GLOBAL SRM MATURITY REPORT

Transcription

1 GLOBAL SRM MATURITY REPORT SRM Benchmarks and Insights from 250 Companies Worldwide

2 WITHOUT DATA, YOU RE JUST ANOTHER PERSON WITH AN OPINION W. Edwards Deming 2

3 jaggaer.com CONTENTS The SRM Maturity Check Summary... 4 Key Findings and Forecasts - An Overview...5 The SRM Maturity Check...6 Survey Objectives and Parameters... 6 Survey Demographics... 7 SRM Development from 2017 to More Transparency With a 360 View...12 KPIs and Performance...13 Does Supplier Classification Make Sense?...14 The Supplier: Partner or Tool? More Than Just a Price Reduction...17 The Right Strategy For Success Conclusion Supplier Management Appendix: Survey

4 THE SRM MATURITY CHECK SUMMARY The second annual SRM Maturity Study, The SRM Maturity Check 2018, was conducted worldwide between January 8th and April 8th. In total, 250 procurement specialists from Europe, Canada, Brazil, the Middle East, China, and India participated in the survey. The survey asked companies about the current state of their supplier management processes, and if they planned to implement an SRM solution or already had one in place. 250 PARTICIPANTS 26COUNTRIES WORLDWIDE 1 21% AMERICA 2 58% EUROPE 3 2% AFRICA 4 16% ASIA 4 3% AUSTRALIA >20 DIFFERENT INDUSTRIES 44 % 23 % 33 % > 500 MILLION > MILLION < 50 MILLION 4

5 jaggaer.com KEY FINDINGS AND FORECASTS - AN OVERVIEW The results of the study reveal important insights into the current state of supplier management in procurement, particularly regarding the effects of company size, structure, and industry on current SRM practices. Following the trend established in the Global SRM Maturity Report 2017, SRM solutions are still most commonly used in the manufacturing industry in This is primarily due to the fact that companies in this industry already began optimizing and investing in procurement several years ago. The implementation of an SRM software solution resulted in more efficient resource planning and improved transparency. Banks, financial service providers, and insurance companies, on the other hand, are lagging behind when it comes to the implementation of SRM solutions. The size of the company is also a factor and the results indicate that larger companies with a high revenue have more mature supplier management processes than small or medium-sized enterprises (SMEs). This is largely due to the fact that bigger companies tend to have more complex processes, a decentralized procurement structure, and many different contacts and suppliers, which all present challenges that require efficient supplier management. Monitoring and reporting, for example, take a lot of time, and by implementing a digital solution, procurement departments can save time and resources for other tasks. SRM solutions will play an increasingly important role in building and maintaining strong partnerships with suppliers in the future. As companies zoom in on the structure and organization of their own personnel, they often lose sight of the importance of supplier management, and may not even consider implementing digital solutions for SRM. By not implementing an SRM solution, however, companies are missing out on the opportunities that result from having a complete overview of their global supplier information. Powerful digital solutions can process, organize, and analyze huge amounts of data at high speed, leading to improved transparency that extends well beyond tier-1 suppliers. Without a software solution, it can be nearly impossible to efficiently monitor and analyze hard facts, such as delivery reliability data, and soft facts, such as risk or quality data, simultaneously. This makes it difficult for companies to identify potential threats early on, which has a negative impact on a company s ability to remain agile. If companies fail to recognize potential problems before they happen, they may not be able to respond in time, which can have disastrous consequences. A digital SRM solution can greatly improve this situation and increase transparency and agility. This is critical for building strong relationships with suppliers. So far, large companies (62% with more than 500 million euro in revenue) have been leading the way in adopting SRM technology and implementing SRM solutions that provide a holistic, 360 view of their supplier information. A central dashboard in the application shows an overview of all of the relevant supplier information, certificates, order history, supplier scorecards, and supplier development data. Having the ability to not only see all of this data at a glance but also use it for follow-on processes can give companies a significant advantage. With the help of digital tools in SRM, companies can greatly increase efficiency and effectiveness in their organizations. 62 % OF COMPANIES WITH > 500 MILLION REVENUE USE A DIGITAL SRM SOLUTION A closer look at the results of the SRM Maturity Check also reveal that primarily hybrid procurement organizations have implemented an SRM solution (36%). This is due to the fact that the teams in these organizations operate in different locations, which makes directing and controlling processes in these organizations more complex. Hybrid organizations have elements of both centralized and decentralized structures. The best features of both are combined to improve efficiency and the overall success of daily operation. Digitalization improves cooperation between the procurement center and the individual decentralized procurement entities, increasing both agility and transparency. 5

