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Ariba Knowledge Nuggets: Supplier Management Challenges Part 2

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SAP Ariba
SAP Ariba

This document discusses strategies for implementing a best-in-class supplier management program. It begins by outlining typical supplier tiers - strategic (1-5% of suppliers representing a high percentage of spend), preferred (3-10% representing significant spend), and other/transactional (85-90% representing low spend). Strategic suppliers receive the most resources and collaboration. The document then lists steps to implement a program, such as solidifying executive sponsorship, establishing onboarding and metrics, piloting categories, and automating processes. It emphasizes selecting metrics and communicating results to drive performance improvements with suppliers.

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Ariba Know ledge Nuggets Building a Successful Supplier Management Program—Part II Supplier Programs: Typical programs have different levels for supplier participation While naming conventions may vary, programs typically cover three major supplier segments or tiers: Strategic Suppliers(1-5% of supply base Representing much higher % of spend) 1-5% Preferred Suppliers (3-10% of supply base representing significant % of spend) 3-10% Other/ Transactional Suppliers (85-90% of supply base 85-90% representing low % of spend, but often high # of transactions) Supplier Tier Determines Components STRATEGIC • Executive sponsors at both buyer and supplier organization • Monthly and Quarterly meetings • Robust scorecards evaluating both supplier and customer performance against objectives • Joint teams working on site at customer; often difficult to know who is supplier and who is customer team member • Individual performance goals on both sides include metrics evaluating output/ performance of collaboration efforts • Cost sharing/ gain sharing PREFERRED • Sponsors at senior level in organization; may or may not be executives • Quarterly or bi-annual meetings • Robust scorecards evaluating supplier performance against objectives • Cost management goals OTHER/TRANSACTIONAL SUPPLIERS • May or may not have scorecards and metrics in place, depending upon resources available to support program and value to be derived • Historically this category of supplier has been overlooked due to the investment required, with the advent of technology to automate the program, we expect to see more of these suppliers brought on board to client programs
Implementing a Best-in-Class Supplier Management program 1. Solidify sponsorship of internal champions and executives 2. Establish robust supplier on-boarding and information management process 3. Determine Supplier Segmentation Model (i.e. strategic, key, transactional) • Select a pilot organization and pilot suppliers and understand what is currently being measured 4. Pilot specific categories and/or supplier tiers 5. Define the process for gathering and reporting scorecard results, and managing supplier performance 6. Automate Contract Management process to drive compliance 7. Solidify metrics (including data sources and calculations) • Establish key performance indicators (KPIs) • Define scorecard and survey questions and templates 8. Analyze results and communicate to suppliers 9. Collaborate with suppliers to improve performance • Greater volumes • Global economy • Revenue generation & acceleration • Cost containment • Compliance All of these impact and are impacted by risk management policies Technology, Capabilities, Content and Community all play a critical role in structuring an effective Supplier Management Program
Where Does Your Organization Fall? Take our poll on the Customer Success Group page in Ariba Exchange!
HAVE YOU JOINED THE CUSTOMER SUCCESS GROUP PAGE ON EXCHANGE YET? As your partner in success, we believe this group is a great place for you to meet and network with other Ariba customers who, like you, rely on Ar- iba solutions to drive their organization's goals. Since we already know of many of the innovative and exciting things you are doing, we think it is time for you to share with others! Of course, you may also find the group to be a great place to learn from others as well. The Customer Success group is for Ariba customers only. This is YOUR group. We encourage you to ask questions, share ideas, post best practice tips, etc. We will do the same. As you explore the site you will find a weekly Tip of the Week, a customer reference calendar, replays of our Cus- tomer Success Lunch 'n Learns, archived Ariba Knowledge Nuggets, upcoming events.....and much more. We also want your feedback on the site and how we can improve it. We are sure you like what you see, but more importantly we hope the site will help you drive greater adoption, compliance, ROI, and savings targets. We look forward to seeing you there!

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Ariba Knowledge Nuggets: Supplier Management Challenges Part 2

  • 1. Ariba Know ledge Nuggets Building a Successful Supplier Management Program—Part II Supplier Programs: Typical programs have different levels for supplier participation While naming conventions may vary, programs typically cover three major supplier segments or tiers: Strategic Suppliers(1-5% of supply base Representing much higher % of spend) 1-5% Preferred Suppliers (3-10% of supply base representing significant % of spend) 3-10% Other/ Transactional Suppliers (85-90% of supply base 85-90% representing low % of spend, but often high # of transactions) Supplier Tier Determines Components STRATEGIC • Executive sponsors at both buyer and supplier organization • Monthly and Quarterly meetings • Robust scorecards evaluating both supplier and customer performance against objectives • Joint teams working on site at customer; often difficult to know who is supplier and who is customer team member • Individual performance goals on both sides include metrics evaluating output/ performance of collaboration efforts • Cost sharing/ gain sharing PREFERRED • Sponsors at senior level in organization; may or may not be executives • Quarterly or bi-annual meetings • Robust scorecards evaluating supplier performance against objectives • Cost management goals OTHER/TRANSACTIONAL SUPPLIERS • May or may not have scorecards and metrics in place, depending upon resources available to support program and value to be derived • Historically this category of supplier has been overlooked due to the investment required, with the advent of technology to automate the program, we expect to see more of these suppliers brought on board to client programs
  • 2. Implementing a Best-in-Class Supplier Management program 1. Solidify sponsorship of internal champions and executives 2. Establish robust supplier on-boarding and information management process 3. Determine Supplier Segmentation Model (i.e. strategic, key, transactional) • Select a pilot organization and pilot suppliers and understand what is currently being measured 4. Pilot specific categories and/or supplier tiers 5. Define the process for gathering and reporting scorecard results, and managing supplier performance 6. Automate Contract Management process to drive compliance 7. Solidify metrics (including data sources and calculations) • Establish key performance indicators (KPIs) • Define scorecard and survey questions and templates 8. Analyze results and communicate to suppliers 9. Collaborate with suppliers to improve performance • Greater volumes • Global economy • Revenue generation & acceleration • Cost containment • Compliance All of these impact and are impacted by risk management policies Technology, Capabilities, Content and Community all play a critical role in structuring an effective Supplier Management Program
  • 3. Where Does Your Organization Fall? Take our poll on the Customer Success Group page in Ariba Exchange!
  • 4. HAVE YOU JOINED THE CUSTOMER SUCCESS GROUP PAGE ON EXCHANGE YET? As your partner in success, we believe this group is a great place for you to meet and network with other Ariba customers who, like you, rely on Ar- iba solutions to drive their organization's goals. Since we already know of many of the innovative and exciting things you are doing, we think it is time for you to share with others! Of course, you may also find the group to be a great place to learn from others as well. The Customer Success group is for Ariba customers only. This is YOUR group. We encourage you to ask questions, share ideas, post best practice tips, etc. We will do the same. As you explore the site you will find a weekly Tip of the Week, a customer reference calendar, replays of our Cus- tomer Success Lunch 'n Learns, archived Ariba Knowledge Nuggets, upcoming events.....and much more. We also want your feedback on the site and how we can improve it. We are sure you like what you see, but more importantly we hope the site will help you drive greater adoption, compliance, ROI, and savings targets. We look forward to seeing you there!