While the area of supply risk management is attracting growing interest and investment from procurement organizations, organizations typically deal with risk on a piece-part basis. That is exactly the wrong strategy, argue Spend Matters analysts Jason Busch, Pierre Mitchell and Michael Lamoureux in their latest report, Spend Matters Landscape Definition and Overview: Supply Risk Management and Compliance. One of their core aims in publishing this analysis, they write, is “to change this perspective and help organizations integrate these supply risk management initiatives more effectively.”
The Supplier Risk and Compliance Management Category
ClientLoyalty competes in what we could most accurately describe as a “sub-sub” segment of the supplier management market. Usually such niches relegate solution providers to a small corner of market obscurity, often to build profitable businesses that go unnoticed by most. But there is actually a real potential market in what ClientLoyalty is attempting to create alongside a select number of other technology providers also focused on the management of strategic supplier relationships: a market for a true supplier relationship management solution.
While there are many solutions today that address supplier information management (SIM) and also supplier performance management (SPM), only a handful actually focus on supplier relationship management — which we are hesitant to call SRM, because the term was usurped by ERP years ago and given an entirely different meaning. ClientLoyalty is one of the few, avenging the “SAP SRM” and “Peoplesoft SRM” product names that did such an original disservice to what SRM is really about. (Hint: It’s not e-procurement!)
This final installment of our Spend Matters PRO Vendor Snapshot series covering ClientLoyalty offers a competitive analysis and comparison with other supplier management providers for shortlist consideration. It also includes a SWOT analysis, user selection guide, summary evaluation and selection considerations. Part 1 and Part 2 of this PRO research series provided a company and deep dive solution overview, product strengths and weaknesses and a recommended fit analysis for what types of organizations should consider ClientLoyalty.
ClientLoyalty, a specialized supplier management technology provider, would argue that true supplier relationship management is not just about gathering and managing supplier information, performance metrics and action plans. Rather, it is a class of solution that addresses the fundamental aspects of strategic relationships including tracking, measuring and managing feedback (from the organization and the supplier). But it must also serve to monitor the evolution of the relationship — not just performance — and allow for the collaborative creation of action plans to improve the relationship. In other words, from a procurement perspective, ClientLoyalty is closer to serving as a data-driven co-therapist chair for buyers and suppliers in strategic relationships than anything else.
But is this a niche market or something more? This Spend Matters PRO Vendor Snapshot explores ClientLoyalty’s strengths and weaknesses, providing facts and expert analysis to help procurement organizations decide whether they should consider it for their needs. The first installment of our analysis provided a company and solution overview and a recommend fit list of criteria for firms considering ClientLoyalty. Part 3 will offer a SWOT analysis, user selection guide, competitive alternatives and additional evaluation and selection considerations.
Supplier performance management is quickly becoming a "hot topic" among procurement organizations that want to create step change improvement as part of their supply management journey. This technology segment is actually a sub-segment of the supplier management technology market, which is more broadly comprised of what we often describe as “strategic procurement technologies” (see Spend Matters’ Sourcing, Contracting and Supplier Management Landscape Definition and Overview report for more detail). But supplier performance management, while a hot topic among procurement people and among those marketing solutions on the vendor side, is unfortunately not a hot topic among developers, especially as it pertains to managing the relationship aspect of supplier collaboration. While many procurement suite technology providers offer supplier management solutions, the reality is that the majority of these emphasize collecting and managing supplier master data and limited supplier performance management requirements.
ClientLoyalty, a somewhat ironically-named technology provider based on its orientation to managing suppliers, is hoping to change this. ClientLoyalty was founded with the desire to bring strategic supplier relationship management to companies that realized the critical importance of relationship management in order to get the most value for their money from suppliers. This Spend Matters PRO Vendor Snapshot provides facts and expert analysis to help procurement organizations make informed decisions about ClientLoyalty’s supplier management capabilities. Part 1 of our analysis provides a company background and detailed solution overview, as well as a summary recommended fit suggestion for when organizations should consider ClientLoyalty in the procurement technology area. The remaining parts of this research brief will cover product strengths and weaknesses, competitor and SWOT analyses, and insider evaluation and selection considerations.
EcoVadis released its seventh and latest Sustainable Procurement Barometer on Tuesday, a joint study with HEC on supply chain sustainability that was first carried out over a decade ago. These studies measured sustainable procurement practices in global procurement organizations and aimed to provide a landscape view, including “sector and geographical differences, industry strengths, improvement areas [and] new frontiers for innovation.” In short, companies worldwide are now investing in sustainability practices across the supply chain, and sustainable procurement has become vital for revenue and costs, risk mitigation, brand reputation, and innovation and growth.
In the beginning of this Rapid Ratings Vendor Snapshot, the initial framework we incorporated showed how a supplier’s financial health was the keystone of broader risks in the supply chain. In other words, assurance of a supplier’s ability to deliver with consistency and quality requires assurance of a healthy supplier. To ascertain the financial health of the supplier, you can monitor its public financial data from Bloomberg or other external sources. This can be valuable if you know how to operationalize the information and can do it in a scalable and replicable way for many suppliers, over time.
But this doesn’t account for financial data from privately held companies that, for most corporations, account for 70%–80% of their strategic/critical suppliers. Such data on this group of suppliers is generally sparse, sometimes difficult to interpret, often unreliable for prediction and challenging to benchmark against peer firms. This is why Rapid Ratings’ approach to assessing supplier financial health (especially for this group) is attractive and unique. RapidRating’s FHR® (Financial Health Rating) is a focused and cost-effective supply risk monitoring solution that creates a forward-looking assessment of financial viability for the dozens or hundreds of key suppliers an organization may have — privately held or otherwise.
