December 12, 2018

How can supplier master data management benefit organisations?

What are the benefits of supplier master data management?

If you don’t know who your suppliers are, how can you manage your relationships with them? More importantly, how can you be confident that you’re working with them in the most efficient way and maximising your ROI? Well, the truth is, you can’t – not without sufficient information anyway.

The best way to build an understanding of who your suppliers are is to establish a ‘single version of the truth’ – which basically means improving the way your organisation captures and manages supplier master data (otherwise known as vendor master data).

Of course, as with many transformation projects, often this is easier said than done. Many organisations simply don’t have the time or internal expertise to introduce new ways of recording supplier data, choosing instead to battle on and do things the way they’ve always done them.

While we appreciate the reasons why organisations may choose to do this, there’s little doubt that this approach can only ever be seen as short-termist. In the long-term however, we believe that this results in competitive limitations and greater exposure to supplier risk.

Supplier data management: why businesses resist change

What is the reason for this inertia? Why do organisations resist change despite knowing that improving their supplier data management processes could make their lives easier in so many ways?

Well, some of the major obstacles we’ve often seen include the following:

  • their IT infrastructures are unable to handle the complexities involved with managing supplier relationships and vendor database management
  • they have complex master data quality issues, especially when it comes to integrating supplier information from different ERPs
  • they often find lots of master data overlapping. This is particularly problematic for larger organisations that store supplier data across many different systems
  • a lack of clarity around data governance (e.g. ownership and policies) can cause confusion when it comes to identifying critical supplier attributes

While these issues are undoubtedly complex, organisations shouldn’t simply ignore them and hope they disappear. Instead, they should face them head on and address them. This is where supplier master data management (SMDM) comes into play.

What are the benefits of supplier master data management?

Supplier master data management helps businesses build better relationships with their suppliers and increase productivity by allowing them to:

  • use their time more effectively and focus on finding the right suppliers for their needs
  • record supplier data that is more consistent and of a higher quality from the outset, meaning downstream users can focus on using the data rather than trying to fix it
  • track active suppliers and reduce the amount of time spent collecting and managing information about vendors that are no longer relevant to the organisation
  • standardise their supplier master data across the board and make their vendor master data management processes more efficient as a result
  • make the supplier onboarding process more efficient

The features and benefits offered by a vendor data management solution should be enough to catch the attention of any CPO. Higher-quality supplier data, coupled with more efficient processes, allow procurement teams to operate more effectively and better meet the needs of the wider business.

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