The case for vendor management automation in smaller businesses

 

By Sheldon Mydat, Founder and CEO, Suppeco

 

Most of the automation debate in procurement is aimed at organisations large enough to hold a debate about it. That has always struck me as the wrong way round. A business with forty people in supply chain can absorb a fair amount of manual chasing. A business with one commercial manager, a finance director who also handles the insurance renewals, and an operations lead who inherited the supplier file from someone who left two years ago cannot. The smaller the team, the higher the return on automation. Smaller teams are usually the last to get it.

 

I have spent about twenty five years on the commercial side of this, and I now run a software company whose customer base skews enterprise. That gives me a decent view of what large teams actually do with the tooling, and how much of it is a function of scale rather than sophistication. The honest answer is that most of it is not. The mechanics of keeping a supplier relationship healthy are the same at forty suppliers as they are at four thousand. What changes is how much of it one person can hold in their head.

 

The gap is after signature, not before it

Smaller businesses are generally good at buying. You negotiate hard, because the money matters and because the person negotiating usually feels the cost personally. What tends to fall over is everything after the ink dries. The savings sit in a spreadsheet. The obligations sit in a PDF on a shared drive. The relationship sits with whoever speaks to the supplier most often, and it runs on goodwill until that person leaves or gets busy.

 

That is where value drains away. Not through a dramatic failure, but through a rebate nobody claimed, a service credit nobody invoiced, a price increase nobody challenged because nobody had the baseline to hand, an auto renewal that went through on a Tuesday. I have written about this elsewhere as dynamic margin erosion, and the label matters less than the pattern. Contracted value and realised value separate, slowly, and nobody notices because no single instance is large enough to notice.

 

At enterprise scale that erosion is a rounding error on a good year. At ten million turnover it is the difference between hiring and not hiring.

 

What vendor automation actually means

There is a lot of noise around the word automation at the moment, most of it involving the word agent. Set that aside. In supplier management the useful definition is narrower and duller. The system watches the things a person would otherwise have to remember, then tells the right person at the right time, with the context attached and something specific to do about it.

 

In practice that comes down to a fairly short list of triggers:

• Performance against KPIs and SLAs, picking up the lapse and not only the breach.
• Contract events. Renewal dates, break clauses, notice periods, indexation windows, milestones.
• Audit and compliance events. Certification expiry, insurance, policy attestation, right to audit.
• Spend against expectation, by supplier and by category.
• Risk signals, financial and operational.
• Behavioural change. Response times lengthening, escalations rising, governance meetings quietly stopping.
• An action assigned and not taken, a request sent and never answered.
• Collaboration and relationship cadence, meaning whether the governance you agreed is actually happening.

None of that is clever. All of it is the sort of thing that gets missed by a busy person with a good memory and no system.

 

Why this matters more at ten million than at ten billion

Two reasons, and the second one is the interesting one.

 

The first is coverage. A small team cannot watch forty suppliers continuously, so it watches the four that shout loudest. The rest are managed by exception, and the exception is almost always a problem that has already landed. Automation inverts that. The system watches all forty and interrupts you about six. Your attention goes on judgement rather than on discovery.

 

The second is credibility. Smaller buyers have less commercial leverage, so what leverage they do have comes from being visibly organised. If you can put a supplier in front of their own performance data, their obligations and their history without a two week fire drill first, the conversation changes character. You stop being a small account that gets managed politely and start being an account that is paying attention. I have watched that shift happen in rooms, and it is not subtle.

 

A pragmatic ninety day approach

If I were running a business turning over five to fifteen million and I wanted this working by the end of the quarter, this is the order I would do it in. It is deliberately unambitious. The failure mode here is not going too slowly. It is trying to onboard the whole supply base in month one and quietly abandoning it in month three.

 

1. Pick twelve suppliers, not all of them. Rank by dependency rather than by spend. The supplier you could not replace in ninety days matters more than the one with the biggest invoice. A good number of the businesses I speak to discover during this exercise that their most critical supplier is a mid sized line item nobody had ever flagged.
2. Write down what good looks like, in three measures or fewer. If you cannot state it in three, you do not yet know what you are buying. Resist the forty point scorecard. Nobody will fill it in, including you.
3. Get the contract dates in. Renewal, notice, break, indexation, review. This is dull work and it is the highest return hour you will spend all quarter, because an auto renewal you failed to notice is a year of pricing you never had to accept.
4. Set the governance cadence before you set any alerts. Decide who meets whom, how often, and what gets reviewed. Monthly for the top few, quarterly for the rest, and be honest about what you will realistically keep up. Then let the system hold you to it rather than relying on your own diary discipline.
5. Bring the supplier onto the same surface as you. This is the part smaller teams skip, and it does more work than everything else combined. If the supplier is submitting their own performance data, uploading their own certificates and looking at the same view you are, most of the chasing disappears from your week. Chasing is the tax you pay for keeping the whole record on your side of the fence.
6. Turn on a small number of alerts. Six or eight. Every alert you create that nobody acts on trains your team to ignore the next one. Start with contract dates, compliance expiry and KPI lapse. Add the rest once the first set is genuinely being used.
7. Give every alert an owner by name. Not a team, not a shared mailbox. Automation does not create accountability. It only exposes whether accountability was ever there.
8. Review at ninety days and delete things. Look at which alerts got acted on and which got dismissed. Kill the dismissed ones. Add the two or three you found yourself wishing you had. Everyone skips this step, and it is the difference between a system people use and a system people mute.

 

What it will not do

Automation will not fix a badly written contract. If the obligation is not in the agreement, no amount of monitoring will conjure it into existence. It will tell you quickly which of your contracts are badly written, which is useful the next time round.

 

It will not make a disengaged supplier care. It will make the disengagement visible early enough for you to do something about it, which is a different and more valuable thing.

 

It will not replace the conversation. The whole point of taking the administrative load off a small team is to buy back time for the conversation. If you automate the chasing and then do not use the time you have released, you have bought a tidier version of the same problem.

 

Where I would start

The reason I keep pushing this at the smaller end of the market is that the arithmetic is simply better there. A large organisation automating supplier management is improving a process it already runs. A smaller one is standing up a capability it never had, usually for materially less than the cost of the person it would otherwise need to hire.

 

Supplier relationships are a depreciating asset. Left alone they lose value quietly and steadily, and the work of maintaining them is not difficult so much as relentless. Relentless is precisely what software is for.

 

Pick the twelve. Get the dates in. Bring the suppliers into the same room. Everything else follows from there.