Showing posts with label Ariba Network. Show all posts
Showing posts with label Ariba Network. Show all posts

Thursday, January 30, 2020

Intelligent Spend Management Supports Better Decision-Making Across Modern Business Functions

https://www.ariba.com/solutions/intelligent-spend-management

Transcript of a discussion on how a data-rich view of spend patterns across corporate services, hiring, and goods reduces risk, spurs new business models, and helps develop better strategic decisions.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next thought leadership discussion on attaining intelligent spend management explores the findings of a recent IDC survey on paths to holistic business processes improvement.

Gardner
We will now learn how a long history of legacy systems and outdated methods holds companies back from their potential around new total spend management optimization. The payoffs on gaining such a full and data-rich view of spend patterns across services, hiring, and goods includes reduced risk, new business models, and better strategic decisions.

To help us chart the future of intelligent spend management, and to better understand how the market views these issues, we are joined by Drew Hofler, Vice President of Portfolio Marketing at SAP Ariba and SAP Fieldglass. Welcome back, Drew.

Drew Hofler: Thanks, Dana. It’s great to be with you again.

Gardner: What trends or competitive pressures are prompting companies to seek better ways to get a total spend landscape view? Why are they incentivized to seek broader insights?

https://www.linkedin.com/in/drewhofler/
Hofler
Hofler: After years of grabbing best-of-breed or niche solutions for various parts of the source-to-pay process, companies are reaching the limits of this siloed approach. Companies are now being asked to look at their vendor spend as a whole. Whereas before they would look just at travel and expense vendors, or services procurement, or indirect or direct spend vendors, chief procurement and financial officers now want to understand what’s going on with spend holistically.

And, in fact, from the IDC report you mentioned, we found that 53 percent of respondents use different applications for each type of vendor spend that they have. Sometimes they even use multiple applications within a process for specific types of vendor spend. In fact, we find that a lot of folks have cobbled together a number of different things -- from in-house billing to niche vendors – to keep track of all of that.

Managing all of that when there is an upgrade to one particular system -- and having to test across the whole thing -- is very difficult. They also have trouble being able to reconcile data back and forth.


One of our competitors, for example -- to show how this Frankenmonster approach has taken root -- tried to build a platform of every source and category of spend across the entire source-to-pay process by acquiring 14 different companies in six years. That creates a patchwork of applications where there is a skim of user interfaces across the top for people to enter, but the data is disconnected. The processes are disconnected. You have to manage all of the different code bases. It’s untenable.

Gardner: There is a big technology component to such a patchwork, but there’s a people level to this as well. More-and-more we hear about the employee experience and trying to give people intelligent tools to make higher-level decisions and not get bogged down in swivel-ware and cutting and pasting between apps. What do the survey results tell us all about the people, process, and technology elements of total spend management?

Unified data reconciliation

Hofler: It really is a combination of people, process, and technology that drives intelligent spend. It’s the idea of bringing together every source, every category, every buying channel for all of your different types of vendor spend so that you can reconcile on the technology side; you can reconcile the data.

For example, one of the things that we are building is master vendor unification across the different types of spend. A vendor that you see -- IBM, for example -- in one system is going to be the same as in another system. The data about that vendor is going to be enriched by the data from all of the other systems into a unified platform. But to do that you have to build upon a platform that uses the same micro-services and the same data that reconciles across all of the records so that you’re looking at a consistent view of the data. And then that has to be built with the user in mind.

So when we talk about every source, category, and channel of spend being unified under a holistic intelligent spend management strategy, we are not talking about a monolithic user experience. In fact, it’s very important that the experience of the user be tailored to their particular role and to what they do. For example, if I want to do my expenses and travel, I don’t want to go into a deep, sourcing-type of system that’s very complex and based on my laptop. I want to go into a mobile app. I want to take care of that really quickly.
If I'm sourcing some strategic suppliers I certainly can't do that on just a mobile app. I need data, details, and analysis. And that's why we have built the platform underneath it all to tie this together.

On the other hand, if I’m sourcing some strategic suppliers I certainly can’t do that on just a mobile app. I need data, details, and analysis. And that’s why we have built the platform underneath it all to tie this together even while the user interfaces and the experience of the user is exactly what they need.

When we did our spend management survey with IDC, we had more than 800 respondents across four regions. The survey showed a high amount of dissatisfaction because of the wide-ranging nature of how expense management systems interact. Some 48 percent of procurement executives said they are dissatisfied with spend management today. It’s kind of funny to me because the survey showed that procurement itself had the highest level of dissatisfaction. They are talking about their own processes. I think that’s because they know how the sausages are being made.

