By: Beroe Inc. --
03 November, 2016
In this era of digital transformation, procurement teams are turning to precise and advanced supplier intelligence when it comes to managing their supplier network. According to a recent research report released by Aberdeen, business imperatives such as corporate mandate to reduce cost, increased pressure for regulatory and internal compliance to contracts, and the need to reduce the complexity of source-to-payment processes are driving procurement organizations to better manage their supplier data. As a result, procurement teams need to leverage strategic sourcing processes to routinely analyze what they buy, from whom, at what price, and at what volume. This means regularly using supplier information to shape procurement strategies.
The labor-intensive nature of the process is the main reason why some companies choose to outsource supplier identification and selection to companies and formulation development suppliers. Supplier & service assurance companies give a speedier turn around time than in house screening.
This makes a certifying agency a neutral third party that would evaluate all companies based on the same benchmarks and parameters. Supplier identification in procurement should be performed based on the size of the supplier.
Another problem with traditional sources is that they are all isolated islands of information. The information flow between departments and personnel is still dependent on manual methods. This reduces transparency and useful application of the wealth of data that they contain.
It also makes the procurement team more nimble in dealing with changes of suppliers or any unforeseen disruption of the supply chain.
Instead of reacting to incidents on the supplier end, the procurement team is better able to anticipate events and prepare accordingly. This tightens up the entire supply chain and makes it less vulnerable to unforeseen events.
Companies are very careful about their due diligence process for employees but neglect to do the same for their suppliers. This is a vulnerability in the procurement process that can affect the entire operations and timelines. This is the reason for the growing awareness about the need for supplier screening. Companies sometimes perform this in-house or outsource the process to third parties who specialize in supplier screening. Certifying bodies that issue certification to suppliers that can be verified by companies sourcing from them are also a part of this process.
Having a system in place to ensure the same compliance consistently for each supplier is important. This should also be scalable and replicable in different geographies. The different parameters for compliance should also be realistic for small scale suppliers as their compliance differs from large scale suppliers.
Cross verification of all the supplier & service assurance certificates and documents is a vital part of the supplier monitoring process. There are also databases that allow a company to verify the financials and other details of every supplier before entering into agreements with them. This supplier screening is a process that should be repeated at least annually to ensure that one is updated on any changes in the supplier's financial health and dependability.
Modern digital solutions such as social media also help follow the supplier and the region’s updates for real-time inputs. Procurement software and other management solutions also have to be more mobile to enable real-time data entry and access so that every person in the procurement team has complete access to all the relevant information regardless of their locations.
Mobile and fully integrated digital solutions also enhance the connectivity between the suppliers and the company making the relationship easier to monitor and grow.
Procurement organizations are turning to new technologies in their efforts to streamline supplier processes so as to remain competitive and reduce time to market (TTM). However, the supplier information required to ensure the success of these efforts is currently scattered across multiple systems and departments. This makes it difficult for procurement organizations to:
Perform supplier fit analysis: Procurement teams often find that the initial supplier identification processes are either too time-consuming or inefficient. This is largely because sourcing professionals need to consult multiple supplier intelligence resources to learn which suppliers are in the marketplace. For instance, a survey of 40 executives who attended the ProcureCon Pharma conference last year reveals that “83 percent of supplier searches take one to six weeks (or more) to identify the right suppliers and their contact information for internal partner requests prior to initiating an RFP”.
Evaluate supplier performance: Procurement teams need to keep track of suppliers available in the market. These teams spend a significant amount of time assessing supplier capabilities and monitoring supplier track records in handling specific deal sizes or types. This information is rarely consolidated or centralized in a single location. Common evaluation parameters and benchmarks can be set only if the information is classified and cleansed in a manner that allows for true comparison, as in the case of supplier spend analysis.
Understand the consequences of supply chain disruptions: Consumer activism and regulatory changes are examples of potentially disruptive factors that can hinder supply chain operations. When such disruptions take place or are anticipated, procurement teams need to leverage their supplier intelligence to understand how the situation can be mitigated – either in the form of an alternate supplier or some other strategy. Take the impact of the Environmental Protection Law that was implemented in early 2015 in China, the world’s primary producer of Folic acid. Several of the country’s Folic acid manufacturers were forced to shut down operations, leading to reduced availability of the product and a subsequent price increase. The effects were so drastic that the average price of Folic acid went up to $445 per kg in the first quarter of 2015, compared to approximately $22 per kg in the previous year.
Most organizations have historically relied on sourcing this fragmented data either from supply partners or customer references. They have also tapped into sources such as ERP solutions, trade publications and workshops. However, it’s time procurement organizations looked beyond these traditional sources.
Procurement teams who harness information from multiple, independent and real-time sources find that they can make more effective data-driven supply chain decisions. Digital solutions such as on-demand market intelligence portals, mobility and social media channels promote a two-way exchange of information which empowers procurement teams to enhance their knowledge and understanding of supplier capabilities and related market information. This enables procurement teams to develop stronger supplier relationships, anticipate or plan for supply chain disruptions, improve contract negotiation and more.
Self-service portals are redefining the way market intelligence is delivered to procurement and sourcing teams. Intelligence partners who offer real-time, on-demand access to reports and category data via a self-service platform enable buyers to easily engage with their services over the cloud. This helps category managers monitor supply markets, set supplier performance indicators and competitor benchmarks. Such platforms offer category managers access to a collaborative peer community of procurement directors and industry experts to gather inputs for market data, supplier negotiations, and more. Contextual and relevant market intelligence helps category managers make the shift from being tactical to strategic.
From supply chain disruptions to tanking markets – procurement professionals need to be prepared for unexpected events 24/7, 365 days a year. They need to be aware of the risks and challenges caused by multiple factors and plan for various outcomes to ensure business productivity and continuity. Mobile solutions can promote sharing of intelligence with either internal or external peer communities (such as on-demand self-service platforms) across spending areas. These include the ability to make quick notes, upload documents and photographs related to any market-related situation. Other important functionalities include receiving notifications and alerts about new information associated with individual suppliers.
Social media channels are relatively newer streams that procurement teams can consider using for gathering supplier intelligence. Traditionally, organizations use social media to reach and interact with their customers. Supplier organizations, too, use social media to share information about new products, prototype testing, facility expansion, achievements, and more. Social media-based supplier intelligence can also help procurement teams get notified about potential supply chain disruptions such as tarnished reputations due to problems in supplier factories, attempts to falsify compliance with working conditions, etc.
Category managers can set up supplier, location as well as industry-based filters and/or triggers to fetch information from social media sites such as LinkedIn, Twitter, and Facebook. They can also follow specific suppliers, create lists and internally share published social media posts with relevant stakeholders. While these steps will ensure a constant stream of alerts, category managers will find that these may not always be accurate or important. In such cases, a procurement intelligence partner will have the contextual background and expertise required to filter out unwanted messages and provide alerts that are relevant.
Digital solutions like the ones discussed above have the power to transform supplier relationships just by introducing an element of two-way information exchange, thereby enhancing the way procurement teams achieve cost savings. By successfully gathering, cleansing, analyzing, and turning various data points into actionable intelligence, procurement teams can gain more in-depth knowledge on their supplier ecosystem and its dynamics.
 Improving Strategic Supplier Discovery Through Technology – ProcureCon Pharm and Tealbook
Join us on Oct 6 for a webinar on Managing Inflation and Supply Shortages