The Supplier Management Market, or “Supplier Lifecycle Management” (SLM) market segment, consists of a collection of supplier-centered sub-market. The many supplier-touching solutions in this sector are packaged under various labels – with definitions that are used inconsistently and somewhat confusingly by providers and practitioners alike.
From a business process standpoint, supplier management tends to deal with the proactive engagement of key supplier relationships within the supply base— beyond basic sourcing and P2P processes. But, we won’t try to define a new market category such as supplier engagement, supply base management, etc., or even use a term like Supplier Relationship Management (SRM) that means so many different things to different people. For example, is SRM a strategic supplier relationship management/collaboration process or is it everything supplier-facing to equate to the flip side of CRM? Practitioners tend to define it as the former, which is how we tend to look at it as well.
From a provider market definition, we focus on simplicity and also on “aiming to the bell curve” of how most practitioners look at this area. In fact, some companies even view supplier management as their default supplier-facing process, within which sourcing and P2P are just sub-processes that occur during the supplier lifecycle. If you are one of those firms, you only need to add sourcing the P2P market areas to our definition. You will also likely need to look beyond the providers that exist within this market (or collection of mini markets) because many assume you already have sourcing and P2P well supported.
The information that is gathered and managed by these solutions can comprise of no more than a basic document and information-gathering repository for disclosure/compliance purposes. The solutions may also expand to deeper collaborative exchanges of information (e.g. performance or proprietary procurement initiatives) with strategic suppliers.
Solution sub-segments within the supplier management market include the following (in italics):
Supplier Information Management (SIM). An area that transcends vendor master file maintenance processes in AP to a broader MDM (Master Data Management) capability that provides a virtual repository and “system of reference” for supplier information. SIM solutions typically also incorporate supplier data management processes (workflows) that have historically been fragmented across AP, sourcing, and offline systems. More advanced SIM offerings can incorporate all of the supplier areas below.
Supplier qualification / certification. This process is prevalent in the sourcing process as suppliers get screened, qualified, evaluated, selected, and prepared for onboarding (which transitions to P2P area), but there are also ongoing re-certification and re-evaluation needs that occur as part of ongoing Supplier Relationship Management (SRM) processes. Again, we will not introduce SRM here as its own market because of the massive semantic variation in how practitioners and providers frame the market. We wrote about this issue with regards to Supplier Management here.
Supplier Risk & Compliance. Supplier risk ties to broader supply risk management, which includes price risk management and broader supply chain risk.
- It certainly includes supplier financial viability monitoring, but it also ties to supplier compliance processes that include compliance to external regulations and to internal policies (which hopefully have some correlation to the external regulations!).
- Supplier diversity is usually included here, which is not so much an aspirational social goal or mechanism to align supply base demographics to customer demographics, but primarily a compliance-driven process.
- Similarly, Conflict Minerals compliance and other types of functional/industry/regional compliance support are also relevant here.
Supplier Performance Management. This includes supplier performance measurement and management processes and supplier scorecards – all of which must dovetail back to broader risk management, category management, contract management, and procurement/supply performance areas.
Supplier Quality Management (SQM). While this area does have overlap in terms of supplier compliance and regulatory compliance, “quality systems” are essentially compliance systems – i.e., supporting the “say what you do and do what you say” philosophy – so this is straightforward. But, there is also a deeper set of functionality in terms of industry-specific quality systems (e.g., PPAP in Automotive), QC/QA functionality tied to receiving (e.g., Certificates of Analysis) and to related EH&S regulations, warranty management, and quality improvement processes that include Lean, Six Sigma, and related methodologies.
Supplier collaboration processes and projects. Supplier collaboration is such a big term that it’s nearly meaningless, but we list it in the context of supplier collaboration projects (e.g., “collaborative cost reduction” projects) that cross many other areas. Good supplier management solutions, regardless of what data points they handle, should provide a way to share selectively the information gathered and tracked with relevant suppliers to ensure discussion are focused on mutually shared data, KPIs, and other references.
To be sure, this is one of the more confusing markets and we expect to see the functionality within this area to converge with the functionality in the broader solutions market.