Supplier Enablement: It’s More Important Than You Think

2 comments January 17th, 2008 David Bush - Iasta

Aberdeen recently released an informative research brief entitled The Supplier Enablement Challenge that pointed out the importance of supplier enablement. They found that Best-In-Class companies that had achieved decent supplier enablement had 15% more spend under management (78% to 63%), requisition-to-order costs that were 30% less ($22 vs $32), requisition-to-order cycles that were 60% shorter (1.8 days to 4.5 days), and 21% less maverick (off-contract) spend (17% vs 23%).

More importantly, they pointed out that you should ignore the 80/20 rule when it comes to supplier enablement. Simply focussing your efforts on the top 20% of suppliers that constitute approximately 80% of your spend is not enough - it’s often the remaining 80% of suppliers that constitute the majority of problems when it comes to supplier interactions. You want at least 80% of your suppliers enabled, and preferably every supplier with web access.

The survey also found some very disheartening statistics. Even in best-in-class companies, the amount of spend that can be catalogued that is actually in a catalogue is only 35.3%, the percentage of requisitions off catalog is 30.1%, and the percentage of catalogs managed by suppliers is only 41.7%. Considering a solution like Vinimaya can easily catalogue anything available over the web, and all a supplier has to do to customize a catalogue for a buyer is provide a custom price feed, these statistics should be over 90% for catalog available items, under 10% for requisitions off catalog, and over 80% for catalogs managed by suppliers. Furthermore, the survey also found that it takes Best-in-Class enterprises approximately twenty-three days to on-board a new supplier. On average, it takes Vinimaya one.

The survey concluded that companies that want to be supplier enablement leaders need to leverage supplier networks, catalog hubs, and punchout catalogs. But while this is true, as the doctor pointed out over on Sourcing Innovation, what they really need to do is leverage agent technology - supplier network 2.0 technology, to speed up their enablement. Furthermore, they need to integrate their enablement strategies with their e-Procurement systems to make sure spend is on contract at the contracted rates. This is even more important than integrating your sourcing system with your e-Procurement system. In any given year, you’re only strategically sourcing a few of your big commodity categories. But you’re buying every category every day.

Entry Filed under: General, Suppliers, Supply Management Best Practices, Technology