we are uh I’m joined today not by Roy
Anderson. Maya is is is uh is joining me
today. Uh Roy Anderson had a had a event
that he needed to attend to. So we’re
just going to move forward with the
NextGen procurement cost podcast and
talk about how supplier management has
changed and what is important about
supplier management now and in the
future. Um and with me is Maya. who’s
going to be moderating the session
today. First though, if you guys want to
put uh in the chat where you guys are
joining us from and uh anything you want
to know about supplier management in the
chat, that’d be fantastic and we can uh
deal with that as as it comes. So uh so
today we’re going to essentially look
through the agenda. So we’re going to
talk about how supply management has
evolved since we started probably back
30 40 years ago and then how we can use
uh SRM supply relationship management as
a strategy to bring sort of procurement
and pro procurement strategy into the
forefront of SRM. So with that we can
All right. Absolutely. So we’ll go ahead
and get to topic one. And the first
thing that we want to talk about is
where SRM is at today. You did a great
job of of chatting to me about this, so
I’m excited to get into it. Um, so if
you can go through like what are the
basic activities of SRM when you’re
thinking about supply relationship
management and how do you see that
reflected in what most organizations are
Well, so when I started in procurement a
long long time ago, we always talked
about supplier relationship management
as a necessary thing to do. But as
procurement is not really the most
funded department in most organizations,
it usually fell to the back of the back
of the line as as things were um
So what ended up happening was that
regulators told us we needed to do
something and those typically became the
things that sort of keep us out of jail
type things. So if you think about
Sarbain Oxley coming in and then you
would have the Enron failure happened
and so then you had folks coming in to
say look you need to evaluate evaluate
people’s financial or supplers financial
stability you need to ev value your
control environments and more and more
things now piled into that as
organizations have more uh let’s call
them woke boards for example to say now
you need to make sure you hire diverse
uh folks you need to make sure you have
diverse suppliers ers, you need to make
sure that they aren’t uh hiring slaves.
You need to make sure they’re not
polluting. You need to make sure like
all those things are sort of adding to
it. But let’s be honest, like none of
those things are rarely decisionmaking
and they’re very rarely strategic.
They’re reactionary in in ways. So
essentially what when I get engaged to
help folks implement supply relationship
management program more often than not
they’re very focused on the tactical
stay out of jail type things and you
know if you’re lucky you start talking
about making sure KPIs are met and so on
and so forth but it’s not really the the
strategic stuff that we sort of dream
about. So, so that’s kind of where we
are today. Most like obviously there are
outliers on either side of that
equation, but most organizations when
you think about SRM is still sort of on
the risk and and get stay out of jail uh
I like stay out of jail. That’s
definitely important. So, we definitely
want to keep that done and dusted. But
let’s talk a little bit about moving
from just those tactical need to haves
um into the more strategic parts of SRM.
Absolutely. And I think it’s very
into contracts and supply relationship
with the best of intentions, right? So
if you think about the tactical pieces
and parts of it. So yeah, you have a
contract, the contract has KPIs, you may
even done a risk assessment and when you
started and the issue very quickly
becomes that there’s no real mechanism
to ensure that those things are actually
done correctly and done regularly and
they add value. So even if let’s say you
say that a supplier needs to you need to
send it you send you a certificate of
insurance and an updated sock too very
seldomly does that get followed up on
and and sort of enforced and that’s the
minimal thing to do to sort of stay out
of jail as we talked about right but
then how then are these suppliers that
you’re picking and I’m talking about the
strategic suppliers like how are they
aligned with developing the future of
your corporate strategy how are they
delivering bring against your corporate
strategy and how can you get them to
sort of go above the tactical day-to-day
stuff and bring things to the four maybe
sometimes before things happen or as
things are happening and it was
interesting I was working as a in
procurement for a large insurance
company and you had claims adjusters
that would come to us and say hey by the
way there’s this new technology now
called you know mobile phones where you
can take pictures of cars and accidents
and we can use that to predetermine
whether or not you know this or that and
the other thing is required and that
strategic like that really shortened
down the claims adjustment process and
those are the types of things that
really changes the um changes the value
of that particular service and those are
the types of relationships that you
want. So, a couple of things, right? You
want you want to get them to bring
innovations to you before they bring it
to anyone else, but they also want to
figure out like how can they warn you
about failures before uh that becomes
apparent, right? And it’s it’s, you
know, what you call a gauge versus an
idiot light, right? When the idiot
lights on your car comes on, it’s too
late. You probably need some sort of
early warning system to make sure that
things are are are are surfaced as and
when it happens rather than uh after
it’s too late. So that’s really
ultimately where you want to switch from
the the tactical of of just checking
boxes to sort of becoming value added
and solving issues together with your
your more strategic providers.
