Supplier data management is a challenge for many organizations, regardless of their size.
Some industries are more advanced on this topic. Automotive & Telecom have better average supplier data quality than Pharma and Retail for example, as stated in a PWC study about data management published in November 2011.
The main reasons for implementing a supplier data management solution are mostly related to risk and compliance monitoring. The pressure is rising in sectors like Financial Services in North America for example. Costs and efficiency also play an important role in such initiatives.
A recent study from Gartner evaluated the cost of supplier data management at around $500 per supplier annually (mostly people and systems). Nevertheless, the accuracy of supplier databases is still relatively low.
Suppliers move, merge, change ownership, change names and locations, etc. All this impacts the accuracy of your data which can cause processing errors or even worst, supply chain disruption.
And let’s not start with duplicates… (the famous supplier I.B.M, wait.. no… IBM… or I B M ?)
The average degradation of data is 2% per month.
Considering the many systems in a company, it can be difficult to build interfaces between all the repositories to ensure consistent synchronization. It is common for organizations to have several ERPs, SRMs, Spend Analysis, Reporting, Excel sheets, Risk assessment grids, Procure to pay…
Here are a few tips to improve the management of your suppliers’ data.
Make this initiative your company’s top priority before starting any new system implementation. The project’s success will largely depend on the executive’s sponsorship and involvement. Moreover, it is a pretty good opportunity to review and improve certain processes.
Invest in a SIM (Supplier Information Management) system. It will be the single source of truth for your supplier data. This information will then be shared with all the systems of your company. Data inconsistencies usually come from the distribution of data ownership across too many systems and business areas within an organization.
Harmonize supplier data!
Define clear processes for onboarding, governance (financial, accounting, purchasing, etc.), and offboarding of suppliers.
Delegate the maintenance of the data to the vendor himself as far as possible. Most of the systems now propose a portal where suppliers are asked to update credentials, data, and contact information. Assuming that you set up a good validation workflow before the publication of any changes, that should really raise data accuracy and lower data management costs.
Check your supplier data!
Regularly measure the quality of your data. For example, by comparing your database master to a source of external data (CIP – Continuous Improvement Process). A yearly action should suffice.
Assign the role of “owner of the supplier data management process” to a specific person. Typically, someone from Procurement will be incentivized on this subject, with clearly defined KPIs.
In conclusion, the path will certainly be long to reach a cleaned and standardized unique vendor repository. It is paramount to set up a harmonized onboarding process and centralized maintenance. But the costs and issues such as risk mitigation can no longer be ignored, for larger groups as well as SMBs.