6 THE SRM MATURITY CHECK The Global SRM Maturity Check was conducted in 2018 from January 8th to April 8th. In total, 250 procurement specialists from around the world participated. Professionals from Europe (58%), the Americas (21%), Asia (16%), Africa (2%) and Australia (3%) participated in the survey. In order to gain a full picture of the state of supplier management practices in companies around the world, specialists with different roles and positions, ranging from buyers to CPOs involved in both strategic and tactical sourcing, were asked to participate. The participants represented a broad spectrum of companies, company sizes, and industries. GLOBAL SURVEY 1 21% AMERICA 2 58% EUROPE 3 2% AFRICA 4 16% ASIA 4 3% AUSTRALIA SURVEY OBJECTIVES AND PARAMETERS The primary objective of the SRM Maturity Check was to find out to what extent companies are already using digital solutions in supplier management. It was important to determine which strategies companies were already implementing and what kinds of process optimization and savings opportunities there were. A further objective was to find out if companies that are already using digital SRM tools were able to achieve higher savings. Special attention was paid to companies current requirements and how they compare to the requirements listed in the SRM Maturity Check Do SRM solutions have an effect on a company s success or does it allow 6

7 jaggaer.com companies to discover hidden potential or savings opportunities? This year s survey focused more specifically on the suppliers, and the benefits of SRM solutions and using preferred suppliers were examined in more detail. Was there added value? If so, was it simply in the form of reduced prices or was there also an effect on the partnership between companies and their suppliers? How were other company goals affected (risk monitoring, innovation )? The survey was based on a standardized questionnaire that covered the core aspects of supplier management. The resulting data was then used to analyze current procurement processes in more detail. Companies of various sizes and from a wide range of branches and industries were included in the study, regardless of whether or not they already had an SRM solution in place. In addition to establishing the importance of KPIs, the study also provides insights into how digitalization can improve transparency and agility, and reveals which companies and industries are already using supplier management tools effectively. DEMOGRAPHICS Just under 80% of the participants were from the discrete manufacturing and process manufacturing industries. The remaining participants represented companies in banking and finance, communications, and the insurance industry. INDUSTRIES 25 % Automoive 21 % Industrial manufacturing 10 % Energy, utilities & mining 10 % Metals 9 % Government and public services 6 % Aerospace, defense & security 3 % Banking & capital markets 3 % Chemicals 3 % Financial services 3 % Retail & consumer 3 % Technology 1% Communications 1 % Engineering & construction 1 % Entertainment & media 1 % Forest, paper & packaging 7

8 The majority of the respondents (44%) work in companies with more than 500 million euro in revenue. 23% of respondents work in companies with between 50 and 499 million euro in revenue and 33% work in companies with an annual revenue of less than 50 million euro. REVENUE 44 % 23 % 33 % > 500 MILLION > MILLION < 50 MILLION 43% of the companies surveyed indicated that their purchasing volume was under 50 million euro per year, 35% had a purchasing volume between million euro per year, and 22% listed a purchasing volume of more than 500 million euro per year. PURCHASING VOLUME 43 % 35 % 22 % > 500 MILLION > MILLION < 50 MILLION 8

9 jaggaer.com The data reveals that more than 60% of the companies surveyed already have global supplier management in place. Just 19% only have locally-defined processes. 21% of participants had no specific supplier management process in place. SUPPLIER MANAGEMENT 70% 60% 50% 40% 30% 24 % DIGITAL SRM SOLUTION IMPLEMENTED GLOBALLY 20% 10% 0% GLOBAL SUPPLIER MANAGEMENT LOCAL SUPPLIER MANAGEMENT NO SUPPLIER MANAGEMENT The results also show a strong correlation between a company s size and annual revenue and whether or not they already have an SRM solution in place. Companies with an annual revenue of more than 500 million euro, for instance, are five times more likely to have an SRM solution than companies with less than 50 million euros in revenue. Companies with between 50 and 499 million euros are twice as likely to have an SRM solution. IMPLEMENTATION OF SUPPLIER MANAGEMENT SOLUTION BY REVENUE 84 % 60 % 54 % > 500 MILLION > MILLION < 50 MILLION Implementation of an SRM solution No SRM solution 9

