Transforming Supplier Management: From Policemen to Innovation Catalyst

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Spend Matters welcomes this guest post from Dave Tienstra, Partner at Information Services Group (ISG).

Modern enterprises are evolving quickly, and with that transformation, their expansive, locked-in, long-term supplier relationships are giving way to digitally enabled, data-driven supplier ecosystems marked by collaboration, a fluid set of suppliers and a mutual exchange of data and information that drives new insights, delivers new innovations and empowers a new way of managing supplier relationships.

Enterprises that do not evolve to this new paradigm will struggle to keep up, and will lack the agility to respond to the ever-increasing pace of market dynamics. The supplier management model that existed for years was all about control, maintaining long-term relationships and a focus on value (read: cost savings). While those elements still matter, the real value today lies in the data and information that can be shared between two parties, and the new insights and innovations derived from that data that can help both organizations grow.

The data and metrics that are being generated constantly by a multitude of business processes and customer and supplier interactions are rewriting the charter of supplier management. This charter is pivoting from one of tracking supplier delivery and making sure suppliers provide the services contracted for, to being a source of operational capability that the enterprises could never achieve on its own.

Rather than merely policing suppliers, enterprise supplier management organizations are now creating a forum for suppliers to have more meaningful dialogue with one another, gain deeper insights into operational metrics and collaborate continuously to solve the enterprise’s business challenges. This type of operating model requires the supplier management organization to be more completely attuned to the needs of the enterprise, and have the ability — and the agility — to orchestrate its symphony of suppliers to deliver sharper, more focused outcomes.

Fundamental to this new capability is deploying a digital supplier management platform — supported by the latest developments in robotic process automation (RPA) and cognitive computing. The constant flow of data can be analyzed in real time and at a more granular level to improve performance; rather than simply tracking defects and outages, this data can be used to support predictive analytics and prevent negative outcomes before they can disrupt business operations.

Specifically, RPA, which automates such labor-intensive tasks as invoice verification and performance monitoring, is more than just a cost- and timesavings technology. It allows the enterprise to track the entire ecosystem of suppliers simultaneously, and gain greater visibility into the relative strengths, weaknesses and future potential of each supplier.

Even in a highly complex supplier ecosystem with hundreds, or even thousands, of suppliers, RPA and cognitive technology can analyze large volumes of data to uncover hidden insights that add significant value to the organization — not only in terms of improving supplier performance or getting the best value across the supply chain but in discovering business opportunity and creating new revenue streams for the enterprise.

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