Using Supplier Data To Drive Resilience, Visibility and Value
Table of Contents
It is safe to say that, over the last 24 months, the pandemic has reinforced an unavoidable truth: in order to maintain a competitive edge, business must drive resilience and visibility across their supply chain – and having a strong digital strategy has been shown to be key to achieving this. In our latest webinar, in association with Procurement Leaders and featuring Costas Xyloyiannis (CEO, HICX) and Jerry Grable (Director eBusiness, BAE Systems), we discuss a range of use cases that illustrate specifically how supplier data drives resilience, visibility and value.
Impetus for tackling supplier data
For BAE Systems, Jerry explains how the organization that he leads in the US covers four sectors, ten different business units and numerous ERP systems, including Oracle, Softpoint and others – and how formerly each unit had a different process for onboarding. This was leading to inconsistent data, such as common suppliers having multiple names, or inconsistent formatting within the supplier data. These issues, Jerry points out, were impacting multiple downstream process and systems, not the least of which was spend analytics and the ability to make significant savings.
Single source of truth & data compliance
One of the initial goals for BAE Systems was to clean up that data to create a single source of truth that would be consistently pushed into each of the ERP systems through integration, resulting in better analytics and more effective use of that supplier data further downstream.
Another goal was to improve the rates of compliance around supplier documentation. With many manual and email-based processes, there is an immense amount of supplier data shuffling that is required, executed by different individuals across the organization. This leads to looser controls over how that paperwork is handled – and could result in audit findings discovering missing paperwork. To overcome this, it required digitization and centralization of processes, with information collected in a central repository, which anyone who needs to can access. This, in turn, creates a one-stop shop for supplier information, which is a vital asset, given that there are over 2,500 internal stakeholders and a whole array of functions that utilize the database for many different queries. For instance, engineering needs to search for suppliers that provide certain commodities or services. It is now, Jerry explains, possible to search for capabilities based on the information suppliers provide when they register.
Supplier data harmonization
The third use case for BAE Systems was the objective of harmonizing the forms, so that there would be only one type of form being used within certain workflows. This means all business units share common forms and that suppliers only need to complete and submit a form once. Without such harmonization, a supplier might have to register multiple times, or provide similar information across various forms. Now, however, there is only one set of common forms and it is easier for suppliers to manage their information effectively. This also creates higher levels of supplier engagement to keep the supplier data updated, Jerry adds.
Commenting on the increased need for visibility and resiliency, especially in light of the COVID pandemic, Costas continues: “COVID has been, in many ways, an accelerator. It has brought to light things which have always been important, but no-one has until now really considered the impact. Many aspects were taken for granted, and suddenly we’re seeing how exposed we are to the fragilities of the supply chain. Before, we may not have cared so much about being customer-of-choice because supply was not constrained. Now, when supply is constrained, the tactics and strategies that are used to drive resilience also have to change.”
Supplier data quality issue
Costas also points out that the supplier data issue is not a new problem, having been ranked consistently as the number one issue for many years in terms of supplier management and digitalization within Procurement. However, the problem continues to persist. COVID has been a catalyst for enterprises wishing to solve this problem, as they have also been able to understand the wider use cases. For example, enterprises have realized that, in the face of challenges, supplier data that is simply collected for transactions is not sufficient – the relationship with a supplier commences before a transaction and can continue for a long time afterwards. Costas explains how this is shifting how enterprises address visibility and resilience, while recognizing that poor supplier data leads to inconsistencies and poor controls.
Internal & external barriers to solving supplier data issues
The barriers to achieving this can be internal and external.
Costas explains that, at the most basic level, some enterprises have simply not recognized yet that this is a problem. Depending on the maturity of an organization from a Procurement standpoint, it can be that this function remains siloed, as opposed to a more mature organization which has an end-to-end view. This means that, if you ask whether there is an issue with supplier data, the less mature organization is more likely to say that there is no issue as far as the singular, procurement suite is concerned.
Supplier data foundation
Furthermore, historically, supplier data use cases have been more challenging to sell internally in comparison to other business use cases, such as cost savings or savings targets against spend. However, Costas points out that this has changed now in light of digitalization and the rise of technologies such as AI or machine learning, which has made it much easier to argue the justification of the business case. The former focus on savings targets has led businesses to prioritize the wrong activities, Costas believes, and has led to a patchwork of various different systems, which is why many are lacking the supplier data foundation today.
Jerry adds the success of what has been achieved at BAE Systems has been due to having a group of leaders that have been joined up in their thinking and who are in agreement on strategies that improve the way in which the organization conducts business. “I think one of the reasons that we have been successful is because we have had that top-down support from our leadership to really help drive these changes.”