10 SRM DEVELOPMENT FROM 2017 TO 2018 The day-to-day work experience in Procurement will change more in the next five years that it has in the last 50. Unstable economic and political conditions, a reduced real net output IF YOU ALWAYS DO WHAT YOU VE ALWAYS DONE, YOU WILL ALWAYS GET WHAT YOU VE ALWAYS GOT. Henry Ford ratio, globalization, and the continuous development of new technologies are all pushing the digital transformation of business processes and procedures forward at a rapid pace. In the survey, participants were asked about the SRM solution they were currently implementing. The results clearly show that the size of the company (> 500 million euros in revenue) is a significant factor in whether or not digital SRM solution is already in place. The following graph provides a detailed overview of the most important results for SMEs and large companies. There are considerable differences depending on the company s size. Larger companies have much more mature SRM processes than SMEs and tend to lie above the market average. These OVERVIEW OF SRM BENCHMARKS Questions Qu4 Qu5 Qu6 Qu7 Qu8 Qu9 Qu10 Qu11 Qu12 Qu13 Average Revenue in million ( ) Above 500m 50 to 499m lower than 50m Average companies have been dealing with SRM-related issues for longer due to the fact that these companies have more complex supplier management requirements and processes. These companies also work with and develop preferred suppliers, and have employees who are specifically focused on managing supplier data. The main reason for this is that having a more complete overview of KPIs also increases transparency. A further benefit of digital SRM tools is that they provide a 360 overview of global suppliers. Companies that have multiple international locations have a greater need for SRM software solutions because managing global suppliers and multiple ERP systems 10

11 jaggaer.com can be a real challenge without the help of IT tools. As a result of these complexities, larger companies have recognized the advantages of SRM solutions and many are already using SRM technology in their organizations. In large companies especially, digitalization has become the buzzword that everyone is talking about, because without it, KPIs can be difficult to monitor, and analyzing the vast quantities of data that companies are now able to collect can seem like a daunting or even an impossible task without the assistance of an IT tool. Without the ability to track and analyze data effectively, it can be difficult to reduce costs, which, according to the Deloitte Global Chief Procurement Officer Survey , is the top priority for 78% of procurement leaders this year. With digitized KPIs and an integrated SRM solution, however, more than 50% of the companies surveyed in the SRM Maturity Check were able to cut costs. COMPANIES WITH A 360 VIEW 62 % 23 % 2 % > 500 MILLION > MILLION < 50 MILLION Compared to the previous year, more companies are now using digital SRM solutions. In the SRM survey from 2017, it was also clear that large companies with more than 500 million euro in annual revenue were more likely to have an SRM solution. In 2018, companies with between 10 and 499 million euro in revenue are following suit. DIGITAL SRM SOLUTION IN PLACE 70% 60% 50% 40% 30% 20% 10% 0% ABOVE 500M 50 TO 499 M LOWER THAN 50M Deloitte LLP.(2018): The Deloitte Global Chief Procurement Officer Survey Leadership: Driving innovation and delivering impact.london 11

