What Are The Five Key Business Processes For Supplier Master Data Management?
In order to deploy a successful centralized operational supplier master data management solution – 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?
[Related: what are the pros and cons of data democratisation? Data Democratisation is the process of taking the overall control of data out of the hands of the few who have previously acted as its ‘gatekeepers’, and making it accessible to a much wider group of people across an organisation. Read this blog in full here.]
Key vendor master data management processes
So here they are, in a very simple manner:
- Create or Extend Supplier (Supplier Onboarding) – more commonly referred to as Supplier Onboarding or Vendor Onboarding. This is the process of how an organization commences a new business relationship with a supplier / vendor. If it’s new for 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 / vendor, 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 or vendor through a portal. Over time this process should go beyond just vendor data management 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 or vendor 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 that there are only four bullet points above, but that’s not because we can’t count – rather it’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 quality good.
The most important part of supplier / vendor data management
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 data and defining your supplier master data management processes.
What is supplier master data?
Supplier master data refers to crucial information about the suppliers that you work with. Although on the face of it these details may seem very basic and therefore simple to manage, things can quickly go wrong if there’s a lack of care or attention to detail when entering and recording supplier data.
Supplier data (otherwise known as vendor data) typically includes vital information, such as:
- details for a contact person / point of contact at the company
- location / geographical information (especially important if the supplier has operations / offices in different regions or countries, etc)
- the products or goods supplied by the vendor
- the supplier’s legal information
- relevant certificates provided by the vendor
Naturally, recording and storing supplier data is not a one-time thing that can be done and then just forgotten about.
In order to maintain the quality of the vendor information over the long term and avoid issues caused by bad data (as well as the need to do a regular data cleanse), you need to establish supplier data management processes.
Why vendor master management is so important
Supplier master data management (SMDM) – which we also refer to as supplier information management (SIM) – is crucial because it goes beyond merely maintaining accurate supplier / vendor data. It allows you to use that data to answer important questions and report confidently back to other parts of the business.
For example, if you want to get a better insight into what you’re spending with your suppliers and make informed decisions off the back of this, you need to have a vendor data management process in place.
[Related: 4 core aspects of a successful data integration project. Supplier data integration is a fairly easy thing to define, as it’s the process of drawing together and combining data from different sources to provide the user with a unified and accurate view of the information. Click here to read this blog in full.]
Given how complex a topic like supplier database management can seem, it’s always worth reminding yourself about the basics of efficient master data management.
The video below by Intricity does exactly that, offering a clear overview and explanation of how common data problems can arise, why master data management (MDM) is so important and the basic requirements for any master data management initiative to be successful. Click below to watch it.
Published June 2017, updated November 2019