If you want to mitigate supplier risk, you have to manage your supplier data…all of it.
Today organizations are tasked with managing vast amounts of supplier data to make the proper process decisions across the organization. Whether it be related to sourcing, contracts, purchasing, and/or payments or wider efforts related governance, risk management and compliance, a typical organization will need to engage many disparate supplier processes and have a good handle on managing the master data around it.
Those who have more visibility to suppliers have a competitive advantage. In a 2020 Deloitte CPO Flash Survey, organizations that are thriving in world since the COVID pandemic were twice as likely to prioritize digitization in their day-to-day operations and seven times more likely to expand their supply bases in response to supply-side vulnerabilities. Other conventional and trusted research suggests investment in supplier management processes will only increase in 2021.
But having a discussion around supplier data and processes that manage them can be tricky. What aspect of supplier relationships are being managed varies widely based on the process in question and who’s involved across the source-to-pay continuum.
Core Supplier Management Processes and Data
Here are just a few examples that fall under the wider umbrella of “supplier management processes” and what is needed from them:
- Supplier contracts and amendments – At the heart of any supplier relationship is the contract. Managing supplier-based contracts and contract changes requires flexibility and the ability to address dynamic business needs. It requires effective change management administration – from contract requests through to redlines, approval and execution – and updates commitments as required. When an organization can digitally capture contracts and address and resolve contract issues at the appropriate level, supplier relationships benefit from contract transparency, open communications, and closed-loop resolution.
- Supplier certifications – If a supplier contract states they will need to submit certifications like a Certificate of Insurance (COI) on an annual basis, automated processes must be in place to ensure this commitment is fulfilled and documented through to completion. Moreover, communicating this expectation must allow for the ability of buyers and suppliers to demonstrate commitment and accountability. Managing this process requires supplier information management that can address workflows that correspond to contractual obligations, internal and external compliance, and or regulatory requirements for building trust and ensuring a sustainable, long term relationship.
- Supplier performance – Monitoring supplier performance requires the ability to easily measure, analyze, and manage the performance of a supplier to cut costs, alleviate risks, and drive continuous improvement. Regardless, best practice supplier management dictates the active role in making sure their suppliers live up to their expectations while ensuring an ability to easily understand suppliers in the context of how important they are to the business and the potential risk they pose to it. Thus access to complete and accurate information regarding supplier performance management allows internal stakeholders to monitor supplier products and services, and determine if changes are required. But automating and visualizing supplier performance data can be a potential colossal effort without the ability to manage and collaborate on the integrity and accuracy of key tools such as ongoing performance reviews and supplier self-assessments to ensure your suppliers are meeting your standards.
- Supplier invoices and payments – This takes us to managing invoices and validation. From invoice matching to identifying exceptions to executing payments, managing supplier invoices can be complex process and prone to errors or inaccurate billing if supplier information is not aligned. Moreover, Accounts Payable needs a fool-proof way to validate calculations and invoices match against agreements. By digitizing the invoice management and digital payment processes through the elimination of paper and aligning them with supplier master data, organizations are more prepared to verify supporting purchasing data, more rapidly detect discrepancies and verify supplier remittance information to help the relationship run more smoothly with on fewer disputes, more consistent payments and remove the risk of fraud.
What all these processes have in common around managing suppliers is the ability to actively manage internal supplier master data and workflows across a wide spectrum of users – be it sourcing, procurement, accounts payable, legal and others. And with the evolution of source–to–pay platforms, what once took weeks can now take days, hours or even without sacrificing quality and control. Evaluating and managing thousands of suppliers can now be possible with integrated supplier data and workflows across cloud-based source-to-contract and procure–to–pay processes.
But this is only part of the story...
Enriching Supplier Information with Third Party Data
While centralizing the management of primary supplier profile data like supplier bank accounts, locations, and contracts is becoming the norm, ongoing monitoring of your most strategic suppliers has risen to a new level of importance. Implications of COVID continue to imbed disruption and risk on supply chains. The business outcomes of cash challenges, bankruptcies and other regional and global business constraints is still not truly understood in 2021, and will more than likely requires the use of trusted third-party data sources to help build resilience into a broad array of supplier management processes.
In this regard, there is a new demand for monitoring strategic supply across hundreds of potential parameters that can address all the process aspects of supplier management. This information relates to supplier based financial stress, credit risks as well as reputational risk factors such as human rights violations, money laundering, corruption, or sanctions. Solving this challenge is part of the solving the wider data strategy across suppliers and everything they touch. By consolidating structured data sources from third parties into one source-to-pay platform, anyone who needs access to suppliers is more enabled to explore, evaluate and capture the “big data” around suppliers and their potential impact on the business.
Moreover, meeting the needs of wider supplier engagement requirements across global locales and requires insights into how to manage them. Driven by increased concern over invoice fraud and invoice compliance means providing more flexibility for integrating with other “best-of-breed” solutions designed to enrich existing master supplier process and data frameworks found on source-to-pay platforms.
For instance, increased demand to meet regional and local invoicing and supplier credentialing requirements with solutions that can accommodate them in broader markets like the European Union, APAC and Latin America means the ability integrate the digitization of legal and regulatory control of third parties on the basis of multiple criteria. This also requires an ability to enable full supplier management and process integration for regulatory compliance, creation supplier referencing processes between buyer and supplier organizations, and invoice indexing and archival compliance management by facilitating and optimizing data automatically where supplier master data is maintained and governed.
Ensuring the fundamentals of supplier management is critical to making the most of process and data automation. When the governance of supplier management activity is transparent for all stakeholders, the benefits can grow exponentially. With the goal of creating one “source of supplier truth”, how easily can you aggregate these disparate data sources into your existing supplier profiles to manage supplier risk, performance, compliance or regulatory initiatives is critical to this goal of managing a complex supplier ecosystem in 2021.
To understand best practices for managing the supplier data challenge in 2021, join us for a webinar with guest speaker, Forrester’s Duncan Jones. During this webinar, we will share the leading trends dictating the increased need for improved supplier management and approaches for integrating third party data and tools into your existing source-to-pay processes.