Supply Risk: Tackle Low Hanging Fruit First

Picking up from my last posting on Supply Risk and how best practice Spend Management can be a vital input, I thought I'd highlight a compelling case study that illustrates my point. What happened was that a large multinational recently published its remittance schedules to 100 key suppliers along with the implicit offer to pay early if the supplier proposed a discount. Whereas the company expected 20 or 30 offers from suppliers, they instead got back 80!

The part I like about this (beyond it being a win-win situation for buyer and supplier) is that those suppliers were signaling something to their customer that may not have come out through the normal survey route or via 3rd party supplier profilers. It's an example of actions speaking louder than words, yes, but it's also the way the information was gathered.

First, it was gathered through the course of normal operations. You're a buyer with a little cash on-hand and are asking any suppliers with constrained cash flow if they want early payment. It keeps them afloat and gives you a little extra discount. All very nice, but it also brings online a unique source of data concerning possible suppliers at risk.

Second, it was voluntary on the part of suppliers. I would wager that suppliers would be much more guarded in their answers to survey questions than in their actions regarding early payment on invoices. Moreover, suppliers are even more open when you ask them to propose rather than coming to them with your own offers based on your assessment of their situations. When they can initiate, they really control their own fate (and are more open).

The other implication of this anecdote is that you don't need all of Spend Management to get this started. In fact, in the area of publishing remittance schedules and taking offers for early payment, the low down payment/quick ROI of solutions out there makes this a compelling idea on its face. Add the side benefit of a new source of data about your supply-base and it may just be the right place to start.

Paul Noël

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