12 MORE TRANSPARENCY WITH A 360 VIEW What are the benefits of implementing a digital SRM solution, and what are the opportunities associated with having a full 360 overview of your suppliers and KPIs? Not only do SRM solutions increase transparency across the supply base, they also make it easy to monitor and access important data from around the world. Buyers and category managers always have the information they need right at their fingertips. This makes it easier to implement global supplier management and supplier development strategies, which can significantly reduce operational costs in Quality Management, logistics, and invoicing. By working together with suppliers to optimize inefficient processes, companies can also reduce the cost of materials. Companies can save up to 3% on the cost of materials and up to 10% on process costs by setting up a global database and by introducing supplier development measures. This not only eliminates duplicate entries in the supplier database, it also reduces the number of claims and prevents supply shortages by automating standard processes and by providing a clear overview of all the most important procurement processes. According to the riskmethods study, BME Supply Chain Risk Management , 45% of companies experience between 1-5 disruptions each year. Every third supply chain disruption can result in more than 1 million euro in damages, which is yet another reason why more companies should focus on increasing agility and transparency. DESPITE THE POTENTIAL OF HIGH, UNEXPECTED COSTS, MOST COMPANIES DO NOT MONITOR RISK IN THEIR SUPPLY CHAIN AS CAREFULLY AS THEY SHOULD. 81% BELIEVE THAT SUPPLY CHAIN DISRUPTIONS ARE DIRECTLY CAUSED BY SUPPLIERS, BUT IN REALITY, 41% OF DISRUPTIONS ORIGINATE IN SUB-SUPPLIER STRUCTURES. Heiko Schwarz, Founder and CEO, riskmethods. 2 riskmethods GmbH (2017) Survey: Cost vs. Risk and the Evolving Role of Procurement 12

13 jaggaer.com KPIs AND PERFORMANCE In addition to the results discussed above, the data also shows that 85% (2017: 84%) of the companies surveyed already use KPIs in their organizations. Of those that do use KPIs, 40% (2017: 34%) use KPIs that are both future-oriented and that focus on past performance. Only 14% of these companies (2017: 11%) have 85 % OF COMPANIES SURVEYED ALREADY USE KPIS have standardized KPIs throughout their entire organization and can analyze the data in a consolidated dashboard (Question 9). As part of the study, participants were also asked if and to what extent their organization had supplier development processes in place. 57% are actively engaged in the further development of their suppliers, and half of these companies indicated that their organizations had mature supplier development programs throughout the entire organization. This shows an increase from last year, where 19% said they had supplier development programs. The SRM Maturity Check shows that companies with a supplier management system (usually involving a supplier development additional analytics capabilities with a 360 view. 15% of the companies surveyed indicated that they do not use any KPIs in their procurement organizations (Question 8). 58 % COLLECT SUPPLIER PERFORMANCE DATA Implementing a supplier management system provides companies with an immediate overview of KPIs that indicate the performance of individual suppliers, and can help Procurement identify potential issues and threats early on. This can significantly reduce the number of claims and prevent supply shortages. Measuring supplier performance is a big part of KPIs. Many of the survey participants indicated that it was important for them to be able to define their own KPIs for this purpose so that they could initiate corrective actions at different levels and at the right time. 58% collect supplier performance data but only at the local level, and this information is usually not centrally available. This makes it impossible to analyze the consolidated data, which centralized procurement organizations are able to do with the help of a digital SRM solution. Only 22% (2017: 18%) of the companies surveyed process), achieve better savings. Companies that have a global SRM system in place (as opposed to companies who only have a supplier management system at the local level), are able to achieve more than double the savings. 13

14 USE OF KPIs IN PROCUREMENT 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% NO KPIs DESCRIPTIVE KPIS (DESCRIBING WHAT HAS HAPPENED IN SPEND, PPM, ETC) BOTH DESCRIPTIVE AND PREDICTIVE KPIS (DESCRIBING WHAT HAS HAPPENED AND WHAT WILL HAPPEN, E.G. FORECASTS ON VOLUME, PRICES, ETC) DESCRIPTIVE, PREDICTIVE AND 360 KPIS (DESCRIBING WHAT HAS HAPPENED, WHAT WILL HAPPEN, AND ALSO INCLUDING RISK AND CSR DATA) DOES SUPPLIER CLASSIFICATION MAKE SENSE? In the SRM Maturity Check, companies were also asked if they classified their suppliers. Based on the responses, more than 72% of the organizations surveyed have a supplier classification system. While 17% of these companies are only able to classify suppliers for less than 80% of the total spend, 26% (2017: 21%) of companies are able to classify suppliers for more than 80% of the total spend, thanks to the implementation of an SRM solution. The results offer clear support for supplier classification. Companies can expect to increase savings significantly as soon as an SRM solution is implemented. USE OF SUPPLIER CLASSIFICATION IN PROCUREMENT AND ACHIEVED SAVINGS 15 % UP TO 15% SAVINGS WITH SUPPLIER CLASSIFICATION 29 % Yes, but information about a supplier s status is not easily available and does not impact operational activities 28 % No 26 % Yes, on more than 80% of the spend 17 % Yes, but on less than 80% of the spend 14

