Supplier Relationship Management (SRM) Research 2012-2013

Supplier Relationship Management
(SRM) Research 2012-2013
Solution Analysis and Business Insights

Supplier Relationship Management (SRM) Research 2012-2013

SRM
Prepared and edited by:
Sarissa Alleijn
Fleur Baarspul
Merel Plante

Special thanks to:
Thomas Dahm
Marjolein Dijkshoorn
Ton van Dolder
Erick Haag
Bart Hellings
Kevin Lemmens
Martin Putters
Kirsten Schipper
TorbjÖrn Thorsén

A note of thanks….
Capgemini Consulting would like to extend its thanks to the vendors who made time to
participate in the Supplier Relationship Management Survey. Without their cooperation and
support, research of this nature would not have been possible.


Table of Contents
Pages

Foreword 4

Business Insights 7

Functionality Analysis 25

Supplier Profiles 57


Foreword
Due to the challenging economic conditions of the last few years, many CPO’s have reverted to the old school methods of
procurement: achieving savings through squeezing suppliers and contract renegotiations. We feel this trend is unfortunate as the
economic situation currently creates numerous opportunities for procurement organisations to achieve savings while creating long
term, sustainable relationships with suppliers.

How can procurement organisations respond to the need for short-term savings while simultaneously focusing on long-term
supplier development? We developed the “Seven Strategies for Future Procurement”, which is a practical framework to assist
CPOs in creating best-in-class procurement organisations. Regardless of the maturity of the organisation, these strategies should
be included in the strategic plans for the coming years.

Below is a high-level look at the “Seven Strategies for Future Procurement”:

Closed Loop Procurement
Many procurement organisations are still struggling to master the basics: spend visibility and, sourcing and contract compliance.
Establishing closed loop procurement is a major achievement and an end goal in itself for most procurement organisations.
This strategy involves optimising the basic infrastructure for procurement, from source to pay, in processes, organisation and
supporting IT systems.

Hybrid Organisation Models
At a functional level, we see a trend towards hybrid organisational models that combine the benefits of central coordination
with improved business collaboration. At a category level, we see further differentiation in organisational models depending on
business, category and supply market specific characteristics. A one-size-fits-all organisation design is no longer good enough.
Gain all of the benefits from different organisational models and shape your own future procurement organisation.

Supplier Value Management
Leading procurement organisations manage collaborative supplier relationships to extract more value from the supply base.
Creating value is on every agenda, but capturing this value is difficult. Utilising a hybrid organisation model, you will be able to
manage different categories in a diverse manner. It is our belief that innovation is the driver for creating value. Use Innovation
Driven Procurement (IDP) to accelerate the pace of innovation within organisations by leveraging the innovative power of the
supply base. (For IDP see Business Insights Chapter).

Supplier Risk Management
Increased dependency on external suppliers, volatility in raw material and energy prices, shortage of key materials, currency
imbalances, and global financial crises have all made companies recognise once again the importance of supplier risk
management and overall resiliency in the supply chain. Looking at the outlook for 2012, we believe risk management will
become even more important in the year ahead. Risk management will be central to procurement, combining risk, innovation,
sustainability, preferred customer strategies, and supplier management.

End-to-End Supply Networks
Leading procurement organisations manage multiple supply networks that differentiate service characteristics by product/market
segment. Managing complex supply networks requires pipeline visibility and alignment of planning and control across multiple
tiers of suppliers.

Talent Development
For years we have seen that CPOs around the globe indicate that talent is the fourth biggest challenge for “marketing”
procurement within their own organisation. We strongly believe that talent will be the key driver of success for procurement
organisations in the years to come. Leading companies have recognised talent as the key enabler for further developing the
supply management function, and are investing heavily in attracting, training and retaining top talent.

4


Technology Leverage
Leading supply management requires technology that is more user-friendly, provides real-time visibility, is better integrated,
enables more effective collaboration with the supply base, and has more powerful analytic and simulation capabilities.

This last “strategy” for future procurement, in particular, is a key enabler for realising most of the other strategies. This is why
the choices in technology should be an integral part of the procurement strategy. Our 2012 SRM survey will help to explore the
technology development areas for your organisation.

As part of the procurement transformation business, we see it as our mission to deliver high performance and robust results to
our clients. The results not only impact procurement departments, but also stretch to other business areas. To deliver quality
results and benefits, we continually develop our thought leadership in the business marketplace. We track recent developments in
Supplier Relationship Management (SRM) solutions, conduct surveys, and evaluate our previous initiatives in order to build a rich
knowledge base of lessons learned from our client and supplier experiences.

We are pleased to present to you the Supplier Relationship Management (SRM) survey 2012-2013. It is interesting to see that over
the last twelve years that we have been running this survey, the market for SRM is still growing and investing in these applications.

This year’s Supplier Relationship Management study consists of three parts:

1. SRM Research: Business Insights—our thought leadership from around the globe, related to the priorities of today’s Chief
Procurement Officers (CPOs) and the Seven Strategies for Future Procurement.