Gardner: Drew, this dissatisfaction has been pervasive for quite a while. As we examine what people want, how did the survey show what is working? What gives them the data they need, and where does it go next?

Let go of patchwork 

Hofler: What came out of the survey is that part of the reason for that dissatisfaction is the multiple technologies cobbled together, with lots of different workflows. There are too many of those, too much data duplication, too many discrepancies between systems, and it doesn’t allow companies to analyze the data, to really understand in a holistic view what’s going on.

In fact, 47 percent of the procurement leaders said they still rely on spreadsheets for spend analysis, which is shocking to me, having been in this business for a long time. But we are much further along the path in helping that out by reconciling master data around suppliers so they are not duplicating data.

It’s also about tying together, in an integrated and seamless way, the entire process across different systems. That allows workflow to not be based on the application or the technology but on the required processes. For example, when it comes to installing some parts to fix a particular machine, you need to be able to order the right parts from the right suppliers but also to coordinate that with the right skilled labor needed to install the parts.

https://www.ariba.com/resources/library/library-pages/the-business-value-of-intelligent-spend-management
If you have separate systems for your services, skilled labor, and goods, you may be very disconnected. There may be parts available but no skilled labor at the time you need in the area you need. Or there may be the skilled labor but the parts are not available from a particular vendor where that skilled labor is.

What we’ve built at SAP is the ability to tie those together so that the system can intelligently see the needs, assess the risks such as fluctuations in the labor market, and plan and time that all together. You just can’t do that with cobbled together systems. You have to be able to have a fully and seamlessly integrated platform underneath that can allow that to happen.

Gardner: Drew, as I listen to you describe where this is going, it dovetails with what we hear about digital transformation of businesses. You’re talking not just about goods and services, you are talking about contingent labor, about all the elements that come together from modern business processes, and they are definitely distributed with a lifecycle of their own. Managing all that is the key.

Now that we have many different moving parts and the technology to evaluate and manage them, how does holistic spend management elevate what used to be a series of back-office functions into a digital business transformation value?

Hofler: Intelligent spend management makes it possible for all of the insights that come from these various data points -- by applying algorithms, machine learning (ML), and artificial intelligence (AI) -- to look at the data holistically. It can then pull out patterns of spend across the entire company, across every category, and it allows the procurement function to be at the nexus of those insights.

If you think of all the spend in a company, it’s a huge part of their business when you combine direct, indirect, services, and travel and expenses. You are now able to apply those insights to where there are the price fluctuations, peaks and valleys in purchasing, versus what the suppliers and their suppliers can provide at a certain time.


It’s an almost infinite amount of data and insights that you can gain. The procurement function is being asked to bring to the table not just the back-office operational efficiency but the insights that feed into a business strategy and the business direction. It’s hard to do that if you have disconnected or cobbled-together systems and a siloed approach to data and processes. It’s very difficult to see those patterns and make those connections.

But when you have a common platform such as SAP provides, then you’re able to get your arms around the entire process. The Chief Procurement Officer (CPO) can bring to the table quite a lot of data and the insights and that show the company what they need to know in order to make the best decisions.

Gardner: Drew, what are the benefits you get along the way? Are there short-, medium-, and long-term benefits? Were there any findings in the IDC survey that alluded to those various success measurements?

Common platform benefits 

Hofler: We found that 80 percent of today’s spend managers’ time is spent on low-level tasks like invoice matching, purchase requisitioning, and vendor management. That came out of the survey. With the tying together of the systems and the intelligence technologies infused throughout, those things can be automated. In some cases, they can become autonomous, freeing up time for more valuable pursuits for the employees.

New technologies can also help, like APIs for ecosystem solutions. This is one of the great short-term benefits if you are on an intelligent spend management platform such as SAP’s. You become part of a network of partners and suppliers. You can tap into that ecosystem of partners for solutions aligned with core spend management functions.

Celonis, for example, looks at all of your workflows across the entire process because they are all integrated. It can see it holistically and show duplication and how to make those processes far more efficient. That’s something that can be accessed very quickly.
Longer-term, companies gain insights into the ebbs and flows of spending, cost, and risk. They can begin to make better decisions on who to buy from based on many criteria. They can better choose who to buy from. They start to understand the risks across entire supply chains.