15 jaggaer.com THE SUPPLIER: PARTNER OR TOOL? To determine the maturity of SRM processes, it was important to not only focus only on whether or not companies have SRM solutions in place (and the state of the SRM solutions in use), but also to examine the status of the supplier in the customersupplier relationship. Is the supplier seen primarily as a tool, or do companies place more value on building long-term partnerships with their suppliers? To successfully build and develop a lasting partnership with suppliers, good communication is key. This includes communicating requirements, sharing information and documents, and working together to optimize processes and innovate. In most cases, when companies implement a supplier network in their organization, it is to facilitate the exchange of information between buyers and suppliers. However, the survey results showed that not even half of the companies who participated had a supplier network, and, due to the lack of an SRM solution, only 8% had a platform for suppliers. The study shows that 50% of companies expect the added value gained from an SRM solution to be primarily in the form of price reductions. For 9% of those surveyed, the growth of the company was a significant factor in working together with preferred suppliers. Companies that are not only focused on price reductions in fact achieve the highest savings overall, with a total savings of up to 26%. VALUE OF SRM IN PROCUREMENT 26 % SAVINGS SAVINGS BY FOCUSING ON RISK 15 % SAVINGS BY FOCUSING ON GROWTH 11 % SAVINGS BY FOCUSING ON REDUCING PRICES 15 % SAVINGS BY FOCUSING ON INNOVATION 50 % Reducing prices 26 % Innovation 14 % Risk 9 % Growth 15

16 jaggaer.com This suggests that in order to maximize savings, companies may want to widen their focus to include other aspects beyond simply reducing prices. Many companies tend to ignore the fact that focusing on growth, risk sharing, and innovation automatically leads to long-term savings. If more value is placed can cut costs without being dependent on price reductions from suppliers. The survey results reveal that 56% of companies with a hybrid procurement organization and full ERP integration are often named customers of choice by their suppliers. Working together with suppliers as partners makes it easier to solve problems and address issues before they become critical, which also helps companies avoid unexpected costs. 15 % COMPANIES SAVE UP TO 15% BY BUILDING BETTER SUPPLIER PARTNERSHIPS on improving supplier relationships, supply shortages and claims can be avoided from the beginning. In this way, procurement As illustrated by the graph, companies that have a digital SRM solution and use the solution and KPIs to qualify, classify, evaluate, and develop suppliers, are more likely to be named a customer of choice by suppliers. Having a preferred status has advantages for both suppliers and for Procurement. Without strong supplier relationships, companies are making themselves more vulnerable to risk. The VW faux pas of is a prime example of supplier relationship management gone wrong. Production at VW was brought to a stand-still when two suppliers halted deliveries. This quickly resulted in supply shortages, HOW CUSTOMERS OF CHOICE APPROACH SUPPLIER MANAGEMENT Questions Qu4 Qu5 Qu6 Qu7 Qu8 Qu9 Qu10 Qu11 Qu12 Qu13 Average Revenue in million ( ) Above to 499 lower than 50 Average

17 jaggaer.com unexpected costs and unhappy customers. Cases like these are not as rare as they should be, and the consequences can be disastrous. This is why striving to be a customer of choice should be a part of every company s supplier relationship strategy; companies with a preferred status with their suppliers save more and get to reap the benefits of a positive and productive partnership. MORE THAN JUST A PRICE REDUCTION Many companies choose to implement an SRM solution primarily because they believe it will help them cut costs by getting better prices from their suppliers. These companies may be unaware of how digital SRM solutions can be used to reduce costs in a range of other ways. Rather than relying solely on uncomfortable negotiations, which can threaten a company s relationship with their suppliers over time, there are other cost-cutting options available. The graph clearly shows that for large companies in particular, 20% (and more) of the preferred suppliers are responsible for 80% of the total spend, which illustrates just how dependent these companies are on their suppliers. SPEND WITH PREFERRED SUPPLIERS 15% 32% 30% 36% 15% 40% 32% 14% 18% 30% 24% 14% > 500 MILLION > MILLION < 50 MILLION More than 20% of suppliers represent 80% of the spend 20% of suppliers represent 80% of the spend Less than 20% of suppliers represent 80% of the spend Do not know or no target / KPI for that This is why investing time on building better relationships with suppliers is crucial, and has tangible benefits for companies and suppliers alike. If companies choose to work with a digital SRM tool, they can expect to save at least 30%, in part because of the following factors: Time spent on supplier registration can be reduced by up to 30% Supplier evaluations can be completed more quickly Contract management is easier and faster thanks to digitalization Fully automated certificate management Easy to classify and qualify suppliers around the world 17