I love it. And I don’t know, it seems so
obvious, but when you really think about
it, your supplier is going to be your
your procurement’s expert on your
organization. Your supplier is the
expert on whatever it is they’re
supplying. So, working with your most
strategic suppliers to hear what what
the renovations are. Of course, mobile
phones, brand spanking new ones, very
exciting. Um, but neat. Awesome. So,
that was great going through both. So,
we’re going to move on now and take a
look at internal alignment. Um, and we
have this really interesting
conversation about making sure
procurement’s actually aligned with the
needs of your internal stakeholders.
because you can be doing wonderful work,
but if it’s not what they really want or
need, they’re not all that impressed
with you. Um, and that was interesting
to me. Can you kind of get into that and
and that conversation we had?
Yeah, I mean, it’s always interesting.
So, I worked for a bunch of different
companies and I worked for some very
large companies where the the balance
sheet was so large that they didn’t care
about saving money. It was all about
optimizing the balance sheet. So, you
know, me coming in as this, you know, at
that point 20-y year procurement person,
it was all about saving money, right?
And I was told very bluntly like, we
don’t care, right? We care about speed,
we care about innovation, we care about
this or that, the other thing. So, it’s
it’s usually you have to have the
internal alignment with stakeholders.
So, you you know that you’re providing
the value that they’re looking for. And
that manifests itself not just in
sourcing, but also in how you manage
your providers, right? So we’re used to
the typical playbook of saying reduce
cost uh you know all those kinds of
things but it could be that you number
one you need to make sure you ensure
supply make sure that the things that
you are required to have are actually
there when when you need them right and
sometimes that cost more money but
that’s okay um and innovations is is
more important than say cost or volume
those kinds of things so it’s is making
sure that you as a procurement
professional understands what your
customers want internally
and then you can give that message to uh
the suppliers right as as the custodian
of the process from beginning to end.
And the other thing is is you should
also ask your suppliers right is what
are your best customers doing in this
field to make sure you can bring that
information back to your customers and
just by doing that you can immediately
add value because those are the guys
that need to make the decisions to do
something or not do something. So the
whole idea of of of breaking down those
closed loops between procurement and
supplier and procurement and the and the
stakeholder, it needs to be sort of a
team effort to make sure things are done
the right way for the right reasons for
the benefit of the enterprise, not
necessarily for the individual pieces of
Awesome. Thank you so much. And not to
uh to jump the gun, but our next
episode, episode 3, is going to be a
little bit more about how procurement
can build those really strategic and
hopefully um pretty close relationships
with their stakeholders. So, you’re
definitely going to want to pre-register
for that one cuz that’s relevant here.
All right. Um and let’s get a little bit
deeper into how teams can actually
evaluate their current SRM. So kind of
looking in the mirror, seeing where
we’re at now and identifying those
opportunities to find more um strategic
Yeah. I mean, and this is a very
so first of all, has the supplier
management or supplier onboarding
process ever made you make you change
And basically, let’s say a supplier
comes in and they have piss poor uh
financial health and they don’t have a
control environment, you know, all those
Will the stakeholders ultimately
override you and still say yeah we don’t
care we’re moving on with that if that
is the typical mode of operandi like are
you really strategic and it was
interesting I was working for a bank uh
uh the marketing department picked a
supplier to do some mobile apps stuff
and we looked into the organization it
was two guys and they were basically you
know working Amazon style in the at the
beginning where it’s like, well, is this
really what you want to sink a couple
hundred grand into? You want you want to
prepay them for those kinds of things.
