The confusion, the never ending confusion that comes with having your ERP(s) managing your suppliers. It has been the primary factor over the last five years that has led to data quality and data integration being the biggest problem for CPO’s. In the past this would have been ignored with gritted teeth as transactional systems such as P2P were bought and paid for. Now however, there is a big shift to a data first approach. Building the foundations first.
With that in mind, this article is aimed at highlighting the four key factors that need to be covered to ensure good quality supplier master data, now and in the future.
If you’re reading this, you’re probably well aware of the different permutations that ERP systems can get riddled with:
- By legal entity (e.g., child/subsidiary)
- By buying organization (e.g., divisions, business unit, locations, plant, country, etc.)
- By commodity
- By tax ID
- By payment location, or bank account
- By customer
Let alone supplier duplicates and/or multiple ERP systems.
The burden of managing this supplier information is heavy – and by not accounting for the organisational, supplier, and relationship views, variations are needed to accommodate for actual day-to-day data usage – and the casualty is efficiency.
Accounts Payable cannot leverage a single supplier master and efficiently pay suppliers; Strategic Sourcing cannot easily ascertain what suppliers are used to further leverage their spend; and, the list goes on.
Even relatively simple companies are seeing added complexity in the form of new regulations becoming a big issue.
So, how does one tackle this exponentially growing problem?
In the simplest terms (usually the best option) these are the key points to tackle:
Vision: Chances are that if you have this problem, you have a large and complex organisation (business units, locations, systems, etc.) – and the reality is that an efficient supplier master cannot be created without “vision”. This incorporates an understanding, company-wide, of the objectives for the supplier master, and having executive sponsorship.
Governance: Do we really need 100 versions of IBM? When does a supplier get added, and in what form? These decisions have to be made and, therefore, a governance board and data stewardship organisation must exist. They define standards and definitions, survivorship rules, and what/how duplicates should exist. Without governance over the supplier data… for lack of a better way of stating it… you’re starting to define insanity if you are expecting different results.
Process: It really does seem like every conversation these days either has the word “process” or “workflow” in it. So why change now? In order to ensure standards are followed, a process has to be enforced. Whether it is through identifying duplicates, the approvals needed to consolidate, change requests, or attaching a supplier to an existing record, systems ensure the right sequence of activities are followed.
System: The system that manages the supplier master data, whether an ERP instance or a Supplier Information Management system, needs to be accountable for collecting, maintaining, and syndicating the supplier information. This includes running matching strategies, match/merge, governance oversight, sending master data to downstream systems, and providing the appropriate “views” of the supplier. Going backwards this means that the system must understand the variations of a supplier, such as:
- A supplier “family” view (an aggregation of suppliers into family trees, or relationships)
- A “system landscape” view (a view which has been translated into appropriate record structure, per downstream system)
- A “supplier” view (a single view of the supplier from the supplier’s perspective)
As a side note, it’s important to recognise just how important genuine flexibility is. As time goes on and changes need to be made, you’ll need to have a system in place that allows for quick, easy and cost effective changes. If this isn’t a priority then all you’ll end up with is an expensive mistake and a shiny brand name.
Back to the main focus of this article. If you manage to get each of these four focus points working in harmony, you’ll be in a great position to empower your organisation and to gain insight into your supply base. All while further finding efficiencies within your organisation/suppliers as your team is able to spend their time making productive strategic decisions.