July 19, 2013

Critical Questions Organizations Should Consider Prior to Implementing a Supplier Lifecycle Management Solution

The business case for supplier lifecycle management seems to be finally coming of age. Organizations are now, more than ever before, mobilizing to implement some form of Supplier Lifecycle Management, whether for supplier onboarding, master data management, supplier performance/risk management, compliance, or other.

Though Supplier Lifecycle Management is a loaded term, to simplify what I am referencing is the process of how one enrolls a supplier, manages the ongoing relationship, and (eventually) phases them out. This will include all elements, from the foundational data-related activities (create / update / delete suppliers) to the more strategic aspects (risk / performance / compliance). As a broad topic it can feel overwhelming to address it all at once – and, more often than not, organizations will pick one element to focus on only. This is the first mistake! While I do believe that the complexity, for large organizations in particular, should be broken down (and phased) based on priorities and resources, the overall scope and objective should be clear from DAY 1.

Why? There is a clear sequence, which is required in terms of capabilities, which need to be in place first in order for the other functions to work well.

Put into example:

Supplier Risk and Performance is a very hot topic at the moment. Coupled with this is being able to roll up the applicable scorecards into supplier family trees. In fact, everyone we talk to these days is asking, “Can you roll up this data into supplier family trees?” But, often overlooked is the process of collecting the data and associating it correctly to suppliers, as well as who actually builds and maintains the family tree. Clearly, if one doesn’t first address the supplier master data strategy and governance, the resulting reports will, at best, have mediocre, short-term results.

The reasoning: It most assuredly won’t be long before the business stakeholders will want to link suppliers with spend, gain insight into the number of transactions, late deliveries, etc., which is all information which may reside in the ERP platform. Maybe people start linking every supplier together as they see fit to build the coveted ‘family tree’? Maybe one purchases Dun & Bradstreet data, as it may seem like a quicker solution, only to get frustrated with the D&B account manager because “their data is bad”.

Side note: Just because D&B doesn’t link up PricewaterhouseCoopers into the same parent company (or even IBM), doesn’t’ constitute “bad data”, as, legally, there is no parent company for PwC. In this case, D&B may be accurate and it is your definitions that are different.

To summarize this example, one needs to be clear on: the basic definitions of what a supplier is; what is to be achieved with the family tree; and, how will the different data sources for the scorecards be linked – and, if one doesn’t have a unique ID for a supplier within your company, managing the supplier lifecycle will not be efficient! You have to know the “supplier” first, and be able to easily identify it.

Back to the point that there is a clear sequence, which is required in terms of capabilities, which need to be in place first, in order for the other functions to work well. The implementation scope, therefore, is not simply designing a supplier survey, or deciding what data elements are included in a report. Instead, one needs to think about the vision, starting with the master data and building upon it to determine the scope of the other business processes ultimately covered. As such, the design phase will be the most important element of the project. Not the technical solution. I want to offer some questions to consider if you plan to embark on implementing some flavor of Supplier Lifecycle Management:

  • Have the processes been designed and aligned globally?
  • Do we have buy in from all the stakeholders that will be impacted?
  • Will our approach work equally well across the different spend categories and geographies, or is it focused too much on the immediate short-term need?
  • Are there clear definitions about what constitutes a supplier? A location? A parent company? A headquarter company? Etc.?
  • Is the ownership of the data clear? Who owns the master data? Who owns the other risk/performance data?
  • Have the master data governance organization and data standards been established? Is it global (centralized), or federated?
  • Is there a clear change management plan?
  • Has the existing data been reviewed – and what effort is required for me to conform the existing data to the correct format?
  • Prior to data load, what plan is in place to create a “gold copy” of each supplier instance? Who will determine if duplicates exist, and which one stays and which one goes?
  • Will I need to integrate with my ERP system, or not?
  • What other data sources will I want to import now? In the future?
  • Is the right operational governance in place moving forward? What if someone wants to add a new field/KPI/ etc.?

The list is much longer, but these are some of the key questions that are often overlooked and cause project cost/timeline overruns. Over the course of the last 10+ years, the key thing we have learned is that your project approach, methodology, and preparedness is equally as important as the actual technical solution.

“Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.” – Paul J Meyer

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