Longer-term, companies gain insights into the ebbs and flows of spending, cost, and risk. They can begin to make better decisions on who to buy from based on many criteria. They can better choose who to buy from. They can also in a longer-term situation start to understand the risks involved across entire supply chains.

One of the great things about having an intelligent spend platform is the ability to tie in through that network to other datasets, to other providers, who can provide risk information on your suppliers and on their suppliers. It can see deep into the supply chain and provide risk analytics to allow you to manage that in a much better way. That’s becoming a big deal today because there is so much information, and social media allows information to pass along so quickly.

When a company has a problem with their supply chain -- whether that’s reputational or something that their suppliers’ suppliers are doing -- that will damage their brand. If there is a disruption in services, that comes out very quickly and can very quickly hit the bottom line of a company. And so the ability to moderate those risks, to understand them better, and to put strategies together longer term and short-term makes a huge difference. An intelligent spend platform allows that to happen.

Gardner: Right, and you can also start to develop new business models or see where you can build out the top line and business development. It makes procurement not just about optimization, but with intelligence to see where future business opportunities lie.

Comprehend, comply, control 

Hofler: That’s right, you absolutely can. Again, it’s all about finding patterns, understanding what’s happening, and getting deeper understanding. We have so much data now. We have been talking about this forever, the amount of data that keeps piling up. But having an ability to see that holistically, have that data harmonized, and the technological capability to dive into the details and patterns of that data is really important.

http://www.ariba.com/
And that data network has, in our case, more than 20 years’ worth of spend data, with more than $13 trillion in lifetime of spend data and more than $3 trillion a year of transactions moving through our network – the Ariba Network. So not only do companies have the technologies that we provide in our intelligent spend management platform to understand their own data, but there is also the capability to take advantage of rationalized data across multiple industries, benchmarks, and other things, too, that affect them outside of their four walls.

So that’s a big part of what’s happening right now. If you don’t have access into those kinds of insights, you are operating in the dark these days.

Gardner: Are there any examples that illustrate some of the major findings from the IDC survey and show the benefits of what you have described?

Hofler: Danfoss, a Danish company, is a customer of ours that produces heating and cooling drives, and power solutions; they are a large company. They needed to standardize disparate enterprise resource planning (ERP) systems across 72 factories and implement services for indirect spend control and travel across 100 countries. So they have a very large challenge where there is a very high probability for data to become disconnected and broken down.

That’s really the key. They were looking for the ability to see one version of truth across all the businesses, and one of the things that really drives that need is the need for compliance. If you look at the IDC survey findings, close to half of executive officers are particularly concerned with compliance and auditing in spend management policy. Why? Because it allows both more control and deeper trust in budgeting and forecasting, but also because if there are quality issues they can make sure they are getting the right parts from the right suppliers.

The capability for Danfoss to pull all of that together into a single version of truth -- as well as with their travel and expenses -- gives them the ability to make sure that they are complying with what they need to, holistically across the business without it being spotty. So that was one of the key examples.

Another one of our customers, Swisscom, a telecommunications company in Switzerland, a large company also, needed intelligent spend management to manage their indirect spend and their contingent workforce.

They have 16,000 contingent workers, with 23,000 emails and a couple of thousand phone calls from suppliers on a regular basis. Within that supply chain they needed to determine supplier selection and rates on receipt of purchase requisitions. There were questions about supplier suitability in the subsequent procurement stages. They wanted a proactive, self-service approach to procurement to achieve visibility into that, as well as into its suppliers and the external labor that often use and install the things that they procure.
By moving from a disconnected system to the SAP intelligent spend offering, they were able to gain cohesive information and a clear view of their processes -- consumer, supplier, procurement, and end-user services.

So, by moving from a disconnected system to the SAP intelligent spend offering, they were able to gain cohesive information and a clear view of their processes, which includes those around consumer, supplier, procurement, and end user services. They said that using this user-friendly platform allowed them to quickly reach compliance and usability by all of their employees across the company. It made it very easy for them to do that. They simplified the user experience.

And they were able to link suppliers and catalogs very closely to achieve a vision of total intelligent spend management using SAP Fieldglass and SAP Ariba. They said they transformed procurement from a reactive processing role to one of proactively controlling and guiding, thanks to uniform and transparent data, which is really fundamental to intelligent spend.

