Shortlisting a supplier performance management solution

Information technology is rapidly changing the way organisations are evaluating supplier performance.

The best of breed supplier performance management (SPM) solutions available today are widely being recognised as important enablers to manage, monitor and find methods for collaboration with suppliers, says Niren Chaudhary, of Zycus, a spend management organisation.

“Up until recently SPM was manual or based on rudimentary information technology tools. These evaluation processes were plagued by a lack of visibility, absence of collaborative platform and process inefficiency,” says Chaudhray.

These cumbersome, time consuming and opaque processes are now getting a face lift with efficient and simplistic SPM solutions.

However, with the availability of a number of SPM solutions from the largely fragmented market, organisations must carefully deliberate when shortlisting a solution which can address their specific requirements in line with the overall objective of supplier management, he notes.

Here are the few rules which Chaudhray suggests organisations keep in mind when short-listing an SPM solution:

1. Ease of Use. Simplicity pays. You want a solution which can address SPM while simplifying the
process for application users. An elaborate and complex solution may only add to complexity
besides adding up to the solution’s total cost. A simple, easy to use solution will minimise training requirements while enabling easy adaptability by application users.

User friendly dash boards, easy data entry / search mechanism and user friendly interface to define key perfromance indicators and score cards are thus absolute must haves for deriving maximum value from an SPM solution.

In addition, an efficient SPM tool should also have a simple work flow to create surveys and collate relevant information after the survey.

Before finalizing an SPM tool it is advisable that an organisation should ask the SPM vendor for hands on experience with the tool for a limited time period. This will enable the application users to have a reasonable feel and asses the tool’s adaptability within the organization.

2. Flexibility. Every organisation has specific SPM related requirements and focus areas which are
in line with its unique strategic objectives. Any SPM tool requires requisite flexibility and configurability to effectively address organisation-specific requirements. It is important that before short-listing an SPM tool, an organisation should have a clear assessment of its requirements.

The organisation should not only define clear cut quantifiable performance metrics in terms of KPIs and scorecards, but also processes to collate information required.

Subsequently the short listing of a SPM tool should be based on the tool’s ability to be mapped according to laid-down processes and its ability to define the KPI’s. The high flexibility of the tool would also allow any changes in defining KPI’s and any other modification which may deem necessary in future.

Remember the golden rule that a tool will only be relevant if it can define performance parameters and processes specific to an organisation’s requirements. SPM tools based on standalone metrics or metrics borrowed from other companies are bound to fail as they would not be aligned to procurement goals of the organization.

3. Focus on Fundamentals. The market today is flooded with products with endless features and capabilities. However a tool which boasts an endless list of features may not be the best for an organisation’s requirement.

What may be more relevant to an organisation is whether the tool addresses the fundamental business problem in a simplified and transparent way while maintaining absolute visibility to all stake holders. A SPM tool essentially should help you manage, monitor and find opportunities for further improvement in the supply chain. It is these fundamentals which should play a major role during short listing of an SPM solution.

Any add-on, though welcome, should not be at the cost of added complexity or give more weight to features which do not serve the above mentioned fundamentals.

4. Integration. It is important for an SPM tool to have seamless integration with other information tools such as supplier information management and ERP systems. The obvious benefit of such integration is automated collection and updating of supplier data. Integration also enables access to a single interface to provide comprehensive and up to date information of suppliers.

The amalgamation of all information tools should result in a manifold increase in their efficiency. Though, most SPM vendors provide integration with ERP systems, the integration with other information tool is generally limited to information solutions offered by the same vendor. An organisation which is in process of short listing SPM tool should thus think of a long-term strategy which may include susequent implementation of other information tools.

5. SAAS vs BTF solution. Whether to opt for SAAS (Software as a service) based or a BTF (Behind
The Firewall) tool is an important consideration before implementing any information tool.

Clearly the market for SAAS based information tools is growing as it enables organisations to save on tool-specific hardware installation, is easy to implement and has a lower upfront cost.

Because of its low upfront cost and minimum requirement of IT support, an SAAS-based application enables relatively smaller companies to use advanced applications which were historically only accessible to larger and cash-rich organisations. The SAAS model also lowers switching cost for the users while enhancing accessibility to all stake holders.

SAAS vendors typically deliver two to four major upgrades per year that the user gets automatically.

Unlike SAAS, the BTF solution has a higher total cost of ownership but may provide better customisation and fool proof security of data. Companies looking for information tools should carefully analyze both the approaches to finalize the one best suited for them.

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