Having a central place where companies can store data about their suppliers, the data provided by their suppliers and third party insight is essential to effectively evaluating supplier spend as part of corporate supply chain management goals. But, not every company practices that. I’m going to talk today about how that central source of data can help you to better understand your suppliers and their related spend, and how to look beyond the hard numbers and make better business decisions.
Before I jump into the mechanics of the presentation, I’ll give you a little background on D&B and how we fit into the equation.At D&B Supply Management Solutions, we focus on helping companiesmake better supplier lifecycle management decisions – powered by D&B insight. Our customers use D&B’s rich, relevant and robust information about their suppliers to make choices at every stage of the relationship – from who to source with to what should be done when a supplier is experiencing difficulty to when it might make sense to find an alternative. We have a database of more than 206 million businesses in more than 200 countries. We’ve been partnering with Ariba since 2009, embedding D&B data about suppliers directly into the Spend Visibility tool.
D&B is committed to expanding our database of businesses on a global scale because we know our customers need these critical insights to conduct business. D&B WorldBase is the largest and most comprehensive global database of companies in the world.
Let’s talk a little about what businesses are up against – Catastrophic disasters. Economic uncertainty.Shareholder expectations. Competitive pressure on your brand, market-share and margins. Outsourcing. Globalization. Demand fluctuations measured in days instead of months or quarters. These realities all add up to massive challenges—ensuring that your suppliers deliver as promised, when promised; that your supplier portfolio reflects your company values and that you can consistently show the ROI of your supplier management strategies. It means designing supply management strategies that support evolving business needs. That means striking the perfect balance between cutting costs and keeping up with revenue and customer demands.
The global crises we saw in 2011 tested the relationships between buyers and suppliers. There is powerful connection between supplier stability and a company’s ability to make money by delivering goods and services. There’s a critical need for clarity into the supply base - really knowing who your suppliers are, what you spend with them, how they align with your corporate reporting and compliance requirements, and how risky they are to your supply chain. Supply chains are simply too lean, demand is too unpredictable and competition is too fierce to not have this clarity.Having clarity isn’t enough though. How you get that level of clarity is equally important. Manual processes are time-consuming and can’t provide the level of granularity that more automated methods do. This is something more and more companies are realizing and are making the switch.
It is important to identify supplier’s from: A corporate family linkage perspective Diversity status Total spend when working with their suppliersThese are just some of the categories that we’d recommend companies explore to get a clear, overall snapshot of supplier health. Companies must also take into consideration:Overall financial health Indicators of risk like legal proceedings against a supplier Socio-political stability of the supplier’s locationHaving a single source of truth for all supplier data gives companies the ability to see the makeup of their supply base at a glance. It also enables the ability to drill down into the granular - and pull back to do analysis at an aggregate level based on the data discovery that’s needed. An automated central repository helps eliminate time-consuming manual processes of pulling data from separate systems and reconciling all the information. A good, strong supplier data fact base helps streamline the process of reviewing supplier data and identifying trends, risks and opportunities.
Let’s take a look at 5 key questions procurement teams need to ask themselves when evaluating supplier spend and managing their global supply chains. These questions can help you validate what you already know about your suppliers, but also expose the gaps in what you don’t know. The first one seems straight forward: “Who are my suppliers?” This is the most important first step to owning your supply chain and understanding where strengths and weaknesses lie – and where there are opportunities for driving more value. Understanding who your suppliers are means looking beyond the information you’ve compiled and information your suppliers provided themselves and enlisting a third-party to help validate and expand that information footprint.
The second question: “Where are there opportunities for cost savings and risk mitigation?” Everyone wants to do more, and with less money. Identifying how much you spend with a supplier and a corporate family level - and duplicate supplier contracts that you may not know existed in disparate systems - present the perfect opportunity to revisit supplier relationships and renegotiate contracts. It also provides companies with the opportunities to show the value of sourcing beyond procurement’s walls.And, risk isn’t always a bad thing. When presented with a ‘risky situation’ companies have two choices – work to mitigate that risk, or embrace it. Knowing where risk or cost-saving opportunities lie helps inform better business decisions and guides companies to look beyond the data to where the true value of the data is.
Third: “Where are there opportunities to diversify the supply base and achieve mandate-driven goals?” We’re seeing a shift from what used to be a mandate-driven model for diversity, especially prevalent in the U.S. In some cases, the value of working with a diverse set of suppliers can be measured simply – by contracts won or lost based on a company’s ability to comply with the mandate. However, as most of you know, global brands are recognizing the strong potential for supplier diversity programs to help them grow their businesses – whether through increased market share among emerging customer bases, stronger share price, faster innovation cycles, or more intangible measures such as brand awareness and loyalty. Snapshot views and reports that tell you how many suppliers in your supply base are diverse and how much you’re spending with diverse suppliers is a great way to increase your competitive advantage.
Fourth: “How can I get advance warning of a supplier disruption or change in the status quo?”Advance warning of supplier trouble can mean the difference between avoiding a disruption and coming out on top or scrambling to pick up the pieces. Your options for resolution are so much broader when you have the luxury of time. We saw this first hand last year following the disaster in Japan. The companies that came out on top were those that had strong mitigation plans in place to address any possible scenario, while those that struggled – and continue to struggle – were the ones still trying to get a grip on how they were impacted even after the waters were receding.
And most importantly: “What can your company do to stay out ahead of the competition?” Having the right information, in the right place is the first step in staying ahead of the competition. It gives you the tools you need to do the proper analysis to make informed business decisions. It can also help your company plan for the future and help link spend data and market intelligence to broader business decisions. Start your analysis instead with categories you know your organization cares about most. If you try to look at too much information all at once you can get bogged down by the details and go off course. Involve Finance and Operations partners along with your Procurement team as you prioritize your supply management goals – and as you work through the analysis and decisioning process. The right insight, combined with the right tools, that help your organization make confident decisions as your move through your supply management processes is the best way to stay competitive, lean and financially profitable.
Efficient spend analytics to drive sourcing pipeline and savings