Choosing the right SPM vendor
Published: Nov 24, 2010
Asia - Niren Chaudhary from Zycus provides a comprehensive list of rules for any organisation seeking out a supplier performance management solution for its supply chain.
Supplier management today is widely recognised as a strategic enabler. In today's world of complex business environment and global supply chains, effective management of suppliers not only gives a competitive advantage but also has a direct impact to the organisation's bottom line. Such criticality of supplier management makes it important for organisations to constantly evaluate supplier performance, assess risk and find opportunities for improvement in the value chain.
The price based evaluation of suppliers has long become outdated. Today, the organisations need a 360 degree evaluation of suppliers on multiple parameters. Supplier evaluation isn't just limited to procurement but also involves evaluation from multiple internal functions. Such requirements have led organisations to formulate complex key performance indicators (KPI) and supplier performance scorecards requiring inputs on multiple parameters from different internal stakeholders. Up until recently, the supplier performance management (SPM) was manual or based on rudimentary information technology tools which at best could be described as ad hoc, cumbersome and time consuming. These evaluation processes were also plagued by a lack of visibility, absence of collaborative platform, and process inefficiency.
Thankfully, information technology is rapidly changing the way organisations are evaluating supplier performances. The best of breed SPM solutions available today are widely being recognised by organisations as an important enabler to manage, monitor and find opportunities for collaboration with suppliers. The usually cumbersome, time consuming and opaque processes are now getting a facelift with efficient and simplistic SPM solutions. However, with the SPM market being largely fragmented and availability of a number of solutions to choose from, organisations still require careful deliberation to shortlist a solution which can address their specific requirement in line with the overall objective of supplier management. Here are the few rules which the organisation needs to keep in mind while shortlisting 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 on the other hand would minimise training requirement while also enabling easy adaptability by application users. User friendly dashboards, easy data entry/search mechanism and user friendly interface to define KPIs 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 finalising an SPM tool, it is advisable that the organisations 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 assess the tool's adaptability within the organisation.
2. Flexibility- Every organisation has specific SPM-related requirements and focus areas which are in line with its unique strategic objectives. It is thus obvious that any SPM tool would require requisite flexibility and configurability to be effectively able to address organisation specific requirement. It is important that before short listing an SPM tool, an organisation should have a clear assessment of its requirement. The organisation should not only typically define clear cut quantifiable performance metrics in terms of KPIs and scorecards, but also the processes required to collate information. Subsequently, the shortlisting of SPM tool should be based on the tool's ability to be mapped as per laid down processes and its ability to define the KPI's. Also, the ability to configure user specific dashboards and access control would be an added benefit. 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 your requirement. 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 organisation.
3. Focus on Fundamentals- The market today is flooded with products which talks about endless features and capabilities. However a tool which boasts of endless list of features may not be the best for an organisation's requirement. What may be more relevant to an organisation is the fact that whether the tool addresses the fundamental business problem in a simplified and transparent way while maintaining absolute visibility to all stakeholders. An SPM tool essentially should help you to 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 the SIM solution. Anything add on though welcome should not be at the cost of added complexity or giving 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 single interface to provide comprehensive and up to date information of suppliers. In other words it would be prudent to say that the amalgamation of all information tools result in manifold increase in their efficiency. Though most SPM vendors provide integration with ERP systems, the integration with other information tools is generally limited to information solutions offered by the same vendor. An organisation which is in the process of short listing a SPM tool should thus think of a long-term strategy which may include the implementation of other information tool subsequently. In such scenarios it would be wise to evaluate a vendor not only on the basis of capabilities of its SPM tool but also on the basis of the capabilities of other information tools of the vendor.
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 lesser upfront cost. Because of its low upfront cost and minimal requirement of IT support, SAAS-based applications enable relatively smaller companies to use advanced applications which historically were only accessible to larger and cash rich organisations. The SAAS model also lowers switching cost for the users while enhancing accessibility to all stakeholders. Besides this, SAAS vendors typically deliver two to four major upgrades per year that the user gets automatically. Unlike SAAS, the BTF solution has a more total cost of ownership but may provide better customisation and fool proof security of data. Companies looking for information tools should carefully analyse both the approaches to finalise the one best suited for them.
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