18 THE RIGHT STRATEGY FOR SUCCESS One of the biggest gaps between SMEs and large companies revealed in the SRM Maturity Check was in category management. Category management is already a must-have in larger companies because these companies need to define and implement global strategies for decentralized and centralized 77 % BASE THEIR SUPPLIER STRATEGIES ON CATEGORIES and encourage synergy between departments, branches and processes. Even though large companies are ahead of SMEs, the survey results indicate that there is room for improvement when it comes to category management. Companies have made little progress in the last year. It is worth noting that, in general, companies with a category strategy are able to achieve better savings because it is largely consistent with the accompanying supplier strategy. In total, 77% of the companies surveyed indicated that their supplier strategy was based on their various categories. These companies achieved higher savings than companies who did not differentiate their suppliers according to categories. 70% reported savings of up to 10%, 23% reported savings between 10% and 40%, and 7% even reported savings of higher than 50%. departments. Transparency is also especially important in an IT environment with multiple ERP systems in order to avoid silos Why is category management so important? The short answer is that category management can help procurement achieve success more quickly. By clustering sourced commodities, AN OVERVIEW OF CATEGORY MANAGEMENT Category Management Question Qu4 Qu5 Qu6 Qu7 Qu8 Qu9 Qu10 Qu11 Qu12 Qu13 Average Revenue in million ( ) Above to 499 lower than 50 Average 18

19 jaggaer.com a category manager or lead buyer can be assigned to a specific category. The category manager is responsible for setting requirements and strategies for a particular category, and then sharing these with the procurement team, ensuring that procurement processes and procedures are consistent and standardized throughout an entire organization. Global organizations usually roll out these strategies locally to reduce costs and optimize categories and supplier portfolios. Even though most companies expect reduced prices from their suppliers, it is clear that they can achieve better savings by focusing on growth, innovation and risk optimization when working together with their suppliers. The results of the SRM Maturity Check indicate that companies with more long-term goals save between 15-26% on costs, whereas companies whose sole focus is on reducing prices only achieve savings WHAT GETS MEASURED GETS MANAGED. Peter F. Drucker of 11%. In light of this study, companies may want to consider changing their priorities and reassess their approach to supplier relationships. SAVINGS BREAKDOWN BY PRIORITIES IN SUPPLIER RELATIONSHIP UP TO 26% SAVINGS BY FOCUSING ON GROWTH, RISK, OR INNOVATION 26 % ONLY UP TO 11% SAVINGS BY FOCUSING ON REDUCING PRICES 11% 19

20 CONCLUSION Based on the results of this study, it is evident that there are multiple factors beyond just reducing prices that should be considered when selecting preferred suppliers. Taking a more 37 % 37% OF COMPANIES REPORTED LONG-TERM COST REDUCTIONS holistic approach that includes aspects such as growth, innovation, and risk optimization can lead to more sustainable and stronger 20 long-term partnerships and, in turn, more savings. By digitalizing supplier management, companies can save costs and also increase transparency and agility throughout their organizations. The 360 view provides a clear overview of supplier data and overall supplier performance, which can help buyers react quickly to unexpected situations. Digital SRM solutions make it easier to minimize risk and prevent supply shortages, unexpected costs, quality issues, and supply bottlenecks. When creating a procurement strategy, it is important to consider the company and its goals as a whole, because in most cases, focusing on growth and innovation can have real benefits for the company, such as more agile processes and better quality products. All of this ultimately results in automatic savings. This approach combined with digital tools can help companies reduce manual processes, leaving Procurement with more resources that can be redirected towards strengthening supplier relationships. This can turn the focus of future negotiations to more than just price reductions.