You know, all the warning bells are
there that you’re paying for something
before you get it. And they said, “No,
no, we we’re going to do this to the
right folks.” And and we got I got voted
off the island. And lo and behold, you
know, less than three months later, that
company was acquired, which was good,
but the the the acquiring party
basically said, “Yeah, we’re not
honoring that contract. It was a silly
contract to begin with.” So basically
we’re left standing. So sometimes we
need to learn those lessons the hard
way. And the irony is they still didn’t
learn the lesson. They would have done
it anyway. But anyway, I sort of move
on. Right. The second question around uh
evaluation of your your existing program
is do you actually do what you say
you’re going to do? Uh are you tracking
performance? And you don’t have to track
performance of every contract, but if if
the contracts are really important to
you, then you should be tracking
performance. you should be tracking um
how quickly you’re paying them, how
quickly they’re responding to issues,
how happy the customers are and those
kinds of things. And if you’re not doing
it, you know, you can start small and
start with the most important things.
But if you’re not doing it at all,
you’re probably not doing all that well
The third is obviously, are you are you
measuring outcomes? Are you measuring
KPIs? And this is sometimes an
interesting discussion because I’ve been
part of very very large outsourcing
agreements for example where we
debatched or rebatched like 10,000
employees and we were you know basically
we took internal departments and made
them external uh vendors so to speak and
we had no clue how to measure the
success of this because now you’re
paying invoices rather than salaries
and you know obviously the the eval the
evolution of tracking activities or
tracking outcomes and those kinds of
things change over time. So, as you’re
setting up a contract, sometimes you
have actually no clue about what to
measure and how to measure it. So, it
needs to be sort of a back and forth
process as the relationship matures and
goes on, but the whole idea here is KPIs
are sometimes not as important as the
outcomes you’re seeking with the with
the third party. So, I think that is
what you need to think about is is yeah,
service level. Does it really matter in
the grand scheme of things if you’re not
getting the outcomes that you want from
using the solution? Right?
The fourth is do supplies validate this
the supplier performance. So again if
you are reporting the you know the
triple nines quadruple nines is that
what folks are actually seeing is the
lag time there is it not there are they
actually delivering things on time is
the data good those kinds of things. So
the whole idea is you know make sure
that your your constituents agree that
things are done the right way if the
supplier uh reports it as such. Right?
So you need to basically start shifting
from are we compliant to are we getting
what we what we want or what we thought
we wanted from this relationship.
And last but not least is
is there a tie between the executives of
your organization and the executives of
the supplier organization. So if
something goes wrong, is there a line of
communication that you can use for
escalation if required? Right? And we
talked about this in a different episode
that sometimes the salespeople that are
selling stuff are selling stuff that may
not be there or it may be
overexaggerated of what what the actual
capabilities are. And then you sort of
need to bring that up to flagpole to
make sure that uh things get resolved
and you know that’s kind of important.
So, can you come to a mutual
understanding if you need to be and can
you exit with uh your head hel head
heads held high at the end of the day if
something needs to happen and these
aren’t always easy discussions to have
but it needs to be very clear escalation
path for existing relationships because
you don’t want to have the first call
between two executives be the
introductory call at the same time as
trying to solve a crisis because that’s
not a good good situation to be in.