Gardner: Before we close out, let’s look to the future. It sounds like you can do so much with what’s available now, but we are not standing still in this business. What comes next technologically, and how does that combine with process efficiencies and people power -- giving people more intelligence to work with? What are we looking for next when it comes to how to further extend the value around intelligent spend management?

Harmony and integration ahead 

Hofler: Extending the value into the future begins with the harmonization of data and the integration of processes seamlessly. It’s process-driven, and it doesn’t really matter what’s below the surface in terms of the technology because it’s all integrated and applied to a process seamlessly and holistically.

What’s coming in the future on top of that, as companies start to take advantage of this, is that more intelligent technologies are being infused into different parts of the process. For example, chatbots and the ability for users to interact with the system in a natural language way. Automation of processes is another example, with the capability to turn some processes into being fully autonomous, where the decisions are based on the learning of the machines.

The user interaction can then become one of oversight and exception management, where the autonomous processes take over and manage when everything fits inside of the learned parameters. It then brings in the human elements to manage and change the parameters and to manage exceptions and the things that fall outside of that.

https://www.ariba.com/solutions/intelligent-spend-management

There is never going to be removal of the human, but the human is now able with these technologies to become far more strategic, to focus more on analytics and managing the issues that need management and not on repetitive processes that can be handled by the machine. When you have that connected across your entire processes, that becomes even more efficient and allows for more analysis. So that’s where it’s going.

Plus, we’re adding more ecosystem partners. When you have a networked ecosystem on intelligent spend, that allows for very easy connections to providers who can augment the core intelligent spend functions with data. For example, for attaining global tax, compliance, risk, and VAT rules through partners like American Express and Thomson Reuters. All of these things can be added. You will see that ecosystem growing to continue to add exponential value to being a part of an intelligent spend management platform.

Gardner: There are upcoming opportunities for people to dig into this and understand it and find the ways that it makes sense for them to implement, because it varies from company to company. What are some ways that people can learn details?

Hofler: There is a lot coming up. Of course, you can always go to ariba.com, fieldglass.com or sap.com and find out about our intelligent spend management offerings. We will be having our SAP Ariba Live conference in Las Vegas in March, and so tons and tons of content there, and lots of opportunity to interact with other folks who are in the same situation and implementing these similar things. You can learn a lot.

We are also doing a webinar with IDC to dig into the details of the survey. You can find information about that on ariba.com, and certainly if you are listening to this after the fact, you can hear the recording of that on ariba.com and download the report.

Gardner: I’m afraid we’ll have to leave it there. You have been listening to a sponsored BriefingsDirect discussion on intelligent spend management through the exploration of the findings of a recent IDC survey. And we have learned how payoffs to gaining such a full and data rich view of spend patterns across services, hiring, and goods include reduced risk, new business models, and better strategic decision-making.

So a big thank you to our guest, Drew Hofler, Vice President of Portfolio Marketing at SAP Ariba and SAP Fieldglass. Thanks so much, Drew.

Hofler: Thanks, Dana. I appreciate it.


Gardner: And a big thank you as well to our audience for joining this BriefingsDirect Modern Digital Business Innovation Discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect discussions. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how a data-rich view of spend patterns across corporate services, hiring, and goods reduces risk, spurs new business models, and helps develop better strategic decisions. Copyright Interarbor Solutions, LLC, 2005-2020. All rights reserved.

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Wednesday, July 03, 2019

Financial Stability, a Critical Factor for Choosing a Business Partner, is Now Easier to Assess

http://www.ariba.com/

Transcript of a discussion on new ways companies gain improved visibility, analytics, and predictive indicators to assess financial viability of partners across global supply chains.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next digital business risk remediation discussion explores new ways companies can gain improved visibility, analytics, and predictive indicators to better assess the financial viability of partners and global supply chains.

Gardner
Businesses are now heavily relying upon their trading partners across their supply chains -- and no business can afford to be dependent on suppliers that pose risks due to poor financial health.

We will now examine new tools and methods that create a financial health rating system to determine the probability of bankruptcy, default, or disruption for both public and private companies -- as many as 36 months in advance.

To learn more about the exploding sophistication around gaining insights into supply-chain risk of a financial nature, I am pleased to welcome Eric Evans, Managing Director of Business Development at RapidRatings in New York.

Eric Evans: Thanks, Dana. I appreciate being on the podcast.


Gardner: We are also here with Kristen Jordeth, Go-to-Market Director for Supplier Management Solutions, North America at SAP Ariba. Welcome, Kristen.

