June 30, 2017

What are the Five Key Business Processes for Supplier Master Data Management?

Processes

In order to deploy a successful centralized operational supplier master data management solution (that’s a mouthful) – which means covering 100% of all data and not just the 20 most important attributes – there are just five business processes you need to pay attention to.

If you cover all of these five business processes and agree them, then you can say bye bye to updating any type of vendor/supplier/third party information in your ERP/P2P solution. Doesn’t that sound great?

So here they are in a very simple manner:

  • Create or Extend Supplier (Supplier Onboarding) – More commonly referred to as Supplier Onboarding. This is the process of how an organization commences a new business relationship with a supplier. If it’s new in the whole enterprise it will be created from scratch, therefore a new supplier. If the supplier is already doing business with one of the enterprise’s organizations then it will be a supplier extension. The process should be defined from a line of business requesting the supplier –for example, this could be anyone essentially in marketing, research, supply chain, finance, etc. – , approval of the request, collection of data from the supplier, review and assessment of data (includes all aspects compliance, risk, data quality, etc.), business approval and finally activation into the target systems (ERP, P2P, GRC, etc.)
  • Update Supplier – this is the process of making any change to an existing record. This could affect both global/central data, which is shared and will require some form of global governance group to do this efficiently – having every team that uses the supplier approve a change to their name is not going to be an effective approach. There will also be instances where the data is purely local, for example the payment terms, bank account or reconciliation accounts used for a particular company – this should be managed by a divisional/local team. Changes could be initiated internally or externally by supplier through a portal. Over time this process should go beyond just master data and cover changes to other types of information such as Health & Safety, Information Security, Social Responsibility, etc. which is beyond the scope of this blog.
  • Deactivate Supplier – this is more commonly referred to as Supplier Offboarding but it’s from the point a user makes a request to deactivate the supplier, the subsequent approval and update to block it appropriately in the relevant ERP/P2P systems.
  • Reactivate Supplier – this process is often forgotten, but, let’s say you have a supplier you have not worked with for the last three years and suddenly you want to use them again. Would you just turn them on for use? Probably not. A lot will have changed during that time and in most cases the reactivation process is very similar to initial supplier onboarding given that you would need to ensure data, certificates, etc. are all still up to date and valid.

You will have noticed there are only four bullet points, that’s because we bundle the first two processes together. To an agnostic business user, they will not understand the subtlety of create vs. extend. Typically, your technology (and data stewards) will handle this on their behalf in order to make life easy and keep your data good.

By far the most important and complex process of all is the Supplier Onboarding process. It is much easier to get things done upfront or from the ground up and it also makes the most business sense.

To start assessing compliance and risk once you have started a business relationship is pretty counter intuitive.

So, there you have it, the five business processes that you need in order to get you started in centralizing your supplier data.

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by Costas Xyloyiannis

Chairman & CEO

With HICX since its formation in 2004, Konstantinos has been instrumental in building it into a leading Supply Base Management company. He is responsible for setting the company’s strategic direction as well as overseeing the growth and expansion, strategy, planning, execution and overall performance of the company.
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