Last week, I had the pleasure of moderating an ISM webinar with Roger Blumberg (Pool4Tool), Bill DeMartino (riskmethods), Pierre-Francois Thaler (Ecovadis), and Edda Rottscheidt (LexisNexis). If you missed it, I highly recommend watching the replay. The one bad thing about webinars is that they usually come to an end before all of the audience questions are addressed, so I thought I’d start a Spend Matters mini-series to answer some of the ones we weren’t able to make it to live. For this installment, I asked Roger Blumberg to address a question from Genesis Energy: Who (clients, industries) has a 360° view of their suppliers? How real-time is the view? What are their business cases?
Sheena: What do you consider a "360-degree view" of suppliers?
Roger: Having a 360-degree view of your supplier is the notion that you are considering your supplier from every possible angle: value, quality, risk, compliance, diversity, and most importantly, their ongoing performance. Back in the day, a supplier was evaluated on price alone. Now, with all the data and systems we have, alongside the ability to integrate all of these systems together, we are able to evaluate our suppliers well beyond price and move to total value that considers all of the aforementioned criteria. By having a 360-degree view, you eliminate a lot of blind spots, and aren’t typically caught off-guard when something does go wrong.
Sheena: What kinds of companies or industries typically actually have this? Why do you see a focus in these industries specifically?
Roger: From what I have seen, there is a fairly direct correlation between how highly an industry is regulated and the importance for a company to have a comprehensive supplier management process. I mostly see this in pharma, aerospace, automotive, medical devices, food & beverage, and the entire defense industry. When you are in industries where the final product is going in your mouth, you can assume that the supplier due diligence is going to be best in class! The same goes for aerospace and medical devices, where a single supplier failure can have catastrophic results. On the flip side, I have seen companies not in these industries do a great job here — but for them it is usually when they have a handful of very large suppliers that make up a significant portion of their spend, and they cannot afford to have their finger on the pulse of that smaller but critical supplier community.
Sheena: How did they make their business cases to get there? What stakeholders need to be engaged?
Roger: Oftentimes the fear and cost of a single incident is enough to justify investing in a 360-degree supplier view. Do the math and calculate the cost of having one of your key suppliers unable to deliver for a day, week, month or quarter, and do the financial modeling on what that would cost you. Look at potential costs associated with having to do a recall because your company engaged with a low-quality supplier. Consider the impact to your stock price and company image when uncertified suppliers deliver tainted ingredients that result in potential loss of lives. When assembling your business case, you want procurement, quality, compliance, legal and risk all at the table. All of these departments play a role in aspects of supplier selection and management as well as supplier risk and quality.
Sheena: Do you have a list of criteria to consider?
Roger: The reality is that it is not a one-size-fits-all model, as no two companies evaluate their suppliers the same way. For instance, some companies have a supplier sustainability and supplier diversity goal while many other companies do not have a goal at all! Some companies place a higher value on price than others. This typically varies by industry, as aerospace, pharma and automotive are very quality-driven. On the indirect side, it may be more price-driven. That being said, there are still best practices to follow. Companies should make these decisions at the executive level and stick to the criteria from project to project, rather than determining the scoring and evaluation process after the RFPs come back. It all needs to be agreed to upfront. Oftentimes the evaluation criteria is shared with the suppliers in advance so they know that you value more than just price alone.
Sheena: As an addition, I posed the criteria question to Jason Busch and Pierre Mitchell, who agreed with Roger, only adding “if you're sourcing to specific outcomes, then it's about methodology, proven experience, and total cost proposed for that outcome. If it's rate/capability/input-based, then it should also include perceived/checked quality and fit of individual consultants.”
Did you miss the event? Watch it here for more!