Absolutely. Absolutely. Those are great
All right, so let’s go ahead and move
on. We’re going to talk a little bit
about the second tier supplier
challenge. Another super super
interesting topic. Um, so I’ll let you
I’ll let you jump into this one a little
So we talk we talk about this a lot and
very often now again if you’re in the
box checking exercise of supplier
management. So as part of GDPR now it’s
become required for people to service
their right focal point uses these third
parties to develop deliver services
right and then you decide okay are these
companies like AWS and Microsoft you’re
probably good to go there and or then
you sort of get into the middle tier
let’s call them maybe monday.com or
Asauna not disparaging those companies
at all but they’re not Microsoft or AWS
and then it’s it’s smaller companies
like that and the amount scrutiny that
you need to have with those suppliers,
you know, depending on what the supplier
is doing for you needs to be taken place
of. And you know, basically again, your
box checking exercises to make sure like
are you comfortable with the third
uh that your suppliers are using. Now
what I always find interesting now as as
I’m developing or as I I’m working at
Focal Point is we started now to look at
the combined risk of the of the third
parties of third parties or the second
tier suppliers and you realize there’s a
lot of concentration risk for example
where you have a whole bunch of first
tier suppliers that are using the same
second tier suppliers and all of a
sudden you can see that oh I have
the same 50 or 60 suppliers using the
same uh you know defense or you know
security solution like if you think
about uh crowd strike comes to mind
right so if they’re all using crowd
strike and their supplier goes down then
you know you can have some real
challenges with your first tier
suppliers and it’s really understanding
the connectivity between the second tier
suppliers and the first tier suppliers
and really the the whole idea of just
even putting something simple in place
to say what is even though you don’t
have a relationship with say crowd
strike, has there been a cyber event at
the organization, is there negative news
or adverse media for that supplier,
those kinds of things. And it’s a
relatively easy thing to set up and it’s
not going to mitigate the risk, but at
least you’re monitoring it, right? And
the challenge always becomes as you are
onboarding new suppliers is are you
doing that comparative analysis to say,
okay, here is a second tier supplier.
How frequently used is that supplier? uh
who owns that that you know the followup
with that supplier if any and what can
we do to mitigate it. So for example, if
somebody collected sock twos uh for that
supplier, could you get it, evaluate it,
so on and so forth. The whole idea
really is is bringing the data together
so you can actually make sense of it and
evaluate it. And that’s very hard when
you think of onboarding a supplier and
you don’t keep track of your second tier
suppliers in a joint database, right?
Because if it’s all there’s a checkbox
exercise. Yeah, this you know the this
supplier is good because the second tier
suppliers also look good. I mean that’s
valuable but not sufficient to sort of
look at totality of the risk of
secondary suppliers and I think it’s
it’s it’s a huge uh it’s a huge problem
or it’s a it’s a huge potential risk
that most folks haven’t really thought
Awesome. Yeah, I remember again I
remember the first conversation about
this we had and I was like my gosh this
is an entire huge new layer on this SRM
onion. Um but absolutely having the
ability to actually get into your data
and see what that means um risk-wise is
is critical. And on that um I think
we’re going to get a little bit into
kind of some functionalities within
focal point that um empower that that
level of visibility. Um so I’ll go ahead
and let you talk through these
Yeah. I mean so you know we talked about
all the strategic stuff but now we’re
back to sort of the t the tactical
stuff. So I apologize for that. Right.