Kristen Jordeth: Hi, and thank you very much.

Gardner: Eric, how do the technologies and processes available now provide a step-change in managing supplier risk, particularly financial risk?
Evans

Evans: Platform-to-platform integrations enabled by application programming interfaces (APIs), which we have launched over the past few years, allows partnering with SAP Ariba Supplier Risk. It’s become a nice way for our clients to combine actionable data with their workflow in procurement processes to better manage suppliers end to end -- from sourcing to on-boarding to continuous monitoring.

Gardner: The old adage of “garbage in, garbage out” still applies to the quality and availability of the data. What’s new about access to better data, even in the private sector?

Dig deep into risk factors

Evans: We go directly to the source, the suppliers our customers work with. They introduce us to those suppliers and we get the private company financial data, right from those companies. It’s a quantitative input, and then we do a deeper “CAT scan,” if you will, on the financials, using that data together with our predictive scoring.

Gardner: Kristen, procurement and supply chain integrity trends have been maturing over the past 10 years. How are you able to focus now on more types of risk? It seems we are getting better and deeper at preventing unknown unknowns.

Jordeth: Exactly, and what we are seeing is customers managing risk from all aspects of the business. The most important thing is to bring it all together through technology.

Within our platform, we enable a Controls Framework that identifies key areas of risk that need to be addressed for a specific type of engagement. For example, do they need to pull a financial rating? Do they need to do a background check? We use the technology to manage the controls across all of the different aspects of risk in one system.

Gardner: And because many companies are reliant on real-time logistics and supplier services, any disruption can be catastrophic.

Jordeth
Jordeth: Absolutely. We need to make sure that the information gets to the system as quickly as it’s available, which is why the API connect to RapidRatings is extremely important to our customers. On top of that, we also have proactive incidents tracking, which complements the scores.

If you see a medium-risk business, from a financial perspective, you can look into that incident to see if they are under investigation, or if things going on where they might be laying off departments.

It’s fantastic and to have it all in one place with one view. You can then slice and dice the data and roll it up into scores. It’s very helpful for our customers.

Gardner: And this is a team sport, with an ecosystem of partners, because there is such industry specialization. Eric, how important is it being in an ecosystem with other specialists examining other kinds of risk?

Evans: It’s really important. We listen to our customers and prospects. It’s about the larger picture of bringing data into an end-to-end procurement and supplier risk management process.

We feel really good about being part of SAP PartnerEdge and an app extension partner to SAP Ariba. It’s exciting to see our data and the integration for clients.

Gardner: Rapid Ratings International, Inc. is the creator of the proprietary Financial Health Rating (FHR), also known as RapidRatings. What led up to the solution? Why didn’t it exist 30 years ago?

Rate the risk over time

Evans: The company was founded by someone with a background in econometrics and modeling. We have 24 industry models that drive the analysis. It’s that kind of deep, precise, and accurate modeling -- plus the historical database of more than 30 years of data that we have. When you combine those, it’s much more accurate and predictive, it’s really forward-looking data.

Gardner: You provide a 0 to 100 score. Is that like a credit rating for an individual? How does that score work in being mindful of potential risk?

Evans: The FHR is a short-term score, from 0 to 100, that looks at the next 12 months with a probability of default. Then a Core Health Score, which is around 24 to 36 months out, looks at operating efficiency and other indicators of how well a company is managing the business and operationalizing.
We can identify companies that are maybe weak short-term, but look fine long-term, or vice versa. Having industry depth -- and the historical data behind it -- that's what drives the go-forward assessments.

When you combine the two, or look at them individually, you can identify companies that are maybe weak short-term, but look fine long-term, or vice versa. If they don’t look good in the long-term and in the short-term, they still may have less risk because they have cash on hand. And that’s happening out in the marketplace these days with a lot of the initial public offerings (IPOs) such as Pinterest or Lyft. They have a medium-risk FHR because they have cash, but their long-term operating efficiency needs to be improved because they are not yet profitable.

Gardner: How are you able to determine risk going 36 months out when you’re dealing mostly with short-term data?

Evans: It’s because of the historical nature and the discrete modeling underneath, that’s what gets precise about the industry that each company is in. Having 24 unique industry models is very different than taking all of the companies out there and stuffing them into a plain-vanilla industry template. A software company is very different than pharmaceuticals, which is very different than manufacturing.

Having that industry depth -- and the historical data behind it -- is what’s drives the go-forward assessments.

