Accelerating 'Supplier Darwinism' via the Cloud

Michael Vizard

Just about any collaboration application that spans multiple companies is more than likely a good candidate for the cloud. So it's not surprising that supply chain management software is moving into the cloud. Case in point is CVM Solutions, which this week announced that it is making its Supplier Central 10 software available as a service on Salesforce.com's Force.com platform.


Despite its potential to lower costs, the more interesting thing might be the analytics potential associated with deploying supply chain management software in the cloud. As more information pours into a common database engine shared by multiple companies, it will become easier to use analytics software to correlate information to find problems in the supply chain.


CVM Solutions has a rudimentary analytics offering in Supplier Central 10 called Supplier Intelligence as a Service that gathers information about suppliers from both within the customer's organization and public sources. As this capability evolves, companies will be able to use this information to check on the overall sustainability of their organization based on issues confronting their suppliers.

 

 


The viability of suppliers has become a major issue in this economy. In fact, a survey commissioned by CVM Solutions finds Fortune 1000 companies used about 4.9 million suppliers in 2009 and that number is down considerably for the first half of 2010. According to Jon Bovit, chief marketing officer for CVM Solutions, calls the situation "supplier Darwinism," in which increased consolidation results in strong suppliers supplanting many weaker companies.


Bovit makes no bones about the fact that Supplier Central 10 is designed to help managers identify those weaker suppliers faster. In fact, he expects customers to use not only the intelligence services provided by CVM Solutions, but also the Chatter social-networking capabilities in the Force.com platform to share information on suppliers.

 


At a time when a few missed shipments or the inability to gain access to a critical component can mean laying off thousands of employees, it's never been more important to determine which of your suppliers are really the fittest.



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Aug 11, 2010 11:52 AM Jessica Hill Jessica Hill  says:

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Thursday, August 19th 2-3EDT

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Aug 30, 2010 2:11 AM Gene Tanski Gene Tanski  says:

Interesting article that highlights some of the potential of the cloud but also some of the downside especially when used for the wrong reasons.

One overall assumption of your comment is that suppliers and vendor participating in a common value chain will combine information into one database that resides elsewhere-the cloud.  If the intent is to improve value chain performance for all participants, then this could result in improved margin performance for each participant.  However, if the intent is to identify and select out 'weaker' suppliers, then you introduce some instability into the support for the cloud. For example, who defines weaker'-a supplier with a superior product could experience a short term financial event that under the definition used in your article would rank them as weak-given their superior product this would be a short term decision view leading to decision (i.e. terminate the supplier) that would weaken the overall value chain over the strategically longer term. Suppliers will immediately pick up on this risk (being graded) and become more reluctant to pool information in common database-if they don't participate, the overall value of connecting the value chain via the cloud is damaged.

Now one could argue that only good' suppliers would participate thereby accelerating the Darwin effect but it again comes to the definition of good-if only financially sound suppliers participate, that makes it very hard to include start-ups and or weaker financial players that may have better products and innovation as a whole potentially becomes more difficult in a cloud enabled value chain-which in effect defeats the original intent-improve performance. Ultimately, as with most things, intent and the subsequent execution of that intent, is key. 

The intent of a cloud based value chain should be that all participants earn a chance to improve performance.  If you start with an intent that you are potentially punishing participants, you will quickly enter a downward spiral of less participation, less innovation, less cooperation and therefore a value chain that underperforms.

Gene Tanski, CEO

Demand Foresight

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