Everything today has to get done quickly. That has simply become everyone’s expectation. And when it comes to managing a company’s extended enterprise – the vast array of suppliers, outsourcers, and other third parties that contribute to the value chain, there is no exception.
When a weather event or geo-political situation arises, identifying which products could be impacted by the disruption and what other suppliers could step in must be determined almost immediately. When a new supplier is being considered, the potential risk associated with working that supplier must be evaluated quickly. When a new regulation is introduced, assessing which providers are impacted and then confirming compliance must be determined within a tight timeframe. When an incentive payment to a global outsourcing provider is being requested, the performance evaluation must be visible to the approver with today’s information.
In most organizations, pulling this information together usually involves what’s akin to a fire drill. Phone calls are made. Emails are sent. Data is requested. Spreadsheets are created. Questions get answered. And no one asks the question, “how long it will take?” They expect the answers immediately. Things eventually calm down, until the next alarm sounds.
Given the heavy reliance companies have on third parties and the high number of people, functions, business lines, and regions involved, the alarms seem to sound more frequently these days. That is why industry leaders have started to implement the right tool to replace what is typically a cumbersome, manual process with one which keeps information up-to-date, visible, and actionable. These leaders are applying the same level of rigor traditionally used for managing internal resources (i.e. Human Capital Management) to overseeing and controlling the activities taking place outside their four walls.
At the highest level, these leaders realize that like employees, each contract represents more than a legal agreement, but a relationship that must be managed throughout a lifecycle. Therefore, they vet providers on more than price, scope, and financial strength. They perform a risk assessment of each of their providers across multiple dimensions – e.g. operational, information security, regulatory, and reputational. Then they put in place management controls for performance and compliance and collaborate with the providers to drive expected outcomes.
As leaders, they also are leveraging tools that are dramatically different than Enterprise Resourcing Planning (ERP) and transaction management solutions like e-procurement and sourcing. As Jim Shepherd from Gartner points out, these new tools have a different set of characteristics:
More flexible, loosely coupled architecture
Easy and intuitive to use
Fast to implement
User configurable and extendable
Rapid innovation cycles
The tools must be different in order to adequately address the questions surrounding, “how long will it take?” The tools must differ in terms of getting implemented, gaining wide spread adoption, collecting all the required information, and making changes as situations dictate (e.g. new supplier, new regulation, new geography, new stakeholder.) Simply put, people no longer have the appetite for long implementations and complex administration. And if you attempt to solve this problem with existing applications that were designed to manage more internally focused processes like procure-to-pay or SOX compliance, while this seems like the fastest way to get results, all indications are that not only will it take a long time, but you will not be able to work with companies outside your four walls in the most efficient and meaningful way.
So as you look to improve your supplier risk and relationship management practices and manage all the companies in your extended enterprise, remember it does not have to take more than 90 days to get a robust solution in place.
Therefore keep in mind the following as you are evaluating alternatives for supplier risk and relationship management software:
Vendors should be able to provide evidence of short-term, high-impact results.
Ease of use contributes to the likelihood of a smooth adoption by users.
Architecting the solution so that the platform becomes a centralized repository for key SRM data and processes will reduce or eliminate the need for users to access multiple systems to see a complete supplier picture.
Target “early adopters” as the first pilot participants by identifying those business units with well-developed manual processes, and who are open to change and are willing to work with the SRM organization to ensure success of the initiative.
Don’t make things more complicated than they need to be.
In summary, since everything today has to get done quickly, you and your stakeholders will need a supplier risk and relationship management solution that is easy to use, easy to implement, and easy to administer. This will ensure that not only do you realize rapid time to value, but that as things change, you can react immediately.