The top capabilities of Supplier Management solutions

The vendors considered

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 is fed to other processes and solutions that need it.

The average SxM vendor has 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 their 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 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 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 levels.

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 management

Capacity to manage supplier risk (identify, assess, mitigate, monitor).

The average vendor supports risk assessments via dedicated KPIs. They typically have standard support for issue resolution and monitoring, such as the ability to monitor issues against timelines and send reminders and notifications for escalations.

Top performers go above and beyond the average vendor for supplier risk modeling by offering a more extensive set of out-of-the-box KPIs, including semantic and sentiment analysis for news, and connected third parties.

I have seen top-performing vendors help customers perform pre-impact what-if analyses to preemptively define mitigation plans and playbooks that can quickly be activated when an incident happens. In addition, a few leading providers have control tower capabilities to bring risk visibility beyond tier 1s and for goods in movement.

5. Supplier collaboration

The ability to support multi-channel and multi-directional collaboration is required in today’s business network of many-to-many supplier-buyer relationships.

An average SxM platform facilitates supplier collaboration primarily via one-to-one unidirectional portals. Suppliers can view, receive, confirm, complete, etc. They can also communicate with buyers. But they have limited value-adding features and are limited in their ability to manage users and accounts.

Top performers support a full network data model that allows many-to-many relationships with one account enabling suppliers to collaborate with their customers and, to a certain extent, with their own suppliers — i.e., the buying organization’s tier 2s — in the solution.

I have seen top vendors that have enabled multi-party collaboration where a buying organization, select tier 1s and even tier-x can work together. Also, certain leading providers offer suppliers with business development features.

What does an SxM solution do?

SxM encompasses 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.

Why buy SxM solutions

Supplier lifecycle management technologies assist supplier governance and ensure that third-party partners relationships are conducted efficiently with minimal risk and maximum compliance, that those relationships are optimized to be mutually beneficial and that the value of those relationships is maximized via value/savings protection, collaborative supplier performance management, maximizing self-service interactions in a manner similar to a CRM system and even product/service innovation.

How ‘Market State’ is derived from the SolutionMap dataset

These ‘Top 5’ (of 19) critical digital capabilities stem from the Spend Matters TechMatch workbench — derived from 120 requirements scored in the SxM Spring 2024 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

Spend Matters SolMap Process

Featured vendors undergo a rigorous, RFI-based assessment process including functionality counter-scoring, supporting materials review, tech demos and submission of independent customer references. Expert analysts deeply vet solution capabilities prior to ranking inclusion. Only relevant industry players that meet the criteria determined by Spend Matters are invited in order to create a complete view and optimal intelligence for its members.