You Can’t Achieve Procurement Success Without A Strong Foundation
When it comes to managing your organisation’s suppliers, it’s likely that one of your main concerns is increasing supply chain efficiency. What makes us sure about this?
Well, because you’re not alone in this respect. In fact, according to a survey carried out by PayStream Advisors, 39% of enterprise-level (companies with revenues greater than $2bn) procurement and sourcing professionals listed ‘increasing supply chain efficiency’ as their main aim when it comes to managing suppliers.
Let’s face it, this isn’t that surprising. After all, the word ‘efficiency’ essentially covers everything an organisation does. If tasks and projects can be carried out more efficiently, more time can be spent doing other things.
However, other key concerns that those working in procurement and sourcing had included the likes of improving supplier validation (which goes hand-in-hand with reducing risk), improving relationships with suppliers and reducing the burden of inquiries on the company.
While the level of concern felt around each issue fluctuated depending on the size of the organisation they worked for, what’s clear is that they are present in every business, from the smallest to the largest.
As you’d expect, the larger the company, the more complex the supply chain. This is because larger companies aren’t only working with suppliers across different departments – they are also more likely to be working with suppliers across different countries too. And, naturally, managing suppliers internationally throws up plenty of issues when it comes to regulation and compliance.
The impact of data on P2P and S2S processes
With so much information being recorded and accessed by so many people in different departments, it’s easy to see how ‘garbage’ data can actually have a detrimental effect on a company.
If it is badly managed, it can have a negative impact further down the line when it’s used in Procure-to-Pay (P2P) and Source-to-Settle (S2S) processes, which also has an impact on that desired efficiency that was mentioned earlier.
The problem is, when trying to address these concerns most large organisations take the right overall approach, but in the wrong way.
Or, in other words, they try to streamline their supplier data management (SDM) processes using S2S or P2P systems themselves, as opposed to a dedicated, central data management platform. This is because many eProcurement and P2P systems include their own in-built supplier networks.
What’s wrong with using a supplier network to manage suppliers?
Using a supplier network, such as a S2S or P2P system, to manage relationships may work quite well for smaller companies because they have fewer suppliers. However, the same can’t be said for larger organisations.
This is because supplier network tools are clearly built for the primary purpose of completing P2P-related tasks, such as processing orders and managing invoices. They are not built for more complex or detailed data management requirements, as in truth they’re little more than supplier portals, rather than communication platforms. This means they aren’t well-suited to performing important processes like supplier onboarding and compliance.
That’s before you even consider other crucial requirements, such as being able to consolidate back-office processes from a potentially vast array of different locations and ERPs.
Why you need a centralised supplier master data management (SMDM) system instead
Rather than relying on P2P or S2S software for your information management needs, you need a dedicated supplier master data management (SMDM) system that can manage your organisation’s data centrally before feeding it into P2P and S2S tools further down the line.
Basically, SMDM lets you consolidate data that is spread across different departments and systems into one foundation that supports all of your other business processes.
Other benefits include the following:
- Centralise and control supplier data from the start. Having access to validations and documents from the onboarding process onwards makes life much easier for departments that need access to that information.
- Keep track of compliance requirements throughout supplier relationships. SMDM platforms allow you to store, access and update compliance information across the organisation.
- Reduce duplication and inefficiency. Data maintenance and management tasks can be automated with an SDM system, reducing the amount of time wasted on entering data manually and the risk of duplicating supplier data.
The key to success is using the right system for the right task. Rather than facing the inevitable issues and impossibilities of integrations in the future, you should use an SMDM system to provide your organisation with a strong data foundation from the outset.
To get a much more detailed understanding of how to achieve Sourcing and Procurement success, read our dedicated white paper.
This is an updated version of a blog that was first published in September 2018.