2. SRM Research: Functionality Analysis—our view of the values you should expect from SRM applications.

3. Supplier Profiles: Profiles of all SRM suppliers who participated in our research.

The research and analysis is based on a series of questions designed to assess whether the software covers a specific set of
functions within the SRM environment. A new item in our research is our independent view on the different vendors. We have
learnt from previous client engagements that this is valuable information for package selection activities.

Apart from the survey, which gives you an overview of the major players in the market, we also want to share the experiences,
issues and questions that we encounter on a daily basis as procurement professionals implementing and optimising SRM; these
can be found in the ‘business insight’ chapter of our publication. We therefore asked our foremost colleagues to share their views
and experiences of SRM, resulting in four expert opinion stories, each telling something about SRM and procurement, from
different perspectives.

Our procurement experts have worked on this study with great care. We hope you enjoy reading it as much as we enjoyed writing
it and look forward to your feedback. Let it be an inspiration for your future initiatives.

We wish to thank all vendors and colleagues who have contributed to this year’s SRM study.

Ton van Dolder
Vice President
Supply Chain Management Practice Leader The Netherlands
Capgemini Consulting

5


6


Business Insights

7


The purchaser as garbage man
How the procurement function can contribute to a more sustainable world

Authors
Erick Haag & Bart Hellings

8


T
he procurement function always Introduction
influences multiple supplier
Sustainability was once the domain
relationships. Therefore, it can play
of idealists, activists and experts.
an important role in striving for a more
Increasing scarcity of resources, rising
sustainable world. This is especially
energy costs and stricter policies
valid in sectors where the purchase
made sustainability a topic for the
volume accounts for more than 50% of
world of business. Sustainability
the turnover. Over the past years, a lot
targets are nowadays integrated into
of attention has been focused on this
the strategies of major companies like
subject. Most of the time, the emphasis
Unilever (100% sustainable purchasing
is on influencing suppliers; this article
of agricultural products), DSM (One of
strives to make clear that this alone is
the three strategic pillars for 2020), and
not enough. Influencing stakeholders
Nike (considers a closed-loop supply
outside the procurement function
chain essential for future objectives).
is essential to contributing towards
From these examples it is clear that
achieving the sustainability goals of
in realising the goals that are set,
an organization. The focus is shifting
optimising parts of supply chains is not
towards managing goods returns and
enough. A radical change is needed,
waste processing. Purchasers should
demanding a new collaborative way
be garbage men, from the perspective
of working amongst suppliers, clients
that garbage is not waste but instead
and other stakeholders throughout
should be viewed as a valuable
the supply chain, including the return
resource.
stream. This new model is also known
as ‘closed loop supply chain’, as
illustrated in Figure 1.

Figure 1: Extended focus area for the procurement function from a focus
on the incoming materials to a ‘closed-loop supply chain’ approach.

Traditional focus of procurement function

Information Flow
Internal Supply Chain

Procurement Production Sales

Flow of goods

Supplier Market Consumers

Recycling process

New focus of procurement function

9


The changing role of the When this concept of reusing materials
procurement function in a is applied on a large scale, this has a
closed-loop supply chain major impact on the traditional role of
procurement. The strategic value of the
For the procurement function, goods return stream increases and the
sustainability traditionally meant volume of newly purchased materials
purchasing goods and services against will decrease. However, this model
optimal environmental and social will have a major impact on existing
conditions. However, to respond to supplier relationships. For example,
the increasing challenges of resource when suppliers collaborate actively on
scarcity and fossil fuel dependency, an optimising recycling opportunities, they
increasing number of organizations are will be ‘rewarded’ with less orders for
searching for possibilities to collaborate new materials.
with partners in the supply chain and
to ‘close the loop’ by using waste as In assessing the strategic value of
raw material. The development of a supplier, a shift will occur from a
this concept was heavily influenced strictly financial perspective on the
by the Cradle to Cradle concept that strategic value to a ‘triple bottom line’
was introduced in 2002 by William perspective, based on the value for
McDonough and Michael Braungart. people, the planet and profits. This
The core of this concept is to reuse means that suppliers who are actively
materials from used products, to involved in recycling and recycled
produce new ones. Maintaining the materials supply will be able to maintain
quality of materials is essential for or even increase their strategic value
long-term success of this model. The for clients.
Cradle to Cradle concept is already
applied successfully by companies like
Auping, Desso, Forbo Flooring and Van
Gansewinkel.

10


Optimising a closed-loop supply Implementing the change Conclusion
chain has more impacts on the
procurement function. For example, The impacts that were described The procurement function plays
the procurement function will play earlier provide a vision on what the an important role in reducing the
an active role in selecting partners procurement function would look like ecological footprint of an organisation.
in the recycle chain, and in selecting after successful implementation of It is not sufficient to merely transfer
the right suppliers based on their this type of sustainability policy. It is the demands from internal users to
contribution to a closed-loop supply unrealistic, and often undesirable, to suppliers. The procurement function
chain. Category teams will have to reach the final stage in a very short time should play an important role in
make different choices, based on ‘triple (within less than a year), as the required establishing a closed loop supply
bottom line’ principles, including all change is too fundamental. Therefore, chain and in actively managing the
elements of a closed-loop supply chain. an implementation plan should be suppliers involved. The increase of
Furthermore, new category teams carefully developed; such a plan could reused materials in the supply chain
will be established based on the new be made per category, for example, has an impact on the supplier strategy
categories from the return stream of by starting with the highest ecological and portfolio. The fact that more
materials. Planning and managing the footprint. Alternatively, it could be organisations are struggling with their
flow and volume of materials becomes planned per end product, which is ecological footprint, is irreversible. If we
more complex because there are more complex, as an end product continue wasting our resources like we
more reused materials to be collected contains a variety of materials. Focus do now, we need to carefully consider
and processed. New processes and and speed of the plan heavily depends our waste. Thus, in order to improve
systems need to be implemented to on the organisation’s goals. matters our purchasers should be
manage a closed-loop supply chain. garbage men, recycling that which is no
Examples include getting products longer needed.
back from users, maintaining quality of
the return stream, handling information
on traceability of products and planning
the input of a combination of new and
used materials.