Gardner: And this is global in nature?

Evans: Absolutely. We have gone out to more than 130 countries to get data from those sources, those suppliers. It is a global data set that we have built on a one-to-one basis for our clients.

Gardner: Kristen, how does somebody in the Ariba orbit take advantage of this? How is this consumed?

Jordeth: As with everything at SAP Ariba, we want to simplify how our customers get access to information. The PartnerEdge program works with our third parties and partners to create an API whereby all our customers need to do is get a license key from RapidRatings and apply it to the system.

The infrastructure and connection are already there. Our deployment teams don’t have to do anything, just add that user license and the key within the system. So, it’s less touch, and easy to access the data.

Gardner: For those suppliers that want to be considered good partners with low financial risk, do they have access to this information? Can they work to boost up their scores?

To reduce risk, discuss data details 

Evans: Our clients actually own the subscription and the license, and they can share the data with their suppliers. The suppliers can also foster a dialogue with our tool, called the Financial Dialogue, and they can ask questions around areas of concern. That can be used to foster a better relationship, build transparency, and it doesn’t have to be a negative conversation to be a positive one.

https://www.rapidratings.com/
They may want to invest in their company, extend payment terms or credit, work with them on service-level agreements (SLAs), and send in people to help manage. So, it could be a good way to just build up that deeper relationship with that supplier and use it as a better foundation.

Gardner: Kristen, when I put myself in the position of a buyer, I need to factor lots of other issues, such as around sustainability, compliance, and availability. So how do you see the future unfolding for the holistic approach to risk mitigation, of not only taking advantage of financial risk assessments, but the whole compendium of other risks? It’s not a simple, easy task.

Jordeth: When you look at financial data, you need to understand the whole story behind it. Why does that financial data look the way it does today? What I love about RapidRatings is they have financial scores, and it’s more about the health of the company in the future.

But in our SAP Ariba solution, we provide insights on other factors such as sustainability, information security, and are they funding things such as women’s rights in Third World countries? Once you start looking at the proactive awareness of what’s going on -- and all the good and the bad together -- you can weigh the suppliers in a total sense.


Their financials may not be up to par, but they are not high risk because they are funding women’s rights or doing a lot of things with the youth in America. To me, that may be more important. So I might put them on a tracker to address their financials more often, but I am not going to stop doing business with them because one of my goals is sustainability. That holistic picture helps tell the true story, a story that connects to our customers, and not just the story we want them to have. So, it creates and crafts that full picture for them.

Gardner: Empirical data that can then lead to a good judgment that takes into full account all the other variables. How does this now get to the SAP Ariba installed base? When is the general availability?

Customize categories, increase confidence 

Jordeth: It’s available now. Our supplier risk module is the entryway for all of these APIs, and within that module we connect to the companies that provide financial data, compliance screening, and information on forced labor, among others. We are heavily expanding in this area for categories of risk with our partners, so it’s a fantastic approach.

Within the supplier risk module, customers have the capability to not only access the information but also create their own custom scores on that data. Because we are a technology organization, we give them the keys so an administrator can go in and alter that the way they want. It is very customizable.

It’s all in our SAP Ariba Supplier Risk solution, and we recently released the connection to RapidRatings.

Evans: Our logo is right in there, built in, under the hood, and visible. In terms of getting it enabled, there’s no professional services or implementation wait time. So once the data set is built out on our end, if it’s a new client that’s through our implementation team, and basically we just give the API key credentials to our client. They take it and enable it in SAP Ariba Supplier Risk and they can instantly pull up the scores. So there is no wait time and no future developments to get at the data.
Once the data set is built on our end, we just give the API key to our client. They take it and enable it in SAP Ariba Supplier Risk and they can instantly pull up the scores. There is no wait time.

Jordeth: That helps us with security, too, because everybody wants to ensure that any data going in and out of a system is secure, with all of the compliance concerns we have. So our partner team also ensures the secure connection back and forth with their data system and our technology. So, that’s very important for customers.

Gardner: Are there any concrete examples? Maybe you can name them, maybe you can’t, instances where your rating system has proven auspicious? How does this work in the real world?

Evans: GE Healthcare did a joint-webinar with our CEO last year, explained their program, and showed how they were able to de-risk their supply base using RapidRatings. They were able to reduce the number of companies that were unhealthy financially. They were able to have mitigation plans put in place and corrective actions. So it was an across the board win-win.

