Supplier Accountability Translate to Real Dollars

Andrew Stroup
March 18, 2020

The business world is at an interesting inflection point: no longer content with simply knowing if you made a profit or not, boards and shareholders are pushing executives to be more data-driven in their decision making and to focus on predicting future performance based on data insight.

One place where this shift is fundamentally changing how business is done is supply chain management. Originally an in-house, back-office function, the increased complexity that came with globalization and technology left most executives without clear insight into what’s happening. The problem, though, is that current methods of data collection are disengaging to employees and frustrating for executives – so a new solution is necessary.

The (inefficient) cost of outsourcing the supply chain

In the early 20th century, supply chain management and employee management were one and the same, since it was employees operating the vast majority of the supply chain (an average of 90 percent in-housed).

In the 1960s and 1970s, globalization opened up massive outsourcing opportunities for manufacturers. Globalization made outsourcing cheaper, but more complex. To safeguard their profits, companies started instituting stricter contracts with service agreements, on-time delivery rates, quality assurance monitoring, and more. This resulted in the rise of supplier performance management.

Technology didn’t keep pace, so most supply chain management was done through paper and pen. People on both ends of the supply chain spent a lot of time collecting and verifying paperwork. Cost savings grew, but so did inefficiencies. Evolutions in outsourcing and technology left gaps.

Technology gaps fail to address evolving supply chain needs

In the early 2000s and 2010s, technology caught up with data collection needs but lacked data insight capabilities. This meant companies would either do it manually or pay expensive consultants to do it for them. Let’s look at how current options fall short:

Current Option 1: Manual tracking through programs like Excel

Between macros, formulas, pivot tables, and more, Excel can be a helpful aid in tracking performance; however, the downside is two-fold:

  • Time-intensive: Setup is manual and issues require spot-checking data by hand with ballooning version control.
  • Limited data storage: Supply chain workflows can consist of millions of data points, which manual programs can’t support at scale.
Current Option 2: Data warehouse technologies like Enterprise Resource Planning (ERP) or Source-to-Contract (S2C) systems

ERP and S2C systems can hold immense amounts of data and offer a single source of truth. But ERP and S2C systems come with their own challenges:

  • Expensive: the systems typically require large, expensive implementations.
  • Siloed data: Large data warehouse technologies typically can’t combine multiple datasets, yielding less insight.
Current option 3: General Business Intelligence (BI) platforms

BI platforms became the go-to for large companies wanting to generate insight across the organization. Similar to ERP systems, the size of BI platforms became their key weakness when it comes to supplier performance management:

  • Limited configurability: BI platforms have trouble with deep-dives into specifics like supplier-level analysis.
  • Highly technical: Businesses needed specialized employees or expensive consulting contracts to generate insight reports.

Given the competition for educated talent, the costs of hiring, and the fact that employees want more engaging work (not data-entry monotony), a new solution has to bridge the gaps left by current solutions.

Now, companies need tools to help them identify what actions need to be taken based on data-driven insights and trends– not just to hold a bunch of data points.

A purpose-built solution creates a force multiplier for your supply chain organization

When we looked at what the market was asking for, it became clear that actionable insights needed to be at the center of any new solution. So that’s how we built LVRG: We focused on building a platform geared to deliver cost-saving or revenue-generating outcomes. This means customers get three new opportunities for growth:

Executives are able to confidently take action

Executives get a clear picture of their supplier base, end to end. This includes:

  1. Executive reporting: You’re backed up by data, not a hunch, when it comes to your opportunities, lost business, and the next steps.
  2. Supplier trend analysis: Highlight supplier performance over time, so you have concrete data to support your negotiations.
  3. Cost-recovery opportunities: Identify when suppliers aren’t complying with their contracts, meaning you get the opportunity to enforce chargebacks and rebates.
Managers and employees save real dollars and hours

Managers no longer have to spend countless hours poring over mountains of data (or managing employees doing this work). With a purpose-built solution, managers and employees get:

  1. Predictive trends and notifications: Alerts when it looks like a bad trend is emerging. Conversely, highlighted opportunities to capture unrealized value.
  2. Remediation workflows: Automatically get an alert if something’s not right, and collect rebates from your suppliers to remedy the situation.
  3. Scalability: Useful and right-sized for any organization, both in functionality and price. Whether managing 10 top-tier suppliers or handling 1,000 suppliers, highlight and facilitate the most important issues in real-time.
Suppliers know how they are performing

Transparency is key to building strong supplier relationships and driving positive change. When suppliers can track their performance alongside their customers, they know exactly what matters to their customers and can take concrete steps to improve their performance.

  1. Metric-driven decision-making: Is the supplier delivering on-time, in full, and without defects? Is the supplier a partner during New Product Introductions? How has this affected their customer’s bottom line?
  2. Continuous improvement: Is a recorded performance issue a one-off issue or a repeat offense? Is the supplier aligned with the customer’s P&L goals and objectives through a transparent accountability system?
  3. Best-in-class: Does the supplier have the ability to know how they’re performing compared to other similar suppliers, or those in the same category? How about across the industry? How do both sides leverage this information to identify new opportunities for expanded or new business?

With the increasing complexity of supply chains, a high-tech platform that generates data-driven insights is a necessity. The world is getting more complex, but this time, technological innovation has caught up and is ready for the next phase.

LVRG tracks supplier performance, monitors contract compliance, and identifies business opportunities and disruptions across your entire supply chain.