Figure 2: An example of an introduction plan
Phase 3

The procurement function proactively
contributes to innovation throughout the
supply chain
Sustainability aspects are part of
integrating supply chains
Suppliers are actively involved in
Phase 2 integrating supply chains, for example
through involvement in Design for
The procurement function is involved in
Recycling (DFR)
realizing sustainability targets entailing a
closed loop supply chain
Procurement stimulates suppliers to
contribute to the recyclability of their
products
Phase 1

Sustainability criteria are included in buying
speciﬁcations
Suppliers are partly selected on their
contribution to reaching sustainability
targets

11


Where Usability and Demand
Management Meet

Author
Torbjörn Thorsén

12


A
little over ten years ago, Booz,
Allen and Hamilton published
a short thought leadership
piece on Procurement Strategy CREAT VALUE
in their Strategy and Business
magazine entitled “The Four Phases
of Continuous Sourcing”1. Although TS
SUL
the article failed to make the impact RE MANAGE DEMAND
Y OF
it undoubtedly merited, it did provide ER
LIV
an alluringly simplistic framework for DE
gauging procurement strategy that has INED
STA REDUCE COST
successfully stood the test of time. SU

In brief, the framework consists of four
value levels that procurement functions
need to master and continuously revisit CAPTURE MARGIN
in order to stay on top of their game.
Adapted from The Four Phases of Continuous Sourcing, Booz & Co. TIME
Whilst the majority of procurement
functions operate quite satisfactorily —
and in a large number of cases even
deliver remarkable returns—on the Second, globalisation—of both
lower levels of the framework (capturing supply markets and the workforce
margin and reducing cost), few are – has enabled organisations to
able to master the skills necessary to reduce costs by switching supply to
deliver against the upper reaches of low-cost locations.
the framework (managing demand and
becoming real value creators). This is What signifies most initiatives on these
particularly evident in the procurement levels is that they are mostly outbound,
of indirect goods and services facing suppliers and partners rather
where even organisations that have initiating change inside the organisation
mastered direct materials procurement itself. Understanding the implications of
falter, thus leaving a great deal of this selected focus is a key challenge
potential unrealised. for procurement organisations who
aspire to elevate their position and rise
One reason that most organisations are above the norm.
now better able to consistently address
the lower two levels of the Booz
framework (capture margin and reduce
cost) is that procurement technology
has matured; e-procurement and
e-sourcing are now standard tools
for most organisations, as is the shift
towards a centre-led procurement
model. The introduction of these
technologies and organisational models
has enabled companies to effectively
introduce increased competition in
negotiations in order to reduce supplier
prices. They are able to leverage
e-sourcing technologies to address
a wider potential supply base, whilst
reducing the number of contracted and
preferred suppliers as a consequence
of the centralised procurement model.

13


Managing demand
KEY (SOUGHT-AFTER) ATTRIBUTE RANKING OF A
In essence, and this is particularly true MODERN PROCUREMENT PROFESSIONAL
when it comes to indirect materials and
services spend on, managing demand
is made up of one part compliance
management and one part business 32% CAT
development. Demand Management EG
EXPE ORY
enables the full enterprise to leverage 27% PROC E
RTIS
existing contracts by rolling out UREEXPE MEN
RIEN T
category-wide e-procurement support, CE EXEC
UTIV INF
whilst keeping an ear on the ground E CO LUENCE
MMU A
NICA ND
and providing enough flexibility to
ensure that new needs are supported
CHAN
GE M
ANAG 63%
TION
CAPA EMENT
(in a controlled manner) in order to BILIT
IES43%
maintain momentum.

