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Supplier Relationship Management: The Importance of HQ Data

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.” This is obviously somewhat at odds with, “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, bought in an attempt 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)
    • Concur (travel expenses)
  • 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 (they don’t)… 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 organisational 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… Organisation 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. This is an issue that comes up time and again during large P2P (etc) implementations that haven’t considered the quality of the data as it stands and going forward.

Instead of being the hedgehog and being focused, providers are attempting to be everything to everyone. 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 recognised (beyond the analyst community) as an important building block within the process of digitising a procurement function. However, Spend Analytics, eSourcing, Contract Management, etc. have reached commoditisation largely as what they are offering is somewhat simpler and more straightforward.

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 commoditised offerings (e.g., software, data, etc.);
• ensuring their underlying data architecture can incorporate any scenario (note: easier said than done); and,
• incorporating a model that can support a complex organisation’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?