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Effective Supplier Management: Because Knowing Is Better than Wondering

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When it comes to good supplier management, it’s an opportunity you wouldn’t want to miss and a risk you cannot afford to take. Meticulous supplier information gathering, measuring performance, and assessing risks is a two-way collaborative process between buyers and suppliers. Without the right tools and processes, efforts to manage your supplier portfolio could take a lot of time with little results. This session presents the groundwork for laying a successful supplier management strategy and the best practices in maintaining buyer and supplier adaption.

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Effective Supplier Management: Because Knowing Is Better than Wondering

  1. 1. Effective Supplier Management: Because Knowing Is Better than Wondering Arent van der Schatte Olivier, Ariba, an SAP Company 22 October, 2015 Public
  2. 2. © 2015 SAP AG. All rights reserved. 2 Per supplier annual cost incurred by the enterprise to manage supplier information and performance without using SIM/PM Tools* $ 1,000 Thus the total costs in managing a supplier base of 1000 suppliers $ 1,000,000 Per supplier savings realized by the enterprise to manage supplier information and performance by leveraging SIM/PM tools* $ 850 Savings realized by managing at least 20% (of 1K) suppliers through the Ariba SIM/PM $ 170,000 *AMR Research: An Economic Dream: Supplier Information Technology’s Massive Cost-Saving Opportunity by Mickey North Rizza Did you know?
  3. 3. © 2015 Ariba – an SAP company. All rights reserved. 3Public Supplier Management Business Challenges Fragmented and inaccurate supplier data across multiple disconnected systems Incorrect, incomplete, and out-of- date supplier information Lack of visibility into supplier performance and risk Inconsistent or non-existent processes to measure supplier performance Limited resources to monitor and execute an SPM and risk program
  4. 4. © 2015 Ariba – an SAP company. All rights reserved. 4Public Supplier Performance Management A variety of business trends are driving the need for SPM as part of strategic sourcing activities, including: • Executive Mandates to Reduce Supplier Risks • Increased Outsourcing • Unstable Supply Markets o more and more companies are taking actions to measure and improve supplier performance: • 70 percent of best-in-class enterprises measure the performance of at least 51 percent of their supply base.* • 43 percent of best-in-class companies have instituted cross-functional teams of key stakeholders to manage supplier performance and risk management programs.** • 54 percent of firms, measured in a study by Gartner, plan to increase budgets for Supply Chain Risk Management activities. There are a number of challenges that may be encountered in taking on this effort: o Large numbers of suppliers (‘000s) can make SPM efforts cumbersome and limit coverage o Fragmented supplier data across multiple disconnected purchasing systems o Inconsistent goals, metrics and measurements across divisions and sourcing teams o Labour-intensive data gathering and rudimentary analysis tools that are not scalable o Lack of a single “owner” for each supplier to drive the SPM process and be accountable for results. • *Aberdeen Supply Risk Management, 03/07 • **AMR - Managing Risk in the Supply Chain - A Quantitative Study
  5. 5. © 2015 Ariba – an SAP company. All rights reserved. 5Public 2. Sign the Deal 1. Find a Deal (Sourcing) 3. Broadcast it 5. Be Invoiced4. Buy it 6. Pay Analyse Track Info and KPI NegotiatePlanDiscover Request ReceiveApprove CatalogueContract PayProcess Invoice Sourcing Contracts Purchase Orders Order Confirmation Shipping Notices eInvoices Invoice Status Payment Status Catalogues Ariba Network 1.8+ Million Suppliers Ariba Spend Visibility Ariba Discovery (free) Ariba Sourcing Ariba Contract Management Ariba Catalogue Ariba Supplier Information & Performance Management Ariba Procure-to-Pay Ariba PO & Invoice Automation Company Information Performance Management Remittance Advice Ariba Solutions Overview
  6. 6. © 2015 Ariba – an SAP company. All rights reserved. 6Public Defining a New Program and Best Practices Consistent performance criteria across the organization Integrate the Supplier Performance Process, Knowledge management, Score-carding Solution, and Reporting Solution Focus on Few Critical Metrics Define supplier ownership model within procurement Start with strategic suppliers, work toward collaborative suppliers (requires segmentation efforts) Define and use a straightforward process Maintain a manageable number of Scorecard and Survey Templates
  7. 7. © 2015 Ariba – an SAP company. All rights reserved. 7Public Typical Programs Have Different Levels of Supplier Participation by Group or Tier
  8. 8. © 2015 Ariba – an SAP company. All rights reserved. 8Public Supplier Tier Determines Program Components