The procurement function needs
to not only be able to track spend
compliance (to policy, processes
and contracts) and provide intuitive
self-service procurement channels Extending the scope of usage patterns, a high volume of
spend needs to be transacted using
(where applicable), it also needs to procurement
e-procurement.
have the competence and capacity to From a strategic perspective, extending
understand and communicate benefits the scope of procurement to include For the past decade, rolling out self-
of procurement in a business context. the upper levels of the Booz framework service procurement has been one of
requires the following prerequisites: the key priorities for many procurement
Unfortunately, this is quite a step
ensure that as high a share of spend as functions. Yet very few organisations
out of the comfort zone for many
possible, is under management, that have been able to achieve the levels of
procurement professionals who have
e-sourcing is widely adopted and used usage that justify the costs of doing so.
often built their careers and reputations
across all categories, that contracts are In retrospect, ROI for e-procurement
on hardline negotiation and policing
managed accordingly with supporting has not been a boardroom success
tactics.
technology in place to ensure visibility, story. While online commerce and
The ability to allocate focus accordingly and finally that supplier risk and social networks have taken the world
is what truly sets leading and mature performance is tracked and appropriate by storm, e-procurement is still
procurement functions apart from their mitigation strategies are in place. struggling to break out of the mould
less mature peers. This is reflected of being little more than a digitised
in many ways, but one example is But more importantly—especially from paper trail. Fortunately, the emergence
that procurement organisations are a savings performance perspective— of cloud and SaaS delivery models
increasingly looking for new traits and contract compliance needs to be have created a market for wraparound
are specifying these traits as essential monitored and seen as an important procurement services that provide
in the recruiting process; competencies KPI for category managers (again end-user shopping experiences that
such as executive communication skills an internally focused activity). This match leading online commerce
and change management capabilities can only be achieved by connecting solutions as well as business network
are more sought after than traditional strategic and operational procurement, solutions. These fill the e-procurement
procurement skill sets such as taking into account the fact that warehouses with appropriate content
category competence and negotiation category management is as much, while providing connectivity and
experience2. if not more, an internal business communication channels for buyers
development activity as it is about and suppliers alike.
Organisations that have already supplier relationship management.
implemented procurement technology
to support strategic as well as It is also important to note that to gain
operational activities are now looking essential transparency into spend
for ways to extend usage. patterns, into process and channel

14


Usability information, they will. Given flexible
procurement channels, they will even Sources
For many, usability is seen as little more comply with procurement processes,
than a shiny user interface. In reality, 1. Hugh Baker and Tim Laseter, Booz
thereby minimising maverick spend
however, it is much more. Though & Co. – Strategy and Business
and expanding procurement’s control
many ERP-based e-procurement reprint 02204 (originally published
of spend.
solutions are lagging in the area of user in 2002)
experience, that issue is addressed by
2. SAP and Procurement Leaders
many independent third-party vendor Mastering Demand - Key Drivers for Modern
solutions3 (including Capgemini’s IBX Management Procurement, 2011
Platform). Equally important is the
issue of enabling users to interact with Mastering demand management is
3. Spend Matters - Getting the Most
procurement technology from mobile a complex task. Procurement needs
from ERP Procurement Applications
devices. to be able to communicate benefits
– Focusing on the User Experience
clearly in a business context, control
and Content, 2011
Many operational procurement and monitor spending in near to real
activities, from requisitioning to time, as well as provide supporting 4. Gartner Research - Key Predictions
approvals as well as access to spend technology that is truly user-friendly – for IT Organisations and Users in
and performance data, can and should providing necessary insight and tools in 2010 and Beyond, 2010
be accessible on the move. In fact, an on-the-go context.
Gartner Research predicts that mobile
internet access will overtake desktop This ability to coordinate, cooperate
internet access in 20134. and enable the organisation to act in
unison from a spend management
With workforces going mobile, speed perspective is manifested in leading
of business accelerating, globalisation procurement functions. They have
of the supply base being the norm traversed into the upper reaches of
rather than the exception, self-service the framework outlined above without
needs to encompass mobile devices losing traction in the lower levels.
to a greater degree. Procurement
technology cannot stay on the Delivering sustainable procurement
desktop; it is a key enabler when value—as in savings, efficiency,
striving for procurement excellence, control and transparency—is reliant
so it needs to be at the fingertips of on procurement being able to address
procurement professionals as well as challenges on all levels:
the wider organisation. • Increasing competitive pressure in
the supply base to capture margins,
Guided buying as well as nimbly shift supply to low
cost/high value locations
Managing demand can also be
supported by empowering end users • Managing demand, leveraging
to make informed procurement innovative technology, and
decisions. By providing end users leveraging guided buying principles
with procurement intelligence such
as delivery precision, quality ratings • Changing management capabilities
and other supplier performance to drive supplier innovation in order
indicators in parallel to procurement to generate increased value
guidelines and policy would provide the
foundation of guided buying that goes
beyond traditional catalogues.

To paraphrase Google’s famous tagline
“Do the right thing; don’t be evil”,
procurement needs to trust the end
user to do the right thing. Given enough

