What Are The Five Key Business Processes For Supplier Master Data Management?
A centralized, operational Supplier Master Data Management (or SMDM) solution must support five key business processes, which relate to the lifecycle of the relationship with each supplier. These are: create, extend, update, deactivate and reactivate.
Once the processes and governance for these five processes have been defined and agreed, all changes from then on can be initiated and executed centrally, removing the need to update information in (or sync information across) ERPs and P2P platforms.
In this article, we will consider the five processes, the scope of information and data involved, and explore the wider benefits that this approach yields.
The five business processes for Supplier Master Data Management
So here they are, in a very simple manner:
- Create 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 or vendor that is new for the entire enterprise.
- The process should be defined by the line of business requesting the supplier. This could be marketing, research, supply chain, finance or others.
- The workflow elements include the approval of the initial request, the collection of information from the supplier or vendor, the review and assessment of the information (including aspects such as compliance, risk and data quality), business approval and activation into the target systems (for example ERP, P2P, GRC, etc).
- Extend supplier. If the supplier is already doing business with one of the enterprise’s organizations, the same process as above applies, but in this case, it is technically a supplier extension.
- This process should facilitate extending existing information and determining whether to use new or existing information.
- Update Supplier. This is the process of making any change to an existing record. This could affect both global or central data, which is shared, and therefore will require some form of global governance group to do this efficiently – having every team that uses a 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 or local team.
- Changes could be initiated internally or externally by the 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, or other relevant areas.
- Deactivate Supplier. This is also referred to as Supplier Offboarding. It starts from the point at which a user makes a request to deactivate a supplier. Two main elements in this process are:
- the subsequent approval; and
- updating information to block it appropriately in the relevant ERP and/or P2P systems.
- Reactivate Supplier. The process for reinitialising a relationship with a supplier after a hiatus.
- It is likely that much information has changed during the time of dormancy, which is why this process is similar to Supplier Onboarding – it requires ensuring that all data and certificates are up-to-date and valid.
By far the most important and complex process of all is the Supplier Onboarding process. It is much easier to complete all necessary tasks upfront. To start assessing compliance and risk, for example, once you have started a business relationship is counter-productive.
[Related: what are the pros and cons of data democratization? Data Democratization 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 organization. Read the blog in full here.]
What is within the scope of supplier master data?
Supplier data (otherwise known as vendor data) typically includes vital information, such as:
- Details of a contact person/point of contact at the company
- Location/geographical information which is particularly important if the supplier has multiple offices in different regions or countries
- The goods and products each vendor supplies
- The supplier’s legal information
- Relevant certificates essential for the operation of the supplier
Recording and storing supplier data is not a one-time exercise if an organization wants to avoid six common data quality issues: namely, inconsistencies, inaccuracies, invalidities, incompleteness, redundancies and non-standard entries.
Defining the five key processes that are required for Supplier Master Data Management (SMDM) is crucial for maintaining vendor data quality over the long term and for avoiding the issues caused by bad data.
[Related: 4 core aspects of a successful data integration project. Supplier Data Integration is fairly easy 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.]
Why is supplier or vendor Master Data Management (MDM) important
Supplier Master Data Management (SMDM), commonly known as Supplier Information Management (SIM), is essential and goes beyond simply maintaining accurate vendor data. It allows the business to use data to answer important questions and influence other parts of the organization due to the insight it provides. Meanwhile, the HICX Supplier Experience Survey reveals that better data leads to better experiences for the supplier, which in turn leads to better data and greater efficiency for both the customer and the supplier.
The video below by Intricity provides an overview and explanation of how common data problems can arise, why MDM is so important, and the basic requirements for any Master Data Management initiative to be successful.
Article Updated February 2022