Procuri Empower: Dispatch Five
At most vendor events, it's highly unlikely to find the most innovative organizations presenting what they’re up to. Usually, the crème de la crème in a particular area like to keep to themselves, preferring not to give away their secret sauce (UTC is a noticeable exception in this regard from supply risk, supplier performance and supplier development perspectives). At Procuri's event, I had the chance to sit in on a breakout session where two program leads from different companies presented their supplier performance management experience to date. I won't name names to protect the innocent, but what I heard was quite elementary indeed. Neither organization had reached the level of being able to quantify the cost of poor -- or excellent -- supplier performance and quality, nor had they succeeded in rolling out supplier performance management capabilities across the majority of their supply base.
Unfortunately, despite their adolescent performance management stage, I'd say these two organizations were still in the top quartile of performance from a supplier management perspective from an overall market perspective. And that's because only a small percentage of companies have moved past an Excel-based supplier scorecarding approach. But neither company who spoke could articulate a quantifiable business case for the returns they had gotten from their investments. Rather, the entire decisions and program -- at least in one case -- came because an executive was interested in exploring supplier performance management. And neither company had in place programs tying supplier performance monitoring and management to proactively identifying supply risk. Incidentally, if you're curious to know why looking at these two areas together matters, certain changes in supplier performance and quality can directly correlate with an increased probability of supplier financial insolvency in a period of months down the line.
As a final aside, this post is not meant as a knock on Procuri's capabilities in the supplier performance area. Rather, as with all technology deployments, it's what companies do with the technology they've purchased, not the act of simply making the decision to license something in the first place. It would be possible to achieve world class supplier performance management using a handful of solutions in the market -- Procuri included.
- Jason Busch
You're spot on with your assessment of how far people have gone or not gone with supplier performance management. But I do congratulate companies like the ones you mentioned who at least do something.
Executive pressure to only invest resources in initiatives that have a clearly quantifiable ROI backed up by a bulletproof business case sometimes can hurt initiatives like managing supplier performance. Their requirements scare the living spit out of purchasing managers and directors who would love to see some operational improvement but don't want to put their necks on the line.
Realistically, few companies can go quickly from having no supplier performance management system to having one that precisely quantifies the cost of poor performance (COPP) and identifies risks and probabilities of failure. It's like a baby being expected to run a marathon without ever even crawling, much less walking or running.
So there should be no shame in taking a stepwise approach to supplier performance management, starting with scorecards, then measuring COPP with one or two key suppliers, then systemizing the process to roll out across their supply base. It's basic kaizen in action.
Great topic. Keep up the great work.
I have no commercial relationship with Emptoris, BTW.
I've always encouraged other bloggers, analysts and the media to disclose commercial relationships. You can read my disclosures section on the right of the navigation pane.