15


The Potential of Supply Chain Finance

Author
Merel Plante

16


W
hat would be the effect on For many companies, the situation buyers. But with the difficult economic
your company’s relationship described above seems impossible climate that companies find themselves
with its suppliers if you to reach. A company’s suppliers will in today, combined with the terms and
were able to pay them immediately always prefer to have the shortest conditions banks put upon companies
after receiving goods and services? payment terms possible while the in the current environment, this solution
What if payment terms were open for company itself will always prefer to have is no longer sustainable. With every
discussion and could be improved the longest payment terms possible. organisation in the supply chain
for buyers and suppliers alike? What Moreover, as that same company is actively trying to protect its bottom
would be the effect on your company’s also a part of a larger supply chain, it line, all parties must show value for
financial performance if, on the one too will want to negotiate the shortest their money and make the best use of
hand, it could achieve favourable payment terms with its own customers. their limited resources. In response, a
favorable payment terms from its Nevertheless, many companies new market for supply chain finance
suppliers, while on the other hand today are in fact able to overcome solutions has emerged.
it was paid immediately by its own this dilemma of divergent priorities
customers? The short answer is that (and achieve the benefits described Supply chain finance is therefore
ultimately the cost of goods for buyers above) through the use of supply a means to have a third company
would be greatly reduced while access chain finance. involved in the payment circle and ‘buy’
to financing and risk exposure for the outstanding payments from the
suppliers would be greatly improved. buyer to pay out the supplier faster. See
This of course would reduce the What is supply figure below for more insight into supply
inherent friction between buyers and chain finance? chain finance.
suppliers and could lead to a level
Traditionally, suppliers have been
of supplier collaboration previously
responsible for facilitating commerce
unheard of.
by providing financing (usually in the
form of favourable payment terms) to

Figure 3: Typically SCF involves three parties and a common platform to execute an operation. Checks and balances are set
in the payments platform to minimise the risk

17


Why might your company Benefits to a Payment Provider analytics for invoices and electronic
be interested in supply The payment provider can build
invoice presentment and payment
(EIPP).
chain finance? stronger collaborative relationships with
customers, despite the unfavourable
The dilemma of the divergent priorities Organisation
economic climate organisations face
between buyers and suppliers is well
currently. A payment provider can use We have noticed that Finance and
known. Unfortunately, the potential of
the largest party as an anchor for the Procurement teams typically drive
supply chain finance is much less well
financial transactions, who is often the the SCF process in an organisation.
known. With the current economic
buyer with a better credit rating instead Collaboration at the executive level can
outlook still looking quite bleak, it is
of a smaller supplier. As the goods are align disparate payment, collections,
undoubtedly only a matter of time
already delivered and transformed into cash management and inventory
before companies start to better
higher value goods at the buyer site, policies that can otherwise work
understand the topic of supply chain
the basis for the finance is very solid. at cross purposes when operating
finance and begin to implement some
independently.
of the many solutions available today.
This sounds like a win-win situation. So
what do you need to have in place to As key metrics you will find centralised
As alluded to in the introduction, there
start? receipt and imaging (or manual) data
are many potential benefits to supply
entry, coupled with decentralised
chain finance solutions. Below is a
approvals. Approximately 85% of
select list of just some of the most What do you need to have the best-in-class companies in
obvious benefits for buyers, suppliers
in place? SCF have been able to achieve this.
and payment providers.
We have seen that companies that Furthermore, the majority of best
are successful in SCF have the right in class organisations have active
Benefits to Buyers
processes, organisation, information cross-functional coordination and
Buyers benefit from increased flexibility collaboration amongst functional
sharing, performance measurement
in cash flow (without changing areas such as accounts payable,
and technology in place. In this chapter
contract terms), the potential for procurement, finance and IT.
we will elaborate more on these critical
improved payment terms, and reduced
success factors.
supplier risk. Moreover, they benefit Information Sharing
from a reduction of working capital
Processes More successful enterprises in
requirements through improved days
It all starts with receiving the goods, SCF have translated their payment
payable outstanding measurements.
and matching, and subsequently strategies into policies and specific
In the long term, this results in a
processing the invoices to the tasks to direct employee behaviour. To
more stable supply base, improved
receivables. The best companies who fully understand the options available
relationships with suppliers and a
use SCF have clear accounts payable in SCF, employees should be provided
reduction of cost of goods purchased
policies to guide their staff. Moreover, information they need to understand
due to a better cash flow position of
they have applied standardisation of why different financing options can
the supplier.
accounts payable processes across be beneficial and how they can be
multiple locations or business units. executed once selected.
Benefits to Suppliers
These companies also have automation
Suppliers benefit from lower risk, We see that information sharing is a
technologies, to further speed up
better visibility into invoice settlements, weak area for all types of organisations
their already well-defined procedures
improved and more predictable cash in general. Only about a quarter of the
that are necessary to ensure efficient
flows as well as payment certainty and best-in-class companies have access
invoice processing.
increased flexibility for their business. to the financial information pertaining to
Similar to the buyers, they also benefit their business partners. More than half
As key metrics, you will find that the
from an improvement in working of the best-in-class companies have
best-in-class companies in SCF
capital through improved days sales system-level controls for segregation
have the ability to access SCF at all
outstanding (DSO) measurements at of duties for each transaction, but a
stages in the supply chain, and have
a lower financing cost. Benefits are little less than half of the firms have
implemented or are in the process of
not one-off, but can take effect when complete audit trails on demand.
adopting payment scheduling, spend
settling new contracts in renegotiations.

18


Performance measurement Technology in place
The successful firms who have At the beginning of an SCF program,
adopted SCF have set up performance segmentation of the suppliers
benchmarks to constantly review their needs to be achieved for successful
performance and take appropriate implementation of the technology
remedial action. These measures can platforms. Furthermore, what we see
be used to further create efficiencies, is that, firms look to minimise one-
such as identification and reduction to-one interfaces with their suppliers,
of components as labour hours, and which can be achieved by growth of
lower costs of goods purchased. e-payment solutions.

