"Start where you are. Use What you have. Do what you can."
Judith Williams, SVP, Global Head of People Sustainability & Chief Diversity and Inclusion Officer at SAP quoted the late Arthur Ashe at the Sustainability Summit at SAP Ariba Live when asked if she had one piece of advice what would it be. In today's age, where companies struggle to manage data and transform available information into actionable intelligence, sometimes the hardest part is identifying just where to start. Unfortunately, there is no how to guide for sustainable sourcing that can be taken off the shelf and applied to each company directly. All organisations are in different states of their journey and while advances in technology and data will help streamline processes, the first step for many companies is making the decision to embrace sustainable sourcing as a part of their sourcing strategy and starting where they can with what they have.
Day 1: Inaugural Sustainability Summit
Data accessibility – When asked what success would look like to many industry leaders in the room; many stated that if all companies readily shared information (such as supplier policies), provided customers with data that could easily be validated and or authenticated it would transform many of the sourcing hurdles companies face today.
Data standardisation – Companies are still faced with questionnaire fatigue and while industry keeps requesting standardisation, they struggle to accept industry association best practices. The goal is to find a way to standardise and share data freely while normalising common attributes. But allowing for flexibility in requested information is important to enable companies to identify what is material to them. Every company is unique. We discussed possible ways to reduce the questionnaire fatigue:
- Utilisation of risk exposure data to drive streamlined questionnaires based on potential risks.
- Prioritise data that is most meaningful to your business and look to utilise platforms where data can be shared freely to reduce redundancy.
- Technology is imperative for standardising and normalising data to improve working processes as defined by sourcing companies to date.
Risk is constantly in motion – Many people associate the word risk with negative repercussions. When in reality, risk is really an opportunity for many businesses. Identifying risk early on in your supplier on-boarding process can help companies eliminate or work proactively to minimise risk exposure for their business. Understanding the correlation of risks and using data such as inherent risk, data with business metrics (such as spend or reliability) and performance management data (such as audit findings, SAQ or censor data) with exposure data (such as event data mined from news or social media) can help businesses not only identify risk or segment suppliers by risk but it can also help companies to begin to predict risk and create new opportunities for their business to source more efficiently and reduce the need to audit or repeatedly request information from suppliers via questionnaires.
The buyer is key – Companies are still struggling to educate and incentivise buyers to treat sustainability as an equivalent metric to spend. Buyers need to be able to quickly make decisions on data without being experts. They also need a systematic way to process suppliers through additional vetting or due diligence if an issue is identified.
In 2018 Ariba processed $3 trillion in spend. That’s a lot of cash. So how do we harness the power of spend to make better corporate decisions? By making it easy for companies to source from diverse suppliers and make more strategic decisions related to reducing risk and increasing profitability.
Panel Questions: The Advantage of Data-driven Supplier Risk Management
"The word ‘risk’ leads to fear. How can we convert it into something actionable?" Padmini Ranganathan, VP of Products and Innovation at SAP Ariba, spoke about using data to break free from our fears of risk issues like child labour and climate change.
How can we go from 1+1 = 3 to 1+1 = 4
Users expectation of data and platforms are based on their own life expectations of how we shop and live. Adoption starts at the top and at the bottom. At the top we must incentivise and create a culture of sustainability. At the bottom, the systems and data used must improve the daily work flow of the user. Here are some of the questions from our panel session:
Q: What are some of the challenges sourcing/procurement organisations face that would call for a holistic supplier risk management solution?
A: Procurement organisations are being tasked to go beyond spend and reliability to include sustainability metrics in their decisions. Buyers have more data then ever but are pressed to make decisions quickly. There is a need to simplify the process. Use a single, trusted source of data, consolidate data onto a uniform platform with a data management solution and provide users with actionable analysis when expert review is needed. Pre-screening is key. Many companies will select suppliers and then give 12 months to comply with sustainability. Companies need to think about how they can validate in advance.
"It’s a mix of art and science. An algorithm is only as smart as the person behind it." There were lots of truths shared throughout the day, but this one stuck with me. Risk data has to come from somewhere – or someone – who really understands the innerworkings of that region, country, supplier.
Q: How would holistic data and insights (e.g., types of regulatory, operational risks/insights/indexes, the way they’re harvested and delivered) help key decision making in the supplier risk management processes?
A: Inherent risk data helps a company identify where to start. They can easily segment their supplier based on key risk issues, locations and/or industries. At the highest level, this can help a user go from an overwhelming number of suppliers to a manageable amount to perform due diligence.
While segmentation is a key initial step, it is imperative to remember that risk is a moving target and companies must stay abreast of not only what potential risks exist but how they are changing. For example, we have seen recent spikes in reports of labour issues in the sourcing of gold and coffee. With these spikes companies can expect NGOS to shift their attention away from key commodities like cobalt and the ICT industry towards retail and restaurants for example.
We believe that it is not enough to understand that a risk exists, but it is fundamental to understand why it exists and how it impacts your business unit. By combining inherent risk data with business metrics and performance management data such as results from audits users can begin to move from managing suppliers reactively to a proactive practice.
Q: [For Amelia Carruth at IBM] Tell us a bit about your Supplier Risk solution go-live process. What have you learned and what benefits are you expected to get from using the Supplier Risk solution?
A: Supplier risk management is a journey which is constantly evolving. Keys to success our corporate culture and buy in to motivate buyers to relay on data and use data when working with suppliers to improve sustainability issues.
Risks are dynamic and so strategy must include a process for changing/modifying approach when new risks are identified or new products are developed. Segmentation is a key first step in any refined supplier risk management process. It allows companies to reduce costs and plan better for remediation of risks.
What a week! I’m happy to be home but thrilled to have had the opportunity to listen to inspirational thought leaders, network with my peers and re-invigorate my outlook on supplier risk and compliance.