Organisations are becoming more reliant on their suppliers in order to meet and achieve business objectives. This has led to the increasing popularity of the supply chain risk management (SCRM) industry. As this need for management becomes greater, the ability to have a program to reduce the workload is an attractive proposition for everday business.
Procurence has been voted European CEO’s Best Third Party Risk and Compliance Provider for 2013. Established in 2010 Procurence specialise in worldwide SCRM implementations for multinational companies. The company’s CEO, Maciej Zaleski-Ejgierd, spoke of the challenges of SCRM and discussed some key considerations when purchasing the software.
Why did you decide to specialise in supplier risk management software?
It’s an exciting topic, still very much in its infancy, though quickly gaining in importance at the corporate executive level. The problem, so far, is that it lies between the competences of enterprise risk management, which focuses on internal risk and procurement, which focuses on suppliers.
There are major differences in language and culture between both departments. But, the interdisciplinary nature of SCRM is also what makes it so interesting.
Where should CEOs search for inspiration?
The automotive industry is very much at the forefront of SCRM, more so than even the aerospace industry, and so I would begin by searching there. They are followed by pharmaceutical or medical devices, apparel and the electronics industry – though here we have to point out selective blindness – the above are often only good at selected aspects of risk management. Respectively: legal compliance, social responsibility and innovation.
What are the key challenges for supply chain risk management?
There is a lot of SCRM know-how in the market. After all, companies have dealt with crises for decades and many of them flourish in volatile environments. The problem is that this knowledge is often locked in the heads of experts and is thus non-scalable. The challenge is to take this implicit know-how, experiences and hunches and try to create a set of interconnected rules that would allow machines to do at least a rudimentary analysis on their own. The next big thing in SCRM is intelligent applications that not merely show the gathered data but guide the user – often non-specialist – towards the right conclusions.
The ten requirements to think about when you’re buying supplier CHAIN RISK management software
1. The ability to handle the whole supply chain, not only your direct suppliers. When disruptions reach your direct suppliers, it’s too late to do anything about it. At the very least you need to know whom your second tier suppliers are and better still, evaluate them too.
2. A good level of flexibility. As clients become more demanding, you will need to evaluate more aspects of your suppliers’ activity. Your software needs to handle quality evaluations, performance rating, social and environmental evaluation (e.g. the recent conflict minerals laws), customer service levels, etc.
3. Can it handle your complex organisation? Regions, business units, departments, projects, categories and suppliers’ subsidiaries. Your software should reflect this complexity and offer reports at all levels of the organisation.
4. Combine audit results and hard facts reporting. You need to combine hard facts from enterprise resource planning such as quality and OTF with subjective evaluation to have a ‘rounded’ picture of the supplier.
5. Forget scores: look at ranks and development. The individual supplier scores are meaningless on their own. To reach useful conclusions, you need to see the development trends and rank suppliers against each other.
6. Assess supplier development. Assessments and reports are not the aim of supplier management – ultimately it’s about improving your supplier base. Make sure you can assign tasks to suppliers and track the implementation progress.
7. Contract management. Keep all relevant contracts electronically in one place. Early warning about upcoming contract renegotiations improves preparations and increases savings.
8. Access to suppliers. Suppliers need to be able to access the application to register, fill out self-assessments and manage documents and tasks.
9. Ease of use. With hundreds of users it needs to have an intuitive interface – otherwise you end up spending a fortune on training and support.
10. Multi-language support. You may want to start in your native language, but keep the option for other languages open.