Of course, many parameters such as Technology is another area where
financial performance can be used as organisations face challenges. The
benchmarks to measure performance. majority of the best-in-class companies
Some parameters which have been are able to segregate partners to
measured by Aberdeen in a survey are: prioritise SCF enablement. Only a
small number have been able to
• 64% of best-in-class have online
establish a single platform to bring
visibility into financial supply
buyers, suppliers and financial
chain events.
institutions together.
• 42% of best-in-class firms have
online visibility into shipment status Challenging? Definitely. But when
and in-transit inventory. all of the activities above are in
motion or already implemented
to lift your company to a higher
maturity level, supply chain finance
cannot continue to be ignored as
a means to further strengthen the
whole supply chain.

19


Procurement and Innovation
Beyond the Establishment of a Partnership

Authors
Kirsten Schipper & Thomas Dahm

20


T
he involvement of suppliers for manufacturers in Japan and the
innovation in organisations has Netherlands demonstrates that the
been a reality for many years. early involvement of suppliers speeds
Most organisations consider their up the innovation process, which
suppliers as being one of the most, if ultimately delivers the benefit of a new
not even the most, important sources product or service being ahead of
of innovation. Supplier relationship the competition and saving time and,
management can increase the level of therefore, money.
innovation-driven procurement, and
provides the procurement function Secondly, early supplier involvement
in the organisation with the tools increases the amount of innovation.
and technology to make the early Ensuring that the suppliers are
involvement of procurement a success. actively participating in the process
of innovation in a structured manner
When talking about innovation and results in more innovation.
the innovative capacity of suppliers,
innovation is not solely limited to new Thirdly, even basic research, but even
product development or the invention more importantly, the development
of something new. Many innovations and launch of a new product bears
become worthy of their name because risk. The participation of suppliers in
they are the new combination of this process will contribute not only
existing elements or because the to sharing of benefits but also the
innovativeness lies in the restructuring mitigation of risks.
and improvement of a process, which
results in a significant advantage over The challenge for procurement
the competition. The classic process departments in organisations has
improvements focus on cost or time been the balancing act between
savings while most companies also the traditional role of negotiating the
attempt to fulfill the customer’s demand most beneficial form of commercial
for CO2 reduction and sustainability. agreement, whilst also facing the
challenge of maintaining a trusting
The decision to make use of a supplier partnership.
originated from the realisation of a
lack of in-house expertise about Many procurement organisations are
the acquired product or service – a aware of the benefits of collaborating
make or buy decision. Whenever with suppliers as a source of innovation.
this externally acquired product or However, many have not yet formalized
service is involved in any kind of these relationships. The study
innovation process, the suppliers’ referred to earlier identified six inter-
expertise should be incorporated organisational arrangements, which
into the innovation process since alluded to the involvement of suppliers
the own expertise in this area has in innovation activities: organisation
been determined to be lesser than of communication, colocation, non-
the suppliers’. There are three major disclosure agreements, formal
reasons why this involvement should contracts, intellectual property rights
take place early in the innovation and manuals. There are several other
process: the speed of innovation, the inter-organisational arrangements
amount of innovation and the reduction where companies share organisational
of risk. infrastructure or even the launch of
joint products to the market in order
The first reason is to be able to innovate to demonstrate the quality of the
faster than the competition. Recent partnership.
research conducted with high tech

21


Figure 4: Procurement involvement in innovation

Cost reduction
opportunities

Traditional
Innovation Driven
Procurement
Procurement Involvement
Involvement

Supplier Involvement

Life cycle value
determined

Concept stage Project stage Prototype stage Revision stage Product stage

The more these inter-organisational As a next step it is essential to translate
arrangements are made that these arrangements into measurable
demonstrate the intensity of the Key Performance Indicators
partnership, the more an organisation (KPIs). All of the inter-organisational
should have SRM as a tool to manage arrangements need to be formalised
and structure this relationship. in jointly developed agreements that
go beyond a standard non-disclosure
In order to reach the next level agreement. For this reason, contract
of maturity in innovation-driven management as an element of
procurement, SRM can help to supplier relationship management,
formalise and digitalise this transition. will become much more complex in
Many “old school” procurement the future. Many contracts are still
professionals have been struggling limited to commercial terms and the
with the balance of negotiating with a level of digitalisation of contracts in
supplier, and being the manager of a many organisations is still immature
partnership with that same supplier. in that they are paper-based and filed
This new mindset allows procurement away into filing cabinets, never to be
professionals to organise regular looked on again. Digital cloud contract
supplier innovation meetings and management solutions better equip
work in an entirely new way. “Sharing procurement professionals with three
is winning” and “win-win situation” powerful functionalities with which to
approaches to partnerships have been manage supplier partnerships:
developed.

