July 3, 2014

Supplier Management: The Foundation Matters

“The loftier the building, the deeper must the foundation be laid” – Thomas Kempis

Often I am asked why walk away from potential opportunities to secure new customers. These are always difficult decisions, but logical ones – and I want to briefly explain.

As a general rule, it is always best to only chase business where you know your organization can help ensure your customer’s success. To lose site of this can only reflect poorly on your own quality of work. HICX Solutions offers a full range of supplier management solutions, from supplier onboarding through scorecarding and risk management, yet many don’t understand why we may walk from a scorecarding opportunity, as an example.

More often than not, we are approached with the following scenarios:

· “We are looking at implementing a performance management solution.”

· “We are looking at risk management (pick any of the thousands of focus areas).”

· “We are looking for a solution to assist us with FCPA, or UK Anti-bribery.”

· “We are hoping to find a solution that can assist us with supply chain finance.”

· “We want improved supplier relationships.”

· …And so forth.

A fairly standard question is, “How many suppliers do you have?” And a fairly standard answer is, “We don’t really know.”

There in lies the dilemma. How can any of these types of initiatives work if there is not a solid understanding of who you are working with, how you are engaged with them, what constitutes the relationship, etc. It is almost similar to trying to build a second story on a house without having the foundation and/or first floor properly secured.

Imagine a risk management program where risk isn’t starting to be assessed from the very beginning of the supplier lifecycle. Imagine trying to implement FCPA / UK Anti-bribery without knowing your third-party relationships, and in what division, geography, and business unit you are leveraging them.

We welcome these types of engagements; however, initiative such as risk, scorecarding, compliance, etc. are building blocks, which rely on the foundation of onboarding, master data management, and governance. Without the foundation, the customer is less likely to succeed, and we would follow suit.

But doesn’t everyone have the foundation already? No. A lot has been written about this; therefore, I won’t bother expanding here, but will ask… Is your supplier master clean, consistent, and reflective of all your supplier’s internal relationships?

Side note: The latest thinking, as well, is that organizations now have to manage “the tail” (80% of the suppliers that make up 20% of the spend) better in order to improve performance. Again, where does one start, and how does one achieve management by exception, without having insight into your total supply base?

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