June 4, 2013

Supplier Relationship Management: Can the Elusive Hole Ever be Plugged?

Mark Twain quipped, “A round man cannot be expected to fit in a square hole right away. He must have time to modify his shape.” The irony is that we usually hear that “one cannot fit a square peg into a round hole”, but we accept Mark Twain’s view when it comes to Supplier Relationship Management.

As the demands on supplier management increase, “time” enables the recurring cycle of one step forward and two steps back.

Not to target any particular company, as many have followed similar routes, but let me highlight a group of acquired solutions, all under one roof, in order to plug certain holes:

  • SAP (ERP)
    • Ariba (spend management)
      • Alliente (procurement outsourcing)
      • b-process (e-invoicing)
      • CMSI (contract management)
      • FreeMarkets (sourcing software, and spend analytics)
      • Procuri (strategic sourcing, contract management, spend analysis, and supplier management software)
      • Softface (spend performance)
      • TRADEX (online registration, bidding, etc.)
      • Quadrem (B2B network)
    • Frictionless Commerce (supplier relationship management)

Regardless of the obvious overlap in functionality, the varying platforms, and the question of whether they work seamlessly for the customer now… does the combined effort of 11 companies plug the Supplier Relationship Management hole – or is the result just a larger “suite” of disjointed products?

Jim Collins spoke of the “Hedgehog” concept in his best-selling book, Good to Great. The message was that great companies pinpoint the intersection of three overlapping circles: What lights your fire (“passion”)? What could you be best in the world at (“best at”)? What makes you money (“driving resource”)? What he argued against was that greatness would elude those companies that are constantly chasing anything that they can make money at. This, as opposed to the hedgehog (which knows one big thing), is the fox, which knows many small things.

The inevitable questions remain:

  • Can the foundation of the existing system handle my data requirements?
    • Highly fluid… Risk information? Supplier Scorecards?
    • Transactional… PLM? eInvoicing?
    • Multi-tier… n-Tier? Conflict Minerals? Supply Chain Mapping?
    • The Basics… Multiple Banking/Payment accounts? Multiple Supplier Sites? Multiple Supplier Relationships?
  • Can the foundation of the existing system handle my unique organizational structure?
    • Processes… By Geographic Units? (and) By Business Function? (and) by Legal Entity? (and) by Customer? (and) by Organizational Unit?
    • Data Governance…  Based on your matrix dimensions? Approval hierarchies?
    • Syndication… Organization view, versus System view?
  • If not, will another acquisition make it better?

Without the proper foundation, no system would be able to properly adapt to your needs without managing the core (a.k.a., “supplier master”, “supplier information”, etc.), – and another round of acquisitions will not plug this hole. Time is certainly not on the side of waiting to find out either.

In lieu of being the hedgehog, providers are attempting to be everything to everyone (a fox). Just because some supplier master data is collected within an RFx, it does not necessarily reach Supplier Information Management. Similarly, just because spend detail is available within the Supplier Information Management tool, it is not necessarily Spend Analysis (assuming a classification “data pump” is part of Spend Analysis, of course).

And… why is it that many providers are trying to throw more systems at the problem instead of plugging the hole (how supplier information is managed, at its core)?

The reality is that “best of breed” ideals need to exist in non-commodity focus areas – and they need to focus on, what Jim Collins identifies as, what they can be the best in the world at.

The management of supplier master data has yet to be commoditized, as the approaches differ significantly. Spend Analytics, eSourcing, Contract Management, etc. have reached commoditization, as the results are simple the results, regardless on the method to achieve it.

As such, any provider that claims to manage supplier master data, in place of just building a bigger “suite” and/or collecting simple data-points, should consider:

  • integrating into being value-added providers;
  • being agnostic as it relates to commoditized offerings (e.g., software, data, etc.);
  • ensuring your underlying data architecture can incorporate any scenario (note: easier said than done); and,
  • incorporating a model that can support a complex organization’s structure, from processes to governance, through syndication.

Time to consider a better path – or, at the very least, holding your provider to a higher standard?

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