22


• SRM systems allow users to store overcome difficulties to bring
all of the agreements relating to joint stakeholders of different companies
partnership activities in a central and disciplines together and align them.
repository;
Today’s challenge is to set up
• they allow users the flexibility structures to successfully measure
to alter agreements by mutual and manage suppliers and build
agreement, which is useful in fast processes and procedures to
changing dynamic development intervene if KPIs are not met. These
projects such as SCRUM systems exist – unfortunately, in
processes most organisations, digital contract
management is not utilised to its full
• and most importantly they allow
extent. SRM offers a solution for a
procurement professionals to
lack of formalisation and control in an
measure the success of the
often unclear process of collaborative
relationship and identify areas
innovation. These formalised systems
for improvement.
can be supported by the structured
The challenges in Supplier Relationship use of social media platforms to
Management with regards to facilitate communication between
innovation-driven procurement are the parties involved. Successful
that they are no longer limited to the supplier relationship management
mindset and the required paradigm requires social interaction in a trusting
shift in the mindset of individuals partnership, within a framework of
in procurement departments. This clearly defined and measured targets,
has (in many cases, successfully) and performance measures.
been achieved in many companies.
Procurement has been able to

23


24


Functionality Analysis

25


SRM Functionality Analysis

Analysis performed by
Sarissa Alleijn

26


For organisations embarking on their Set up of the Supplier When selecting or evaluating an
Supplier Relationship Management application, it is important to determine
Relationship Management
(SRM) journey, often the most difficult which functions are critical for your
challenge is the ability to understand
Survey company’s procurement processes.
the spectrum of suppliers that could A functionality analysis is conducted Therefore a weighted score addressing
satisfy your requirements. based on a list of 171 questions, your preferred functionalities may
covering the entire spectrum of the result in a different outcome from
The key questions in support of this procurement process. These questions those shown in this survey. In order to
that are often considered are: represent the “most asked-for” and distinguish between the functionalities
the “most-critical functionalities”, as of the applications, it is necessary
• Which applications are available on
we recognise them from our client to understand which functionality
the market and what functionalities
discussions and interactions. Vendors supports the procurement processes.
do these applications provide?
are given the opportunity to indicate
• Do applications offer the same whether the requested functionality is To assess the level of support, we
services across all aspects of the available or not. divided the overall SRM process into
procurement function or are they nine sub-categories:
specific to one component of SRM? When interpreting the data it is
1. Procurement Intelligence
important to remember that this
This chapter will elaborate further on analysis is based on a series of 2. Project Management
these questions. questions designed to address whether 3. Sourcing
the software covers a specific set of a. Electronic Tendering
Supplier Relationship Management
functions. It is important to note that b. eAuctioning
depends on collaboration amongst
all of the questions have been scored
the enterprise’s internal and 4. Supplier Management
without weighing. This means that a
external suppliers for survival and
high or low score does not indicate 5. Contract Management
progress. Collaboration across
whether an application is good or bad; 6. Catalogue Management
sourcing strategies, management
it merely states the coverage of the
and governance remains critical 7. Operational Procurement
SRM functionality within the application.
to the success of supplier 8. External Resources
relationship management.
9. BPO Procurement

Figure 5: Capgemini Procurement Process Model

Procurement Intelligence

Analyse
Develop Place Approve
needs & market
Sourcing Requisition Requisition
dynamics
Strategy

Manage Procurement
RFQ Strategic Supplier Place
Manage Order
Process Sourcing Performance content Order
Cycle Cycle

Supplier Selection Verify process Receive
Negotiate & Contract and invoice goods
Finalisation

Project Management

27


Overall Functionality offer Operational Procurement 5. Catalogue Management
functionality. While the 2010-2012 is an element of Operational
Analysis
SRM research showed that there Procurement. Therefore, it is
As in previous studies, this year’s was still a greater focus on Sourcing not surprising that the vendors
vendor review shows that the than on Operational Procurement, that do not offer Operational
differences between applications are this year the survey shows that Procurement functionality also do
most visible in coverage at a functional vendors realise the importance not offer Catalogue Management
level. of the Operational Procurement functionality. Catalogue Creation
cycle as the backbone of the and User Capabilities are the
Some applications provide full coverage Procurement process. subcategories with the highest
for all subprocesses, whilst others can functional coverage (average score
be considered niche players supporting 86 percent of the vendors provide of 80 percent).
only a selected functionality. Although Electronic Tendering functionality
the reviewed SRM applications are while 66 percent provide 6. This survey shows that some
very capable, there are substantial e-Auctioning functionality. In line full suite vendors have started
differences between these applications with previous editions, Electronic to develop External Resource
and of course each of them will have Tendering is perceived by all functionality, indicating that this
a different fit within your organisation. vendors as core functionality as functionality is still growing rapidly.
Although it might seem that certain compared to eAuctioning. This supports the observation
applications have a low overall score, made in 2010-2011 that there is still
we cannot conclude these applications 4. In line with the observations made scope for improvement as some full
are of lesser quality. in the previous editions, Contract suite vendors not offering External
Management functionality has Resources functionality will start
Overall conclusions from this year’s continued to improve (90 percent to develop this functionality in the
survey: of the vendors offer Contract near future. Most of the vendors
Management). Only four vendors offering External Resources
Considering the survey as a whole, the
responded with a score of less than functionality offer high functionality
following represent the major findings
70 percent coverage in this area, (average >90 percent) regarding the
and conclusions:
with the average alone above 84 first part of the process (Specify,
1. Out of all of the vendors surveyed, percent. The majority of the vendors Approvals, Requisitioning), more
only five do not offer Procurement offer Contract Management than they support the second part
Intelligence functionality, which in combination with Sourcing of the process (Selection & Order,
demonstrates the importance of and Operational Procurement Monitoring and Aftercare). Since
tracking operational improvement functionality. However, there the demand for External Resources
benefits, and assessing and are vendors that offer Contract functionality grows in organisations,
ensuring compliance. There Management solely as an extension it can be expected that this area
is, however, a huge diversity in to the Sourcing or Operational will further increase functionality
coverage ranging from 97 percent Procurement cycle. There is even and richness of capability in the
to 19 percent. And, in addition, one vendor that offers Contract near future.
none of the vendors surveyed Management as a standalone
module since the relationship 7. BPO remains a strong area for
have full coverage of the service
with Sourcing and Operational growth with an average of 62
offerings, which leaves scope for
Procurement is totally absent. percent. “Procurement Intelligence”
more improvement over the next
and “Sourcing” continues to be a
few years.
Contract Compliance is still the key priority on the list of top 5 BPO-
least developed area with an based scenarios in use. “Contract
2. Project Management is still a
average of 76 percent. Since Management” and “Catalogue
key differentiator, with vendors
Contract Compliance is the next Management” are new entrants in
either providing functionality in this
phase once P2P compliance has the top 5 this year, whereas “Project
area (59 percent of the vendors
been achieved or is maturing, it is Management” and “External
surveyed) or no functionality
anticipated that this area will further Resources” are not high on the
whatsoever.
improve in functionality over the priority list as BPO scenarios.
3. 79 percent of the vendors surveyed next few years.
offer e-Sourcing functionality
as compared to 76 percent who

