Rethinking Supplier (Information) Management
The latest episode of Dial P for Procurement (an hour-long monthly livestream event co-hosted by industry influencer, Kelly Barner, and Supply Chain Now Founder Scott Luton) featured HICX Chief Commercial Officer, Ragnar Lorentzen in a conversation with Jeffrey Ostrander, Head of Supply Transactions, Western Hemisphere at Schlumberger.
The lively discussion covered many diverse topics impacting Procurement today – from automation to democratization of technology – but the main theme provided the context for discussion around three key questions: what do we mean by supplier management, what do we mean by supplier information management (SIM); and how have the two become so deeply interlinked in an increasingly digitized age?
Success of suppliers equates to success of the organization
Jeffrey Ostrander sets the scene by discussing the management of relationships with suppliers themselves, illustrating how they play a role not only in the success of Procurement, but in the success of the overall organization.
Suppliers are critical partners, as Jeffrey explains in the context of a service company in the oil and gas industry. “What happens when you’re working in these crazy conditions – we work in super remote places, super hot places – what happens when that supplier doesn’t deliver the air conditioner? What happens to the work? It’s catastrophic. What happens if we don’t have the raw materials to build something on the product sales side? Of course, it’s catastrophic, so in the end suppliers play the fundamental piece of it. They are central to the whole thing.”
Another area raised in this part of the discussion focuses on the value of supplier relationships and whether organizations are appreciating the value that suppliers deliver. As Jeffrey points out, that close partnership with the supplier is always the ambition but that it is often a difficult practice to establish, especially in light of competition from an area such as strategic sourcing. However, it remains vital that the organization understands explicitly the value of the supply base.
Changes in Supplier Relationship Management
Next in the conversation, Ragnar highlights the biggest change that he has seen in the area of supplier relationship management, which has been its transition from a practice that previously served “only the few strategic top suppliers,” to one that considers the entire supply chain as a “strategic entity,” and “as an extension of their own corporations.”
The other significant shift Ragnar points to is the increasing reliance on start-ups or emerging players to drive innovation. It marks a change in mindset from the past when this was considered the domain of the established enterprises, with the combined Procurement technologies and supply chain solutions being one of the biggest areas to be receiving VC investment, behind fintech.
Supplier Information Management
Supplier Information Management (SIM) is defined as the ability to collect data, manage data and render data re-usable across the entire enterprise and to the benefit of all stakeholders and applications, including the ability to collect and convert data on behalf of all other systems in the enterprise – defined here as data interoperability – and manage that data for the entirety of the supplier lifecycle.
Ragnar noted that SIM is undertaking a similar journey to other domains such as customer, employee, shareholder and product, where data management typically tended to be decentralised, but is increasingly becoming centralised and managed as part of a wider digital transformation process, adding, “Where it is going now, is more domain specific experience management. You now have customer experience management platforms, you have employee management experience platforms, you have product experience management platforms and the same will be true for supplier experience.”
“But first, you have to get control of the data,” he adds. “Once you have that, you can then extend workflows to manage the whole supplier lifecycle but in a much more coherent way.”
The key difference between ‘relationship’ management and ‘experience’ management is the shift to establishing open communication channels in order to foster mutual collaboration that results in a ‘win-win’ for both parties in the relationship. “You want to pull your supply base into joint value chain objectives such as sustainability or compliance,” he advises.
Organizations need to work cross-functionally to drive Supplier success
Extracting value from the supply base is not something that Procurement can achieve in isolation, nor can supply chain, operations, marketing or any other function. It needs to be all functions working together, which relies on data interoperability. This creates a challenge for all areas to work and support each other cross-functionally. It means working together in terms of the data, the technology and the goals and objectives.
As Jeff explains, to overcome these challenges, “you have to have someone who is really looking at the governance and really looking at what you are trying to drive from that data.”
He continues: “Hands down, data is the king. It’s been the king for a long time, it’s just now that it’s finally getting center stage.”
The stakes are high for getting this right. Jeff adds, “Everyone one of us in the Procurement industry has, for sure, had someone in the executive team come to you and say, ‘why can’t I buy this like the Amazon approach? Where’s my nice user interface? When am I going to see my instant tracking? When am I going to see my payment completely checked off?’ That user experience, this is what data is eventually going to drive us to.”
What is needed for digital transformation projects to be successful?
As Ragnar describes in this session, “It needs extreme alignment across the organization,” and this includes people, technology and change management.
From a people perspective, Ragnar emphasizes the need for strongly business-oriented people with broad soft skills to run the transformation, adding that these will be: “People who can communicate well with senior people, people who can build trust with stakeholders, as well as people that can do the hard project management and that are strong communicators.”
From a technology point of view, Ragnar states the need for a highly flexible solution. “Many large organizations are getting fed up with very inflexible software. However, this is changing with solutions such as low code that fit better into a corporate environment, rather than the corporate environment needing to fit in with the limitations of the software,” he adds.
From a change management perspective, the messaging is important. Although the solution is corporate-level, there is benefit to the business user. Ragnar advises, “You need to be able to listen to their requirements and be very detailed and empathetic about what they need to achieve, whilst at the same time being very clear about the benefit that this will have for everyone.”