21 jaggaer.com SUPPLIER MANAGEMENT 2030 One of the most important goals in procurement has always been to reduce costs. Costs can result from much more than complaints and supply shortages. For example, changing suppliers can also be very costly. To counteract these issues, many companies are already using a digital SRM solution, which helps Procurement track important data and react quickly to supply shortages and avoid complaints. This is also confirmed in the Gartner study Hype Cycle Procurement and Sourcing Solutions, In the future, an all-in-one supplier platform will be an absolute necessity to ensure transparency and communication between companies and suppliers. With the advent of Industry 4.0, more and more energy will be put into avoiding disruptions, which can interfere with the complex network both within and between companies. In addition to orders from customers that automatically generate requirements for suppliers, manufacturing equipment will communicate with each other to optimize the manufacturing process. Logistics and shipping processes will also be automated and controlled digitally, which will allow companies to save their resources for other tasks. Compliance with quality and delivery requirements will be monitored continuously in automated supply chains. Procurement will also need the help of intelligent systems to analyze the vast amounts of data that companies will soon be able to collect. Artificial intelligence and smart algorithms will also help procurement monitor market developments, benchmarks, risk, and supplier KPIs. All of these processes will need clean data to function, which is why companies should start consolidating a clean master database now. Big data and analytics have already surpassed what manual processes are capable of, and are being used for forecasting and to analyze events and disruptions around the world. Data analytics can help companies react quickly to changes in prices for raw materials, supply shortages, and quality developments, and can also help Procurement make better decisions. Using this data for price negotiations and in supplier development can reduce costs that go far beyond reduced material prices. Learn more about digitalization in Procurement. Download the JAGGAER Digital Procurement Study Just Hype or the New Standard?. The data from JAGGAER s 2017 Digital Procurement Study 5 shows that companies are planning to invest in SRM or esourcing tools within the next 1-5 years. This is a sign that companies have recognized the benefits of digitalization, and are aware that having a complete overview of their supply base will help them operate more effectively in nearly any situation. PRIORITIES FOR INVESTMENT 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% BIG DATA ANALYSIS ALGORITHMS / SMART WORKFLOWS DIGITAL ASSISTANTS / BOTS PREDICTIVE ANALYTICS / KPI RPA BLOCKCHAIN SRM-/eSOURCING-, eprocurement TOOLS Already in use > 1 year > 3 years > years Not planned 4 Gartner Headquarters (2017): Hype Cycle Procurement and Sourcing Solutions, Stamford. 5 JAGGAER Digital Procurement Survey 2017: Hype or new Standard 21

22 APENDIX: SRM QUESTIONS ID 1 2 Questions How much financial benefits has your organization delivered last year? (Expressed in % of your total external spend) What value do you expect your key/preferred suppliers to deliver? Please rank your priorities from 1 (most important) to 4 (less important). 3 What percentage of your key/preferred suppliers do consider you as a customer of choice? 4 Do you have a central repository or database of suppliers? 5 Is there a formal qualification process and is it recognized across the organization? (Focus on direct only) 6 Do you have a process to classify suppliers as: preferred (= expand business), active (= keep as it is), or disengage (= phase-out) - or an equivalent system? 7 Do you have a list of your preferred suppliers that is shared, known, used, and easily available? 8 Which KPIs do you have / follow related to SRM? 9 Do you track KPIs related to supplier performance (defects and non-quality, on-time delivery, etc) 10 How much (%) of the spend is concentrated on key/preferred suppliers 11 Do you have a process in place to promote suppliers, develop them, and recognize them (access to new product developments, awards ) 12 Are the SRM aspects detailed above tailored to each category? (definition, target ) 13 Do you have dedicated Master Data Management (MDM) organization or dedicated roles with regards to supplier data? 14 Do you have a supplier portal or network? Disclaimer The SRM Benchmark Survey 2018 and all therein contained assumptions and recommendations were based on the information from the online survey. Although the greatest caution was exercised all information is provided without guarantee. In addition, the study is available in German. In case of any inconsistencies with the English version, English version is to be prioritized. The information contained in this document is proprietary JAGGAER. All Rights Reserved. 22

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