This Spend Matters PRO Vendor Snapshot explores Rapid Ratings’ strengths and weaknesses, providing facts and expert analysis to help procurement organizations decide whether they should consider the provider. The first installment of our analysis provided a company and solution overview and a recommend fit list of criteria for firms considering it. Part 3 will offer a SWOT analysis, user selection guide, competitive alternatives, and additional evaluation and selection considerations.
This may seem like a ridiculously simple question whose answer comes embedded in the term itself (“Managing suppliers!”), but it can be tricky. Supplier management is a broad term, and it has become ever broader in its evolution from a post-contract area to include also strategy and planning and other pre-contract activities. In other words, supplier management has become supplier lifecycle management. But to nail down a pithy definition for supplier management, it is “simply the management of supplier-facing business processes throughout the lifecycle of a supplier,” as Spend Matters analysts Michael Lamoureux and Pierre Mitchell put it in their Supplier Management 101 series.
Ask any procurement organization what area of risk is most pertinent to them and supplier financial risk will usually rise to the top. In particular, suppliers that are classified as strategic or critical based on business impact (not just annual spend) need to be monitored more closely and regularly to maintain operational resilience, ensure business continuity and minimize business risk — and this monitoring obviously must include evaluating financial viability. This is a core aspect of broader supply risk..
Predictive analytics are key to getting early insight (especially relative to your competitors) on suppliers whose financial health is starting to waver. Getting such intelligence via predictive analytics requires basically two things: strong analytic models and good data.
For publicly traded suppliers, you can get financial statements, but you still have to extrapolate from the historical financials to gain actionable insight or develop some sort of predictive statistic. Some companies have used the Altman Z empirical scoring model, but not only is Altman Z an outdated algorithm that has been shown to be inferior to more updated ones (to be discussed later), but you also have to spend the time compiling and interpreting the data, which tends to fall outside the usual purview of the procurement professional.
The bigger problem, though, is the lack of financial data readily available for private firms — especially in the U.S. For most corporations, up to 80% of their strategic/critical suppliers are private and don’t typically share their financial statements with customers for various reasons. One of those reasons may be that they’re highly profitable and don’t want procurement to see this information, although this is certainly not always the case. In other circumstances, a supplier might feel that being private exempts them from disclosure. Or in the worst of cases (from a supply risk perspective), a vendor might not be doing well financially and is worried about losing additional business. Yet, a customer still wants to be sure that a supplier is not in financial distress — or moving in that direction. So, what the buyer would really like is a scalable managed service with a service provider that can help predict supplier financial health, including bankruptcies.
But this won’t happen unless such a provider can address the supplier concerns of protecting the confidentiality of their raw financials.
This is where Rapid Ratings comes in. Rapid Ratings is a provider of empirically driven financial health scoring of businesses — including private suppliers. The firm’s Financial Health System uses financial data as inputs and then utilizes them within 25 industry-specific, integrated analytic models that calculate a normalized financial rating (0-100 scale) designed to help predict future corporate defaults and identify companies’ inherent strengths. Think of it as a “FICO score for corporations.”
Rapid Ratings claims to have predicted 94% of bankruptcies at least six months in advance, and that the FHR provides predictive capabilities out to 12–18 months. The firm also specializes in working with private suppliers to obtain the necessary financial data to produce their FHR. In fact, nearly two-thirds of the more than 40,000 rating events performed by Rapid Ratings are of private companies. Most impressively, the firm claims a greater than 85% success in getting private suppliers to submit their data.
This Spend Matters PRO Vendor Snapshot provides facts and expert analysis to help procurement organizations make informed decisions about Rapid Ratings' solution offering. Part 1 of our analysis provides a company background and detailed solution overview, as well as a summary recommended fit suggestion for when organizations should consider Rapid Ratings in the procurement technology area. The rest of this Spend Matters PRO Vendor Snapshot research brief covers product strengths and weaknesses, competitor and SWOT analysis, and insider evaluation and selection considerations.
There is still time remaining to register for today's webinar with Jason Busch and Pierre Mitchell. The Supply Chain Devil's Dozen: Top 12 Supplier Risks for 2017 will show 2016 the door and usher in 2017 as it relates to the supply chain and supplier risks, including areas of focus for your organization to succeed in the new year.
How should procurement organizations shift their investments and strategies to account for major global changes? How can you map these risks to their underlying causes? Get your questions answered by the Spend Matters analyst team by attending today's presentation.
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Join Jason Busch (founder and head of strategy at Spend Matters) and Pierre Mitchell (chief research officer) tomorrow at 12 p.m. Central for The Supply Chain Devil's Dozen: Top 12 Supplier Risks for 2017.
What does 2017 have in store for your organization? When it comes to supply chain and supplier risks, Spend Matters analysts believe you have 12 areas to focus on for the year ahead.
How can you shift your investments and strategies to account for major global changes? How do you "map" these risks to their underlying causes and to the causes of different types of risk?
Sign up here!
Ford. Macy’s. General Motors. Lockheed Martin. Carrier. Rexnord.
What do these companies have in common? Well, one thing is that each has been rebuked on Twitter by President-elect Donald Trump, mostly for using foreign-made materials or having operations overseas or “moving to Mexico.”
While our fearless leaders are forging ahead on a new way to think about quadrants / 2x2s / matrices / [insert consulting-term du jour here] to help procurement practitioners make better decisions in real time — more on that initiative very soon — we figured we’d point to a classic 2x2-style look that the World Economic Forum takes on global risk in 2017, from its recent report. Hint: there's a lot of green.