The Right Supplier is a Value, Not Just a Cost

Scanmarket's Henrik Balslev and Forrester's Andrew Bartels present the latest trends in supplier selection as an illustration of risk management's vitality when shopping for new vendors. Packed with infographics and data-driven insights, Forrester sheds light on the power of picking the right supplier, and the shift to regarding the correct vendors as an asset and not only a cost. 

Source-to-contract software provider, Scanmarket cohosted this edition in its educational series with Forrester,  a consumer behavior research firm who specializes in applying buying trends to real-world results for companies looking to maintain a competitive advantage. The ideal pairing  bridged the world of the theoretical and abstract to realized software offerings that harness the power of AI in the procurement industry. 

The move from cheapest to strategic supplier selection is the hallmark of a modern buyer team, as was clearly outlined in the presentation. Utilizing existing suppliers in the database is also encouraged, but making deliberate choices that drive value to the organization are the keys to the "investment verses spend" mindset.

Examples of strategic purchases include: 

• New direct materials from key suppliers
• New items for retailers to put in stores
• Critical parts and maintenance supplies
• New consulting or outsourcing services
• Key legal accounting or marketing services

The bottom line is often an amalgamation of more than just outright money spent on any one given supplier, but rather the total investment in the relationship, meaning any absorbed costs because of the supplier selection as well. Andrew Bartels cautioned against just going with the cheapest option, citing many instances in which large corporations faced unanticipated costs like litigation, recalls and product replacements  as a direct result of hiring unqualified suppliers or ones that cut corners. Forrester's Bartels also noted the importance of integrating technology into the procurement team's toolbox, as advancements in sourcing come from the digital space, as opposed to traditional methods. 

The consumer behavior data clearly shows the need for strategic sourcing with the help of AI driven software,  to find the best match for the most critical characteristics in a supplier. Scanmarket's Henrik Balslev drives the point home with data showing the majority of newly auctioned items have been services, rather than products, which were the leading categories for many years. As labor constraints continue to impact many industries, searches for a robust service provider lineup has become essential as out-sourcing takes hold. This shift also exemplifies the domination of service-based businesses as opposed to product-based business as the world grows increasingly digital.  

Balslev highlighted the the Spend Analytics and Contract Lifecycle Management components of the Scanmarket software suite as answers to the modern spend department's most important question: how can we actualize savings while also ensuring regulation compliance when it comes to our vendor selection?  Opening a new range of evaluation points, Balslev notes that many companies now focus on less pricing related factors, and more ethical or process related attributes when they search for a new organizations with which to do business.

Such categories include: 

• Sustainability
• Diversity
• Government Regulation and Policy Compliance
• Risk Mitigation and Assessment
• Quality and Speed of Delivery, etc.

Driving value, not just costs was the core message of the presentation as the two reflected on the fact that risk mitigation and management is becoming more important than ever to today's CPO.