As many procurement professionals know, the market for supplier management solutions remains extremely fragmented. Both specialists and suite vendors offer solutions, however, due to the plethora of tools out there, finding the one that fits an organization’s long list of requirements is difficult.
Gartner’s research aims to help application leaders supporting procurement and sourcing to understand the different types of vendors, as well as guiding them in narrowing down the options and choosing the right solutions.
Focus on preparing supply chains for future disruptive events
Continuing supply chain disruptions have had a wide-reaching impact on procurement organizations. As many companies begin to come to terms with this reality, their focus is switching to how to best prepare their supply chains to cope with future disruptive events. Many organizations are reexamining technology solutions that can be used to boost organizational resilience, creating revitalized interest in the supplier management solutions market.
What are supplier management solutions?
Supplier management solutions form the basis upon which organizations manage supplier information, risk, performance, and governance. They help companies keep track of and plan more effectively for major supply shifts experienced in supplier health, availability of materials, supplier risk, and price fluctuations.
Gartner defines supplier management solutions as “applications that support information management, risk management and performance management, and related activities.” It is one of the primary elements of strategic sourcing suites.
While supplier management is part of the overall strategic sourcing process, it focuses mainly on activities after the contract has been signed. However, it can also support supplier discovery practices by offering information about potential and existing suppliers.
Supplier management software revenue accounted for about 7.4% of the $6.4 billion procurement software market or $475 million through 2021. Gartner forecasts that this segment will account for nearly 10% of the $12.7 billion procurement software market or $1.2 billion through 2026, at a five-year CAGR of 21%.
The market for supplier management applications is fragmented
There are many different types of solutions available, which are dependent on how vendors interpret and define supplier management and the specific problem they are trying to solve. At the same time, procurement organizations define supplier management differently.
Some incorporate all supplier interactions, such as sourcing, contract negotiations, and even purchase order and invoice exchange. Others have more specific definitions, such as supplier performance management or supplier information management. Some organizations also widen the scope to include screening of potential suppliers.
This complex market makes it difficult for procurement teams to find, compare and evaluate solutions to help them reach their goals. Application leaders supporting procurement and sourcing can use Gartner’s research to navigate the supplier management application market.
Create your supplier management use cases and requirements
As many organizations are searching for a supplier management application without having thought out what they want to achieve with it, it makes sense to clearly define your use cases before selecting the appropriate technology vendors. Here are some common examples of what companies hope to achieve:
Collecting and managing supplier information: This can range from basic data (such as addresses, emails, etc.) to industry certificates, product categories, financial performance, and corporate social responsibility information.
Keeping track of and managing supplier interactions: This includes the ability to save meeting notes from quarterly business reviews, operational reviews, and performance reviews, as well as important communications.
Tracking and monitoring supplier performance: This is the ability to visualize, track and report on key performance indicators (such as service level agreements [SLAs], quality, and delivery performance) and qualitative ratings (such as internal stakeholder feedback and innovation) by supplier and/or contract.
Assessing, monitoring, and preventing supplier risk: This involves having the capacity to assess and monitor supplier risk by tracking suppliers’ financial performance, geopolitical risks, news sentiments, judicial or court filings, and regulatory compliance.
Developing suppliers and managing supplier innovation: This includes planning, managing, and collaborating on supplier development and innovation projects with help from project management tools, collaborative workspaces, alerts, and reminders.
No one vendor covers all these activities, so it’s crucial to understand what needs to be achieved and which areas are the most important. Having clear and comprehensive requirements across several areas will result in either a compromise on functionality or the need to deploy several solutions.
Develop a shortlist of vendors
Once you’ve decided on your requirements, you can look for the vendors that offer the closest fit to what you need. Gartner has broken these down into five vendor types: Supplier Information Management, Supplier Governance, Supplier Performance Management, Supplier Risk Management, and Supplier Development and Innovation. Scoutbee is listed as one of five sample vendors in the “Supplier Information Management” category. Gartner states that the highlights of this group “include strong and flexible support for supplier information management – ERP-agnostic, but a niche market with few specialized vendors.”
To read the full report, please click here: Gartner Reprint