Comprehensive sourcing analysis and supplier collaboration

The article that leads this series of articles identifies the six main pillars necessary for a smart, efficient, flexible, and customer-focused supply chain. One of those pillars is 360° sourcing analysis and supplier collaboration, and that’s the area we’ll address here.

• The six pillars of the intelligent supply chain:
  1. Intelligent network design and risk management
  2. Smart forecasting and integrated business planning
  3. 360° sourcing analysis and supplier collaboration
  4. Touchless and agile order to delivery
  5. Supply chain as a service
  6. Supply chain control tower and end-to-end performance management.

Procurement is evolving more rapidly than ever before. The challenges around supply chains, risk managing including sustainability, technology advancement in areas such as artificial intelligence, and the inability of procurement in many organizations to react to changing business environments, is seeing this pace accelerate.

As part of this, strong supplier collaboration is becoming key to driving an effective supply chain that enables 360° visibility both internally and externally.

Sourcing analysis…

For many organizations, procurement remains focused on a small number of criteria to make sourcing decisions. For a given specification, price is the determining factor – sometimes total cost of ownership (TCO) and rarely return on investment (ROI). For items where short lead times are important, delivery dates may be taken into account. But many miss the tools or data to make decisions beyond these few factors.

Let’s look at the data required to undertake further analysis within the purchasing process:

• For supplier performance, we need to look at past data such as delivery times, returns, and failure rates
• For risk, we should look at sustainability and diversity measure metrics, financial risk, and social indicators for areas such as modern slavery.

But it is impossible for organizations to track this data against every one of their suppliers. Right?

Take supplier performance. Most organizations have much of this data available to them, be it invoice data, purchasing data, delivery dates, refunds, and credits. If they have a procurement lifecycle management (PLM) system in place, or MRO (maintenance, repair, and operations), they might even have data to link this to their production systems to understand the impact on production failures. Creating predictive models from this data and feeding this information back to the organization’s procurement system will ensure this data is available for sourcing decisions.

For risk management, there are terabytes of data available in the public domain, not to mention the myriad of private services that can be leveraged. While mining this is beyond most organizations, there are many services that can provide this service across the supplier base.

There are also sourcing platforms that will analyze spend data and automate the supplier selection process based on an organization’s own supplier base, together with their own supplier performance data and external risk management factors based on the criteria defined for sourcing. Intelligent online searches can aggregate information to build a detailed picture of the supplier landscape, bringing together analyst reports, other third-party assessments, media coverage, social media comments, and more.

From this analysis, conducted in the open market, organizations will develop a better understanding of their current and potential future suppliers, and their resilience, performance, and sustainability.

But it doesn’t need to be an all or nothing approach. While organizations work towards getting their data perfect, incremental improvements in visibility will drive much better sourcing decisions and improve supply chain resiliency.

… and supplier collaboration

Comprehensive analysis of the kind we’ve just summarized enables organizations to be confident in the suppliers from whom they source products, materials, and services.

Which, of course, is highly desirable. But all of this is largely a tactical benefit. What a thorough analysis can also provide is an understanding not just of practicalities, but of character. The better a business truly knows its suppliers, the better it will be able to form lasting and productive relationships with them. Collaboration of this kind goes beyond tactical gains to deliver genuine strategic advantage.

When organizations and their suppliers know and trust one another well enough, the boundaries between them can become fluid. They can share responsibilities in order to achieve outcomes in planning, in quality, and in delivery that benefit all parties.

The collaboration can go further still. Supplier input can lead to positive changes in product design that organizations may not otherwise have been able to envisage.

When relationships reach this level, they’ve left the basics of fulfilment far behind. They’ve become genuinely innovative – so much so that perhaps the term intelligent supply chain doesn’t do them full justice.

Innovation and intelligence

It’s time, perhaps, to recognize that supply chain innovation needs to – more than ever – include procurement. Rather than being reactive, it needs to be more intelligent – and even creative – to be able to add more value to the organization.