So, as you can see here, we’re looking
at uh the focal point screen, and you
see here that Susan aka Grover has a lot
of things that need to be done, she she
has a number of uh approvals that need
to get get done and bunch of tasks that
need to get done. And we can
automatically when things are overdue
and when things aren’t being done as
expediently and efficiently as possible,
the solution can flag those things and
send reminders and alerts to make sure
that things are being done
as and when needed or escalated as and
when needed. And I think that’s one of
those things that are typically missed,
right? uh supplier management is not
always the most sexy thing in the world,
but unless you actually follow things up
internally, it’s going to disparage the
brand of SRM even more. So, you know,
again, fairly rudimentary, right? But at
the end of the day, knowing where things
are sitting in the pipeline and knowing
who has the ball and what is waiting on
are kind of important. And if you kind
of move into the next thing, and this is
again a sock 2 type example, right? So
here and again you can see here we we
created a fictitious supplier called C
supplier cloud player. Um and you can
see here that the sock 2 uh Susan has
one of those things that that needs to
be done. So obviously this this sock 2
is coming up for renewal and it’s
important to note that it expires in a
few days and you need to sort of follow
up and make sure that uh Cloudflare uh
uploads the new sock too to make sure it
stays compliant and again like you can
push responsibility internally to the
stakeholders internally or to the
suppliers right so you can set up the
workflow to do whatever it is that you
want to do if you want to send it to the
supplier for the first swing that’s fine
or if you want to send it to the
stakeholder or the or procurement for
the first swing and they can do that
direct connectivity between the supplier
and the stakeholder fine too. So then
that’s all good well and good. Now
here’s the really cool thing if you go
and that’s the idea of automatically
evaluating a sock 2. So the sock 2 that
you see on the screen actually it’s not
a sock 2 it’s a report of a sock 2 and
it’s focal point sock 2. So the first
thing we have done here is we have
created an AI agent to read through that
entire sock too and basically come up
with you know the good, the bad and the
ugly of every sock too. So it looks at
exclusions, it looks at exceptions, it
criteria, the tech service criteria,
right? And you can see here the top line
of this is that it’s it this is an an
excellent report. It has good um good
controls. they are uh effective and and
they’ve tested like life is good right
the report does not have any
qualifications to it meaning like
meaning it’s not unqualified
it is unqualified meaning it’s it’s good
there’s no sort of qualification
statements to say it would have been
good if and so everything is good here
right but it does flag that there are
two potential items that you may want to
follow up on uh one is is that AWS is
carved out is probably okay right
because most people know AWS but you
follow up with it right here from the
screen. Right? So, the whole idea is
using automation and AI to essentially
automate the the uh assessments for you,
but then also coming up with potential
follow-on items right there. So,
basically, do you want to follow up on
that? Yes, I do. You click the button
and it assigns it to somebody and it
sort of takes off from there. And the
idea really is bringing the information
to you as and when needed um before it
becomes an issue. And typically if you
sort of send things to internal review
for a sock 2, it takes two to three
hours if somebody looks at it and reads
a stem to stir and through the magic of
AI you can have it now scanned in a
matter of seconds and come up with a
preliminary report that says you know
here are the things you need to focus on
and you know the future is now and it’s
pretty cool. Um so uh moving right on to
and this is kind of the last slide for
you know essentially what good supplier
it should be essentially managing the
relationship of the supplier not these
not the technical stuff of of sock twos
and and certificates of insurance and
making sure that you know you have the
the latest and greatest uh uh update or
whatever it is, right? It’s making sure
that there’s an alignment between this
the stakeholders internally to the
company and the supplier itself in in
external internal stakeholders. Make
sure that everything’s aligned and and
essentially making sure that you are
innovating together, you’re
collaborating together and making better
decisions, right? Uh it’s it’s a very
telling sign when procurement is a
toothless tiger that checks a bunch of
boxes and making sure that all these
reviews are getting done.
But if if you still do the reviews and
you get voted off the island if bad
things show up, you know, you’re
probably not all that that well suited
to sort of move to the next to the next
space, the next spot. So with that, you
know, happy to get into discussions with
you guys about anything that you want to
know about supplier management. I myself
have built supplier management programs
for for large financial services and
insurance companies. So I’m kind of
passionate about it. The thing that you
should think about here is if you want
to download a an assessment to say are
is your supplier organization, supplier
management organization delivering
strategic value, you you take a picture
of the QR code on the left and that’s a
downloadable that you can sort of go
ahead and uh check some boxes and so on
and decide about where you are sitting
in the journey. And if you want to
register for our next podcast, which is
March 18th, uh you should take a uh
picture of the QR code on the right. Uh
Maya, thank you so much for uh taking
care of us today. Uh and Roy makes his
um apologies for not showing up today,
but thanks a lot for all your time,
everybody, and we look forward to
Thanks y’all. Thanks everyone.
