This document discusses building a successful supplier management program. It outlines some of the challenges companies face today such as economic volatility and increased business risk. It then discusses how proactively managing risk, implementing efficient processes, and becoming more agile can help companies address these challenges. The document also summarizes research finding that supply chain risk is increasing and more formal risk management programs are needed. It argues that technology, capabilities, content and community all play important roles in structuring effective supplier management programs.

1. Ariba Knowle dge Nuggets
Building a Successful Supplier Management Program—Part I
In today’s business environment, companies are finding:
• Commerce can be complex, fragmented, and inefficient
• Marketplace/economic volatility
• Increased business and financial risk
• Need for compliance due to regulatory requirements
• Access to credit/cash more challenging
The question becomes….what will it take to be successful?
• Proactively managing/mitigating risk
• Implementing efficient business commerce processes
• Becoming more agile and flexible
• Reducing costs and increasing operational efficiencies
• Competing more effectively to improve revenue and profitability
• Becoming a Customer of Choice with strategic and critical suppliers –“The Hackett Group”
All of these factors can directly impact management of your suppliers. Challenges can range from:
Inaccurate and fragmented supplier Incorrect, incomplete, and Inconsistent or non-existent
data across multiple out-of-date supplier processes to measure supplier
disconnected systems information performance
Lack of visibility into supplier Limited resources to monitor and
performance and risk execute an SPM and risk program
• Increase in overall supplier management • Reduced quality, service and on-time
costs by 60-80%** delivery by 23 percent
• Failure to meet supply commitments in- • Ineffective sourcing leading to high prices
creases risks and costs • Increased risks due to non-compliance
** Source: AMR research, 2009
•

2. What is Procurement’s Role in Managing Supply Chain Risk?
According to Aberdeen Research
“The CPO’s Agenda 2009”
• CPO’s of leading enterprises
identified supply-related issues as
one of the top three areas of focus
in 2009
• Two-thirds of the same
companies expect supply risk to
increase over next three years
• 71% of CPO’s believe that Supply
Risk is increasing yet 30% have a
formal program in place to
manage it
For Procurement Leadership
• There is renewed pressure to improve how to diagnose and manage risk
• Access to a consolidated and comprehensive view of supplier information becomes all the
more critical to monitor supplier performance
• A requirement for predictive supplier intelligence to identify suppliers at risk
• Being “Surprised” or lacking key information will not be acceptable when a crisis strikes
Technology, Capabilities, Content and Community all play a critical role in
structuring an effective Supplier Management Program
TECHNOLOGY CAPABILITIES CONTENT COMMUNITY
Leverage software to Market, commodity, Market, commodity, Quickly discover,
streamline and financial, operational financial, operational assess and on-board
systematize gathering, and contractual and contractual alternative suppliers to
organizing and managing information along with information necessary hedge your risk by
the vast amounts of know-how and for effective decision- tapping a global
information required to resources to assess, making and alerts network of pre-enabled
monitor your supply chain design and implement trading partners
and identify problems the right risk
management programs
and processes

3. Supplier Management is Multi-Faceted and Touches Many Aspects of
Business Commerce
What Supplier Management is not:
• “Stand alone” process
• Static/disjointed scorecards
• Supplier performance reviews
(unidirectional v. 360o)
What Supplier Management is:
• Open dialog embedded throughout
Procurement lifecycle
• 360orelationship review incorporating all
aspects of Supplier –Information,
Performance and Risk
• Creating incremental value through win-
win initiatives using technology as an
enabler
Foundational Principals for an Effective Supplier Management Initiative
• Develop Executive Sponsorship
• Know your end game, concentrate on those
elements that drive toward the end game
• Define your Supplier Ownership Model and assign
Supplier Managers to Strategic and Preferred
suppliers
• Integrate the supplier management processes,
knowledge management, performance measures
and reporting requirements across your organization
• Use technology to Automate processes, including
data collection, reporting, analysis, Contract
Management etc.
• Work with (not on) suppliers
• Build in continuous improvement, modify
performance metrics over time, encourage
opportunities for cooperative innovation