Let me pose this question: how much of the valuable knowledge you have about your strategic vendors and agencies is all in your head?

Capability Management

One area in which we are seeing increasing interest in Indirect Supply, especially among larger enterprises, is what we term "Capability Management".

Meaning, we seek to capture and manage data which describes the capabilities of suppliers to provide important strategic services.

How is this different to a Supplier Database?

Many companies have invested in a Supplier Database to help manage their portfolio of high transactional suppliers, particularly those that provide commodity items where on-line catalogues and up to the minute pricing is vital.

However, this approach is of little use when it comes to managing a roster of Strategic Suppliers, for example in the domain of services companies such as marketing agencies, because a suplier database does not hold the information needed to make good decisions about strategic suppliers.

Although cost is always an important factor in supplier decisions, capability, competence and experience are far stronger drivers when we're looking at strategic suppliers.

Centralizing Information

As a result, the idea of centralizing strategic supplier capabilities information, much of which resides in the heads of a few key executives working with particular vendors, is a central plank of the next wave of supplier optimization.

In most cases is much more cost-effective to first leverage those vendors with whom you are already working before reaching out to new providers. A well developed Capabilities database allows you to do that.

And in the current economy where cost management is such a key driver, we must also optimize our vendor portfolio to work with the best providers, selecting those that deliver the best functional capability at the appropriate cost.

Author: Richard Benyon (Decideware)