplier management has suffered partially due to a market of "me too" providers. As new areas of focus emerge (i.e. conflict minerals), the market has and will continue to see providers attempt to define it from their own vantage point (e.g., from diversity, networks, scorecarding, GRC). With many of these providers ramping up on core requirements, such as data governance and processes, buying organizations suffer from replacing one broken process with another. As a result many have waited to undertake the seemingly monumental task of fixing their entire supplier management program until they are more confident that they will only have to fix it once.
Spend Matters: Who should own it?
Constantine: This is a great question, and at the center of why supplier management projects are often tricky from an organizational standpoint. Supplier management affects many functional areas (sourcing, A/P, finance, compliance, supply chain, IT, etc.) so there is rarely one owner – or consensus across the stakeholders, at least initially. Some of the critical success factors always reinforced around supplier management projects include organizational buy-in, clear governance and executive sponsorship. The one who should own it is one who can champion supplier management cross-functionally. In our view this should be procurement, as they are starting to own the broader process of driving improvement across the organization. Further, as some have taken note of the obstacles inherent within their own organizational structure, we have seen the emergence of the "Procurement Excellence" role. And, within their responsibility, have become owners of the supplier lifecycle as it relates to driving improvement across the organization.
Spend Matters: Why has tools adoption been spotty to date? How can we change this?
Constantine: Tool adoption, per my earlier observation, has been hindered by the inability to gain consensus across the organization, which is exactly what's needed to solve the overall supplier management challenge. Moreover, some providers have helped confuse the issue by solving a targeted problem, but claim their system is built to handle the larger issue. Again as examples, a scorecarding engine or diversity tool, most likely will not have the data modeling, complex workflows, integration, etc. to handle global supplier management needs.
Furthermore most organizations have already invested millions into their ERP systems. As such, there is often an IT-bias in exploiting these investments and the power to influence the direction. For instance, SAP, Oracle and others have great ERP products, but their platforms were never built from the ground up to quickly handle the complexities of the ever-changing needs within supplier management.
How do we change or solve this? I am confident it is being solved as we speak. It's how early spend analytics platforms had to overcome the ERP-bias and/or "we have a data warehouse, therefore..." and now they have widespread adoption. Similarly, we are now seeing organizations move toward enterprise-wide supplier management platforms to gain advantages not yet realized.
Spend Matters would like to thank Constantine for sharing his observations on the supplier management market. We wish him the very best of luck as he evangelizes this market as part of the leadership team at HICX Solutions.