The state of technology in supplier management

It's one of the Six Pillars of Supplier Management, along with value, engagement, governance, people, and collaboration. Yet the adoption of dedicated technology solutions for supplier management continues to be low among organisations worldwide.

Rates of technology adoption are low

The importance of technology is top of mind according to " Building Resilience: The 2022 Global SRM Research Report," which includes survey data collected by State of Flux from a global cohort of companies. Yet overall, the supply chain is underinvesting in supplier management technology. While there is a movement away from desktop tools such as Microsoft Excel, SharePoint, etc., the shift is happening slowly.

Survey results indicate that many core supplier management functions, including risk management, relationship management, performance management, innovation management, and CSR/Sustainability management, are still supported by generic applications such as Excel, SharePoint, and Teams, or by no system at all.

*Master data is also defined as the central register by some supplier management functions.

A recognised need for change

Despite the low rates of technology adoption in some areas of the supplier management lifecycle, companies recognise the value that technology brings to their operations. While desktop tools have played an integral role in helping companies manage supplier management data, dedicated systems offer custom features that make them more usable, auditable, and secure, and the industry recognises the importance of these advantages.

More than one in four organisations indicate that a lack of IT functionality is one of the three top barriers to maintaining a successful supplier management programme, and fewer than one in 10 are satisfied with how their IT systems and technology support the supplier management lifecycle.

Perceived benefits of supplier management technology

Companies see the adoption of dedicated technology systems and solutions as valuable, and they are able to articulate the specific business benefits they expect to achieve by adoption supplier management technology.

Nearly three-quarters (71%) of companies identified supplier management performance and improvement (process and framework) as the top benefit they expect to see. Risk identification and management, having a single place to manage suppliers, value capture and delivery, and information management, sharing, and reporting were also among the top perceived benefits for more than half of companies.

Insights gathered from S&P Global's KY3P®, an integrated solution suite that manages end-to-end third party and vendor risk management, confirm these findings. According to the data, automating supplier management allows organisations to consolidate and digitise critical information in one place. This can decrease the administrative burden on procurement teams, risk management functions, and other stakeholders as well as suppliers, and can lead to efficiency gains in the third party vendor risk management (TPRM) process.

In particular, lower-value and labour-intensive tasks such as onboarding suppliers, screening suppliers via data feeds, sending out due diligence questionnaires, and completing other parts of the due diligence assessment process can be automated. This improves risk management and enhances efficiency while enabling TPRM teams on to focus on the things that really matter.

Priorities driving technology adoption

Harnessing the power of technology is vital in making supplier management a consistent and sustainable activity. Technology optimises supplier management processes and practices while simplifying and automating information management and reporting. This allows practitioners to spend more time engaging suppliers and the business to drive value from relationships.

When asked what they prioritise as an important factor in a technology solution, more than half of the respondents indicated that they want to centralise the information that is key to managing suppliers and close to half identified the need for integration with existing systems as a priority.

Fewer than one-third of companies (31%) indicated that the cost of technology was high-priority consideration, suggesting that they are motivated to find solutions that deliver the greatest business value, rather than those that reflect a specific price point.

Challenges for adopting supplier management technology

The State of Flux report identified several factors that may be slowing the rate of adoption for supplier management technology, with defining a business case emerging as a key challenge. While companies see the adoption of dedicated technology systems and solutions as valuable, and they can articulate the specific business benefits, only one in four have a fully defined and documented business case for supplier management.

Therefore, it seems that some supply chain leaders are still held back by the difficulty of defining a concrete business case for technology that takes into account added business value. Focusing on the efficiency gains, potential cost savings, and especially the added value from improved risk management and supplier performance are key elements to consider when crafting a business case.

Once a cogent case has been made, finding the right solution can also pose an issue. Supplier management consists of a wide range of functions, including supplier onboarding, operational and strategic management, and supplier exit management. The challenge of finding a single solution to support the entire lifecycle may be causing companies to delay the search.

A changing mindset

One of the key takeaways from the State of Flux report is the correlation between low levels of satisfaction with existing supplier management technology and low levels of adoption for specialised systems that support core functions within the supplier management lifecycle.

Despite adoption challenges, procurement and supply chain professionals are motivated to realise the value of dedicated solutions, especially the ability to centralise supplier data, manage risk effectively and efficiently and use it to inform existing systems and management and drive reporting.

To explore S&P Market Intelligence's approach to supplier management, learn more about KY3P, an integrated suite of solutions to manage end-to-end third party and vendor risk management.

For tips on how to strengthen your supply chain, read " Four ways to create supply chain resilience."

To understand the bigger picture around supplier management, access the full State of Flux report.

S&P Global Market Intelligence is a division of S&P Global (NYSE: SPGI). S&P Global is the world's foremost provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help many of the world's leading organizations navigate the economic landscape so they can plan for tomorrow, today.

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