This article was originally posted in Supply and Demand Chain Executive.
Supplier Information Management[/caption] Supplier data management is costing organizations millions of dollars each year. According to AMR Research/Gartner, supplier management organizations have increased their employee headcount and system resources by 35%, and are spending up to $1,000 per supplier annually, to manage their supplier information across the enterprise.
Why is clean, consistent and connected supplier information important for effective supplier management?
In larger organizations, supplier information is typically fragmented across departmental, line of business and/or regional applications. In most cases, this means it’s inaccurate, inconsistent, incomplete and disconnected across the different siloed systems. Adding, changing or correcting information in one system doesn’t automatically update it in other systems. As a result, supply chain, sourcing and buying teams struggle to get access to a single view of the supplier so they can understand the total supplier relationship across the business. As a result, it’s difficult to achieve their goals, such as:
To effectively manage global supply chain, sourcing and procurement activities, organizations must be able to quickly and easily answer questions about their suppliers’ or vendors’ companies, contacts, raw materials or products and performance.
Quite often, organizations have separate procurement teams in different regions and they have their own regional applications. As a result, the same supplier may exist several times in the company’s supplier management system, but captured with different company names. The buying teams don’t have a single trusted view of their global supplier information. So, the different teams would purchase one product from the same supplier - each of them with different pricing and payment terms - without even knowing about it. They don’t have a clear understanding of the total relationship with that vendor and cannot benefit from negotiated corporate discounts.
If the data that’s fueling operational and analytical systems isn’t clean, consistent and connected, they cannot quickly and easily access the information they need to answer these questions and manage their supply chain, sourcing or procurement operations efficiently or effectively. And this results in ineffectiveness, missed procurement opportunities and high administration costs.
For example, a fashion retailer needs to ensure that all compliance documents of its global vendors are current and complete. If the documents are incomplete or expired, the retailer could face serious problems and might risk penalties, safety issues and costs related to its supplier incompliance.
A Business Value Assessment recently conducted by Informatica among companies across all major industries, business models and sizes, revealed that by leveraging trusted data quality, annual supplier spend could be reduced by an average of $6M. Breaking this down by industry, the possible annual reduction in supplier spending, thanks to improved supplier information and data quality, could be $9.02M for Consumer Packaged Goods (CPG), $4.2M for retail and $2.76M for industrial manufacturing companies.
To reduce costs related to poor supplier information quality, these are the five best practices that will help your company achieve a more effective supplier relationship management:
These best practices may seem basic or obvious, but failing to apply them is the main reason global supplier data programs stumble. They will help fuel operational and analytical applications with clean, consistent and connected supplier information for a more accurate view of suppliers’ performance, compliance and risk. As a result, supply chain, sourcing and buying teams will be empowered to cut costs by negotiating more favorable pricing and payment terms and streamlining their processes.
Related blog: At Valspar Data Management is Key to Controlling Purchasing Costs