Tuesday, March 4, 2008

Supplier Performance Measurement and Compliance Management

Supplier performance measurement and compliance management go together. Both of these solutions feed from the same data as the supply chain visibility. However the business ownership for the supply chain visibility normally resides with the operations team, while the vendor relationship organization owns the supplier performance scorecards, and compliance. Given this organizational dichotomy, many organizations tend to pursue separate solutions for these two related capabilities. From the solutions point of view, though it is most desirable to pursue a single solution that addresses these needs together.

Three types of solution providers can address such needs...

VAN Providers

These are the VAN (Value Added Network) providers that normally provide the EDI services. In the past few years though, most of the VAN providers have added application functionality to their services that enable visibility across the chain. For supply chain operations, such visibility goes across the purchasing, shipping, distribution, and receiving and settlement functions.
Most of these functions use standard EDI communications. Some very common examples being 850/855/860/856 for purchase orders and ASN; 204/990/214/314 for load tenders and shipping; 110/210/810/820 for invoices and remittance.

As these transactions pass through the VAN, these providers have built applications and reporting to provide the supply chain visibility, vendor performance and compliance metrics. Organizations may need to feed some additional data for receipts as that is generally an internal transaction and may not go through a VAN provider’s network.
All the major providers in this space such as Sterling Commerce, Inovis, GXS etc. provide such capabilities. Most of these vendors also provide charge-back capabilities for non-compliant vendors; pro-active notifications; and web-portal for score-cards as well as dispute settlement are some of the other nice features to consider.

The advantage of this approach is that no extra data interfaces need to be built, and there is very little IT effort involved in standing up this capability once the business metrics have been established. A web-portal is generally part of the solution and on-boarding is provided as an additional service if desired.

The solutions in most cases can be hosted, or brought in-house; or purchased as extended services to VAN, or exclusive of VAN services. Costs must be considered for all the services desired.

ERP Vendors

Next class of solutions in this space comes from the standard ERP vendors. All major ERP vendors cover the functionality as part of their SRM (supplier relationship management) suites. SRM supplier management function collates all the required data from purchasing, receiving, transportation and warehousing modules of the ERP to create and provide the scorecards. Any charge-backs as a result of non-compliance are sent back to the ERP’s finance modules.
SAP, and Oracle are examples under this class of solutions. Some more niche vendors such as i2, and Ariba/Procuri also provide good functionality in the space.

Consider this solution approach if an ERP is already in place, and most of the related supply chain functions have been deployed preferably on a single vendor solution. This option may turn out to be more cost-effective in these cases.

Niche Vendors

Then there are vendors that specialize in this functional area. These are dedicated vendors that provide extended solutions and services in the space. They have well-packaged out of box solutions and can help in situations where business requirements are not well understood, or not yet matured. Consider them to bring on-board the business expertise needed to set up such programs and for a quick packaged solution with well defined footprint.

Some examples in this class of solution providers would be Compliance Networks, Emptoris, Eqos, and TradeCard.

Many more vendors exist in all classes of solution providers above, and the names mentioned have been picked only to exemplify the specific class of solutions.

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