  9. 9. © 2015 Ariba – an SAP company. All rights reserved. 9Public Supplier Information & Performance Management Process Supplier Creation - Supplier Self Registration or Internal User conditional supplier questionnaire - Mandatory information, attachments with expiration dates, automatic scoring of inputs 1 Send supplier information to other enterprise solutions 6 Review & Approval - Intelligent, configurable routing & approval - Approval flow based on supplier attributes - Dashboard reminders and e- mail notifications for key tasks - Approvals and notifications by e-mail 2 Information Repository & Syndication - Manage supplier data, certifications & risk - All supplier data and activities consolidated in a centralized workspace - Import data from external systems 4 Search, Report & Analyze - Powerful search by key word & attribute - Analytical reporting for comparison & decision making - Find & qualify new suppliers with Ariba Discovery 5 Performance Management & Notifications - Supplier surveys integrated to scorecards - Capture and track supplier KPIs - Automated notifications for expiring attributes & certs - Manage all supplier related tasks, events and actions 3
  10. 10. © 2015 Ariba – an SAP company. All rights reserved. 10Public SIPM Solution Elements Analyze Discover Plan Negotiate Track Dashboard Survey / Scorecard Supplier 360°report Supplier Workspace Performance Mgmt. Process Supplier Profile + Risk Data
  11. 11. © 2015 Ariba – an SAP company. All rights reserved. 11Public CAPTURE GENERAL INFORMATION Name, adress, contact, phone, commodity, etc GET MORE DETAIL Certification, sustainability, minority empowerment, hazardous material process, financial report, internal categorization REVIEW & APPROVE Route information to key stakeholders for approval Onboard Suppliers & Capture Supplier Information Take Action Repeat How Supplier Management Works Reporting Extra Profile Information (Internal/External) ADD ERP / OUTSIDE DATA Spend, expediting information, invoice volume, contract value, security audits, etc RUN STAKEHOLDER SURVEYS Internal/External surveys per categories, groups, region, departments –auto renewal TRACK USING SCORECARDS Track Key Performance Indicators MANAGE PERFORMANCE Collaborate with supplier to manage relationship Track Supplier Performance ERP DATA SURVEYS/ SCORECARDS
  12. 12. © 2015 Ariba – an SAP company. All rights reserved. 12Public Requirement Benefit SIPM repository holds all contract management information including supplier reviews, score cards, certifications and SLA performance (360 Supplier view) Enables you to demonstrate effective supplier management of maintenance programs. This are particularly important in any legal related matter. Enables you to compare suppliers month on month and 1/4 on 1/4 performance Better alerts of any performance issues or potential contract breaches Ability for suppliers/contractors to actively manage their obligations to you by entering contract and qualification information directly in to SIPM Suppliers become more responsible for day to day contract and qualification data freeing up you staff from this task A single repository enables you to collate and funnel information in to subsequent sourcing events Reduces sourcing cycle time, performance information is on hand when re- negotiating contracts, and enables you to fine tune sourcing requirements Dashboard reporting functionality gives management a snap shot of the supplier performance process including over due items such as reviews and certificates Circumvents potentially damaging contract performance issues and ensures you staff are proactively managing their contracts
  13. 13. © 2015 Ariba – an SAP company. All rights reserved. 13Public Supplier Information Management EXAMPLE - Reporting Dashboard • Dashboard can be customized for individual users
  14. 14. © 2015 Ariba – an SAP company. All rights reserved. 14Public SPM Project Structure SPM PROJECT SCORECARD KPIs SURVEY Feedback RESPONDENTS
  15. 15. © 2015 Ariba – an SAP company. All rights reserved. 15Public Recurring Tasks First Iteration Master Recurrence Second Iteration Documents Tab For First Iteration For Second Iteration Third Iteration For Third Iteration Tasks Tab
  16. 16. © 2015 Ariba – an SAP company. All rights reserved. 16Public Set pre-grades for each possible response Pre Grading Surveys
  17. 17. © 2015 Ariba – an SAP company. All rights reserved. 17Public • Track supplier performance in specific areas. • KPI values are based on survey scores • Include target performance levels • Performance period-specific and supplier-specific Scorecards
  18. 18. © 2015 Ariba – an SAP company. All rights reserved. 18Public Scorecard upon completion of surveys
  19. 19. © 2015 Ariba – an SAP company. All rights reserved. 19Public Content Visibility by Participant • Survey content can be filtered so that certain users can only see specific sections • This allows you to send out one survey to multiple people and control the questions each user can see/answer
  20. 20. Thank You

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