Sourcing suppliers is often an arduous task for B2B companies. They must manage the risks of taking on new suppliers that can deliver the right products on time, but nowadays companies increasingly want to do business with suppliers that adhere to ethical and sustainable practices.
At the same time, B2B companies want to improve their suppliers’ experiences—and reward those who perform well. Supplier risk and performance management (SRPM) software applications—a growing subcategory of the much larger supplier value management (SVM) technology market—helps B2B companies accomplish those goals, but choosing the most effective supplier management tools is a crucial task in itself, Forrester Research Inc. says in a new report, “Now Tech: Supplier Risk and Management (SRPM), Q2 2020,” by Duncan Jones, a Forrester vice president and principal analyst for sourcing and vendor management professionals.
“Be wary of niche vendors that falsely claim to offer ‘comprehensive third-party risk management solutions’ but in fact fall well short of our definition of SRPM,” Jones writes.
The SRPM technology market grew 15% in 2019, compared to 13% for the overall SVM market, Forrester says in its new report, Forrester defines SRPM as “software that aggregates static, transactional, and unstructured data about suppliers and manages both initial risk assessment and ongoing relationship management.”
The report covers 23 vendors, grouped by annual revenue figures. It also indicates the level of functionality each vendor provides in SVM and SRPM and lists criteria such as the names of some of each vendor’s customers and the vertical industries each vendor serves—including industrial manufacturing, aerospace and defense, facilities management, pharmaceuticals and oil-and-gas. The 23 vendors covered in the report, listed in alphabetical order, are: Aravo Solutions, Achilles, APEX Analytix, Avetta, Corcentric (Determine), Coupa, Dun & Bradstreet, Enlighta, GEP, HICX Solutions, Ivalua, JAGGAER, MetricStream, Oracle, Proactis, ProcessUnity, Riskmethods, RSA Archer, SAP Ariba, ServiceNow, SirionLabs, Synetrade and Zycu.
In a related report, “The Forrester Wave: Supply Risk and Performance Management Platforms, Q3, 2020,” Forrester analyzes what it defines as the ten most significant technology providers.
Improving governance and raising standards
Chief procurement officers (CPOs) at B2B companies often turn to SRPM software to manage multiple supplier management processes—such as onboarding, monitoring and performance improvements—within one enterprise-wide platform. The Forrester reports says SRPM software has multiple benefits for B2B companies.
“SRPM is a crucial component of the wider SVM category,” Duncan writes. “Just as savings-focused e-purchasing has evolved into customer-focused SVM, SRPM has evolved from risk-averse validation into a comprehensive platform.”
Today’s B2B customers have growing expectations, and many are demanding that companies’ sourcing practices around fair trade, labor and the environment, for example, are ethical and sustainable. Some SRPM software manage compliance with relevant local laws, but that’s really the bare minimum. The best SRPM platforms, the report says, “go broader and deeper, helping CPOs meet consumers’ increasing expectations for [corporate social responsibility] CSR priorities.”
SRPM also helps B2B companies source from slightly riskier suppliers by allowing them to tailor the assessment and monitoring of that supplier to that supplier’s specific context. Because more innovative suppliers tend to come with greater risk, this helps push innovation forward through streamlined risk-tolerant sourcing, the report says.
And SRPM raises the overall standards of the suppliers. “Making suppliers’ risk ratings and performance scores visible to users when they are making sourcing choices helps them better balance price with value,” Duncan writes. “This in turn raises standards, as suppliers learn that underperformance impairs their ability to win deals.”
What SRPM vendor is the best fit?
The SVM market is packed with a plethora of SRPM vendors that vary greatly by size, functionality, geography and vertical market focus. And the report says they each have their own set of strengths and weaknesses.
To take advantage of the benefits SRPM has to offer, B2B companies must first find the SRPM vendor that best suits their business. The report breaks the SRPM market into three types: SVM suites, specialists SRPM platforms and process management platforms.
SVM suites embed SRPM software within all sourcing and procurement processes. B2B companies that already have SVM suites in place should determine what its SRPM capabilities are, as most SVM suites come equipped with SRPM modules.
Specialist SRPM platforms sit on top of business-unit-level applications. This solution may work well for B2B companies that already have multiple sourcing and procurement applications in place because it’s faster and easier than replacing all of them with a SVM suite, the report says.
Process management platforms offer some SRPM capabilities. But the report says they tend to be “incomplete offerings, shallow in key areas such as supplier self-service and integration with risk information sources, and require more configuration than true SRPM products.”
Making SRPM a top priority
As SRPM continues to grow in size and importance, the report says B2B companies should be exploring the value of SRPM software and creating a shortlist of SRPM vendor candidates to further evaluate.
“Include many risk types in the scope of your product selection and implementation,” Duncan writes. “Favor vendors that integrate with multiple specialist risk information providers. Use SRPM as a key decision criterion if you are choosing an SVM suite.”
Cate Flahardy is a Chicago-based freelance journalist covering business and technology.
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