PROACTIS News

Warning: A Comprehensive Supplier Management Capability is Quickly Becoming Mandatory

Regulatory Compliance and Risk Management Requirements Driving Greater Adoption of Supplier Relationship Management (SRM) Solutions
PROACTIS, a global Spend Control and eProcurement solution provider, today announced growing indications that organisations in most private, not-for-profit and public sector organisations are recognising the imperative need to consistently maintain accurate, up-to-date information for their entire supplier base.

They are seeing that, in addition to needing supplier information to support purchasing and accounts payable activities, it is critical to maintaining compliance with regulatory requirements and effectively managing risk associated with supplier non-performance and non-compliance. Further, PROACTIS is seeing an increasing number of organisations adopting Supplier Relationship Management (SRM) software solutions as the most cost-effective way to enable the capabilities they need.  
    
Supply Chain Becoming a Focus for Regulatory Compliance
 
One example of a growing range of regulatory compliance requirements is the “Transparency in Supply Chains” clause in the UK Modern Slavery Act 2015. The goal of the act is to reduce global labour abuse. The intent of the supply chain clause is to further that goal by eliminating the purchase of goods produced by exploited people. The clause requires any company with more than £35 million turnover that supplies goods and services and carries on a business, or part of a business, in any part of the UK to publish an annual slavery and human trafficking statement. In this statement, the company needs to publicly disclose the steps, if any, taken to ensure slavery and human trafficking are not taking place in any of its supply chains. Under the Companies Act 2006, directors can be held criminally liable for signing off on wrongful or misleading information in annual reports.
 
In practical terms, compliance with this act and others like it requires companies to implement a methodical approach to ensuring their entire supplier base is also in compliance. A growing number of legislated requirements could cause legal action to be taken against a buying organisation due to a lack of compliance within their supplier chain. That can include issues with sub-contractors as well as suppliers of just about any type of goods or services.
 
With a supplier base of any significant size, prevention of supply chain non-compliance issues requires a robust, largely automated series of integrated capabilities to:
  • Collect and maintain accurate and complete information for every supplier
  • Maintain a thorough qualification of each supplier’s capabilities, certifications, policies and procedures
  • Monitor all of the possible changes, required actions and actual performance KPIs for each supplier
A comprehensive approach to supplier management has many benefits to the procurement process, of course, in that it enables the organisation to be more effective in supplier selections and appraisals, monitor changes to suppliers and screen suppliers against sanction lists for financial compliance etc. And it greatly streamlines all kinds of supplier interaction and commerce. But it is increasingly becoming a necessary component of regulatory compliance as well. 
 
Supplier Relationship Management (SRM) Technology Becoming a Priority
 
The effect of this trend is clear – a growing number of organisations are making deployment of a Supplier Relationship Management (SRM) software solution a priority. In a June 2016 PROACTIS survey of a wide range of private sector, public sector and not-for-profit organisations regarding the deployment of various types of eProcurement solutions, Supplier Relationship Management (SRM) was near the top of the list of solutions those organisations intend to deploy. Although only 16% of those organisations said that they currently have partial or full automation of the SRM process in place today, 94% said that they plan to automate the process in the next couple of years and a sizable 52% said they plan to focus on SRM in the next six months.  
 
“Whether they refer to it as Supplier Relationship Management (SRM) or Supplier Information Management (SIM), many organisations are recognising that a methodical, comprehensive approach to supplier interaction and monitoring is becoming virtually mandatory,” said Simon Dadswell, Group Marketing Director at PROACTIS. “I would add that those organisations that have already deployed PROACTIS SRM tend to have high levels of satisfaction. It is generally seen as a tool that delivers results and supports Procurement’s goals for risk reduction, improved supplier relationships and improved supplier communication. We think formal, software-assisted SRM will become an almost universal part the Procurement landscape over the next few years.”  
 
 
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