The top capabilities of SxM with Enhanced Risk solutions
This Spend Matters series takes a look at the state of procurement technologies in the market today and whether they meet user demands. Spend Matters is featuring the top 5 digital capabilities of different procurement technologies and what functionality you can expect from average and top performing solutions, leveraging its SolutionMap dataset.
In this article, our analyst Bertrand Maltaverne looks at SxM with Enhanced Risk.
What does an SxM with Enhanced Risk solution do?
SxM solutions encompass many activities that the complex nature of business relationships necessitates. Such activities include discovering new potential suppliers, collecting and maintaining information on suppliers, qualifying suppliers and managing ongoing collaborations to realize the expected value. SxM with Enhanced Risk solutions further develop their risk capabilities and requirements, as supplier-related risk is a key component in suppliers management and needs to be embedded in all decisions.
Why buy an SxM with Enhanced Risk solution
Despite that there is no single ‘supply risk management’ solution market (i.e., combining supplier risk, supplier compliance and supply chain risk management), companies need risk and compliance management capabilities within their source-to-pay (S2P) and third-party risk management (TPRM) processes to protect supply performance not just at a supplier level but also at a higher category and supply chain level to support ESG, GRC and other enterprise-level risk/compliance processes.
Top 5 Supplier SxM with Enhanced Risk tech capabilities
What’s the state of different procurement technologies in the market today and do they meet user demands? Spend Matters is featuring the top 5 digital capabilities of different procurement technologies and what functionality you can expect from average and top solutions, leveraging its SolutionMap dataset.
Exploring the actual market state of the top 5 capabilities
1. Supplier information management
The ability to manage (collect, enrich, validate) supplier-related information to make it a source of truth that informs other processes and solutions.
On average, vendors can be expected to have supplier profiles focused primarily on identity-focused data, such as identifiers, locations, industry and category codes. It is often extended with information on certifications, financials (payment) and sustainability. Customers can extend the data model to create more fields in profiles. The information is entered in multiple ways: by users at the time of the creation; by suppliers during the registration or self-registration process, which is often dynamic; and by a small number of connected third-party sources. Users can search suppliers based on the content of profiles by using predefined filters, tags or simple queries.
Top performers differentiate themselves through breadth and depth. They can collect and verify more information by being connected to a large number of third-party sources, e.g., governmental institutions. Their search function is also more powerful and can be based on profile content, metadata extracted from documents and sentiment analysis. They enhance registration, self-registration and profile management by using a network and connected sources to prefill certain fields and push updates to all parties on the network and by having a richer workflow engine to manage approvals and alerts efficiently and effectively.
I have seen top performing vendors integrate with solutions for multi-tier supply chain mapping, check suppliers against multiple country-based blacklists and even verify ownership of bank accounts in many countries. These capabilities offer accurate, up-to-date supplier information for buyers and make the registration process seamless and low-effort for suppliers.
2. Supplier qualification
The process of evaluating and approving vendors based on their ability to meet certain standards, expectations and requirements set by the buying organization.
The average vendor supports supplier qualification for classification and segmentation based on the collected information available in the solution, which varies according to the vendor’s supplier information management (SIM) capabilities. A configurable workflow supports the process. However, statuses are assigned manually (as the output of these workflows) and, more often than not, at a supplier’s company level and not at the intersection of multiple taxonomies, e.g., geography or organization.
Top performing providers use more data to support supplier validations and, more importantly, are more prescriptive in recommending or automatically assigning statuses. Also, statuses can be defined at a granular level to reflect the differences between categories, geographies and business units.
I have seen top performers that can use data gathered manually and automatically from various sources to automate supplier segmentation based on multiple and complex customer-configured business rules.
3. Supplier performance management (measurement)
The ability to define the relevant performance indicators and measure actuals vs. targets
The average vendor provides customers with out-of-the-box KPIs and scorecards that are calculated based on data from assessments, ERP interfaces and third-party sources. Customers can create additional scorecards but not always underlying KPIs. Actuals are measured against targets, and deviations can generate alerts.
Top performers leverage their strong analytics capabilities to offer customers with more out-of-the-box content, deeper configurability in designing KPIs and scorecards, and nested KPIs/scorecards capabilities. Customers can set more granular targets and measure gaps against these and community-based benchmarks. For example, I have seen how leading providers enable customers to manage targets at category and business unit level. Customers can then cascade and instantiate these targets at the supplier level to ensure they are simultaneously contributing to the category’s overall performance and remaining realistic and tailored to each supplier. From there, they can roll-up actuals from each supplier to the category level to measure actuals versus the target of the category.
4. Supplier risk modeling
The capacity to model supplier risks, such as risk types and scoring, and apply them to suppliers.
The average provider enables customers to assess risk across multiple dimensions using a multi-level risk taxonomy that mixes operational and compliance risks. KPIs are calculated based on internal and external data. Typical dimensions are financial, fraud, ESG, cybersecurity, reputation and human rights.
Top performing providers have more depth and granularity in the elements they allow customers to track and more configuration options for risk modeling (elements and scoring). I have seen leading providers with capabilities to identify and manage risks beyond tier-1 suppliers, e.g., CO2 Scope 3 and human rights in supply chains. and handle environmental impacts beyond carbon, e.g., all GHGs, water and deforestation.
5. Supplier risk management
The ability to assign ownership, assessment/scoring rules and thresholds/alerting for these risks — and then continuously monitor them.
On top of a risk model, the average provider allows customers to measure, monitor and mitigate risks by setting up the right KRIs and scorecards. The solution can generate rule-based alerts. Customers can also launch mitigation actions.
Top performing vendors go further by providing richer (what-if, prioritization) and more granular (supply chain) analysis capabilities. I have seen how leading providers leverage AI for alert generation and action recommendations, and they have a model that self-adjusts as data streams into the system.
The vendors considered
How ‘Market State’ is derived from the SolutionMap dataset
These ‘Top 5’ (of 21) critical digital capabilities stem from the Spend Matters TechMatch workbench — derived from 181 requirements scored in the Supplier Risk Management Spring 2023 SolutionMap solution benchmark.
The Top 5 capabilities are the highest-weighted critical capabilities that are central to the displayed solution market benchmark. They have been developed by Spend Matters team of analysts and refined by procurement users in tech selection projects using our market-proven SolutionMap benchmarking dataset and associated TechMatch decision-making tool.
Spend Matters® SolutionMap Procurement Technology Intelligence
Spend Matters built a better way to help companies, and their consultants, advance procurement practices via technology. SolutionMap compares technologies on two main factors: technical capability (gathered via a rigorous RFI process) and validated customer ratings. Data is refreshed every six months. Participation for vendors is completely non-commercial.
Spend Matters® SolutionMap Intelligence Process Overview
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