Oftentimes, it’s not about the return on investment (ROI) on the platform, but the fact that companies were thwarting a disruption. An event did not happen because we were able to address it before it happened.

On the flip side, you can see how resilient companies are regardless of all the disruptions out there. They can use the financial health scores to observe the capability of a company to be resilient and bounce back from a cyber breach, a regulatory issue, or maybe a sustainability issue.

By looking at all of these risks inside of SAP Ariba Supplier Risk, they may want to order an FHR or look at an FHR for a new company that they hadn’t thought of if they are looking at other risks, operational risks. So that’s another way to tie it in.

Another interesting example is a large international retailer. A company got flagged as high risk and had just filed for bankruptcy, which alerted the buyer. The buyer had signed a contract, but they had the product on the shelf, so it had to be resourced and they had to find a new supplier. They mitigated risk, but they had to take quick action, get another product, and some scrambling had to be done. But they had de-risked some brand reputation damage by having done that. They hadn’t looked at that company before, it was a new company, and it was alerted. So that’s another way of not just running it at the time of contract, but it’s also running it when you’re going to market.

Identify related risks 

Gardner: It also seems logical that if a company is suffering on the financial aspects of doing business, then it might be an indicator that they’re not well-managed in general. It may not just be a cause, but an effect. Are there other areas, you could call them adjacencies, where risks to quality, delivery times, logistics are learned from financial indicators?

Evans: It’s a really good point. What’s interesting is we took a look at some data our clients had around timeliness, quality, performance, delivery, and overlaid it with the financial data on those suppliers. The companies that were weak financially were more than two times likely to ship a defective product. And companies that were weak financially were more than 2.5 times more likely to ship wrong or late.

https://www.rapidratings.com/
The whole just-in-time shipping or delivery value went out the window. To your point, it can be construed that companies -- when they are stressed financially – may be cutting corners, with things getting a little shoddy. They may not have replaced someone. Maybe there are infrastructure investments that should have been made but weren’t. So, all of those things have a reverberating effect in other operational risk areas.

Gardner: Kristen, now that we know that more data is good, and that you have more services like at RapidRatings, how will a big platform and network like SAP Ariba be able to use machine learning (ML) and artificial intelligence (AI) to further improve risk mitigation?

Jordeth: The opportunity exists for this to not only impact the assessment of a supplier, but throughout the full source-to-pay process, because it is embedded into the full SAP Ariba suite. So, even though you’re accessing it through risk, it’s visible when you’re sourcing, when you’re contracting, when you’re paying. So that direct connect is very important.

We want our customers to have it all. So I don’t cringe at the fact that they ask for it all because they should have it all. It’s just visualizing it in a manner that makes sense and it’s clear to them.

Gardner: And specifically on your set of solutions, Eric, where do you see things going in the next couple years? How can the technology get even better? How can the risk be reduced more?

Evans: We will be innovating products so our clients can bring in more scope around their supply base, not just the critical vendors but across the longer tail of a supply base and look at scores across different segments of suppliers. There could be sub-tiers, as a traversing with sub-tier third and fourth parties, particularly in the banking industry or manufacturing industry.
We will be innovating so our clients can bring in more scope around their supplier base, not just the critical vendors but across the longer tail of a supply chain and examine the scores of different segments of suppliers. It could be third tiers and fourth-parties.

And so that coupled with more intelligence or enhanced APIs and data visualization, these are things that we are looking into as well as additional scoring capabilities.

Gardner: I’m afraid we will have to leave it there. You have been listening to a sponsored BriefingsDirect discussion on new ways that companies can gain improved visibility, analytics, and predictive indicators to better assess the financial viability of their partners across their global supply chains.

And we have learned about new tools and methods create a Financial Health Rating system to determine the probability of bankruptcy, default, or disruption for public and private companies.

So a big thank you to our guests, Eric Evans, Managing Director of Business Development at RapidRatings in New York. Thank you so much, Eric.

Evans: Thank you, I appreciate it.


Gardner: And we have also been here with Kristen Jordeth, Go-to-Market Director for Supplier Management Solutions, North America at SAP Ariba. Thank you.

Jordeth: Thank you.

Gardner: And a big thank you as well to our audience for joining us for this BriefingsDirect digital business risk remediation discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect interviews. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on new ways companies gain improved visibility, analytics, and predictive indicators to assess financial viability of partners across global supply chains. Copyright Interarbor Solutions, LLC, 2005-2019. All rights reserved.
 
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