28


Figure 6: gives an overview of the available functionality of each vendor application. The Y-axis represents the vendors and the
X-axis represents the categories within the SRM suite.

nt
me t
ge nt t en ce
na e en
t en en
Ma em em rem lig s
ec
t g ag
em na
g
roc
u tel rce
roj na t in ou
a an Ma al
p
en es
gP tM M e on lR
rci
ng cin ac
pli
er gu ati rem na ll
ou ur ntr p at alo er oc
u
ter O era
S So Co Su C Op Pr Ex BP Ov
SAP SRM 98%
Ariba 92%
Proactis 91%
Eeebid 88%
Esize 88%
Tblox 85%
SynerTrade 82%
Proquro services 82%
BravoSolutions 75%
Hubwoo 71%
IBX 70%
Pool4Tool 66%
Oracle 63%
Volt 61%
Peoplesoft 59%
Inconto 55%
JD Edwards 51%
Bupros 47%
Perfect commerce 42%
BasWare 41%
Archifact 38%
Negometrix 36%
VendorLink B.V 32%
bipsolutions 30%
Upside Software 25%
SciQuest 24%
Verian Technologies 23%
Spend360 19%
Ecovadis 9%

29


Analysis per Category The in-depth application review is
structured according to the nine
When selecting an SRM tool, you are subcategories listed earlier.
likely to have certain requirements that These subcategories have been further
are more critical than others. If you divided into a number of functional
are looking for a full-suite application, categories as shown
the overall functionality scores may be in Table 7.
sufficient for your selection. However,
if you are looking for a particular
functionality or a set of functionalities,
a more in-depth review of the results
is required.

Table 7: Additional Functional Categories

Procurement Project Supplier Contract Catalogue Operational External BPO
Sourcing
Intelligence Management Management Management Management Procurement Resources Procurmeent

General Project General General General General General Specify BPO
Management Approvals
Strategy Evaluation & Authoring User Requisitioning
Development Development Capabilities Requisitioning
Spend Demand Compliance Request for
Analytics Aggregation Database Supplier Quotation Selection &
Repository Capabilities Order
Electronic Approval
Tendering Administration- Monitoring
Content and Purchase Order
Operational e-Auctioning Review Approval Transmission Aftercare
reporting
Negotiation Administration- Receiving
and Contract Creation Goods and
Signing Services
Administration-
Maintenance Invoicing

30


Procurement Intelligence Procurement Intelligence is key to
assessing and ensuring compliance,
Procurement Intelligence is the process tracking operational improvement
of collecting, cleansing, structuring and benefits and in implementing sourcing
drawing insight from market analysis, strategies. Procurement Intelligence
process measurements (both sourcing software typically supports spend
and procurement), spend data, analytics and operational reporting.
supplier performance and knowledge
management solutions. Procurement The ability to clearly communicate
Intelligence solutions support findings is critical to achieve staff and
data collection, data processing management buy-in. Therefore, the
and validation, Key Performance functionality to graphically represent
Indicator (KPI) calculation and report findings is of high importance in this
generation. The knowledge gained type of application.
from Procurement Intelligence aims
to simplify decision making, making
this subprocess a critical part of both
the strategic sourcing process and
procurement governance.

Figure 8: Procurement Intelligence

Procurement Intelligence

Develop Analyse
Sourcing needs & market Place Approve
Strategy dynamics Requisition Requisition

Manage Procurement
RFQ Strategic Supplier Place
Manage Order
Process Sourcing Performance content Order
Cycle Cycle

Supplier Selection Verify process Receive
Negotiate & Contract and invoice goods
Finalisation

Project Management

31

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