Supplier data management
He admits that, despite the size of the company, it too took a while to really understand the importance of master data management and to recognize that change was needed. “It wasn’t until we really started to dive into the processes that we began to learn that this really doesn’t work,” he adds. Jerry points out that, without a consistent source of data that should come straight from the supplier, there a lot of limitations, as he explains, “It is a culture change. However supplier data is being managed today, it is likely that it has been managed that way for a considerable amount of time, so this involves change management. It’s a change in culture, it’s doing things a different way and it requires leadership to drive these different initiatives.”
One of the challenges with initiatives such as supplier master data management or supplier information management is understanding what the success metrics look like.
On this topic, Jerry shares with the audience a number of statistics that were pertinent to the business case for BAE Systems. He explains that the starting point for BAE Systems was to go into a significant amount of detail in terms of what they were doing formerly: how long it takes to do specific, identified activities that digitalization can assist with. Across the four sectors and ten business units in the US, the business case showed that over 16,000 hours of labour savings could be achieved by harmonizing these processes. As Jerry highlights the improvements are manifold: “So instead of ten onboarding processes, we have one. Instead of ten sets of forms for a workflow, we have one set of global forms. We can use the system to auto-collect documents when they expire to save time, and so forth.”
BAE Systems also set goals around cycle times. As Jerry explains, cycle times can vary by business unit as some units are more complex than others, which can result in longer cycle times for supplier onboarding. Generally, for BAE Systems, a goal of seven days has been set to allow for all information to be provided, which represents an improvement from what was being achieved before. Within the complex business units, it is now around three to four days, so the target is being met by more than half; meanwhile simpler business units are now achieving times of one to two days, so the improvement is significant.
Finally, Jerry says that a huge benefit to harmonizing forms has been realized in terms of reporting. Being in the defense industry, BAE Systems has the need to issue new questionnaires very regularly. With harmonization, a questionnaire that all business units share can be published within ten to fifteen minutes – and because responses can be collected from all suppliers in a harmonized form, it means that the business can report on against it consistently and that all responses can be analyzed at once. “You can imagine, if you had ten different forms collecting similar data, to try to consolidate all of those into one document to report to leadership on, is very difficult. So, harmonizing forms will help significantly with reporting.”
Wider benefits and bringing new value to the business
Jerry says that improvements in communications with suppliers have yielded huge benefits for BAE Systems. “The ability to quickly send messages and attachments out to our wider supply chain has been a key capability. That’s simply only possible because we have centralized our supplier records, and we have centralized our supplier contacts,” he adds.
As a defense contractor, BAE Systems is constantly having to deal with new regulations which create a need to communicate regularly with suppliers, such as the recent examples of COVID and cybersecurity. “These are typically fed to my group now and we can send those communications out to whichever suppliers that we need to, very quickly,” Jerry explains.
An invoice portal is another capability that Jerry mentions as being possible now that suppliers are recorded in a central database. He says that the accounts payable (A/P) groups at BAE have previously had to deal with a large number of telephone enquiries each day from suppliers asking about invoice or payment status. Now that this has been centralized, suppliers have access to the information and they can maintain their own information. This self-service approach has led to more than a 65% reduction in the number of calls to A/P Shared Services. A five-year business case was met within six months and suppliers are able to obtain the information they need, twenty-four hours a day, all year round.
One unexpected benefit has been an increase in collaboration with senior leadership on requirements, which can lead to yet further harmonization and standardization. As Jerry recounts, “Each time we try to harmonize a process across our business units, business units start questioning why there are disparities. For example, certificates of insurance is an area that we are working on harmonizing and our businesses are asking, ‘why is it, that for our ship repair business, for suppliers to come on-site, it’s a million-dollar liability? But for our electronics facilities, we’re asking for three million liability? A shipyard is more dangerous than us!’” These types of observations are driving conversations at higher levels and leading to greater harmonization of policies, which has the effect of making it easier for both BAE sites and BAE suppliers to conduct their business. As Jerry continues, “Insurance is a cost to our suppliers, so anything that we can do to harmonize those requirements, and even reduce them, saves our suppliers money.”
Costas goes on to point out that the value of the single communication channel is frequently grossly underestimated.
Commencing the journey: ensuring success
Costas’s first piece of advice is to take high-impact use cases, such as supplier onboarding, to fix that process, and then the supplier data being captured in that workflow can be fully connected from that point forward. Having this established means that use cases, such as showing invoice status (which may rely on multiple different systems in the background), become really easy. From this starting point, an ever-wider range of activities start to become much easier once the foundation of data has been created.
Supplier data governance
Supplier data governance is an important area to drive success. As part of the conversations, the topic of what information needs to be managed globally and what supplier data needs to be managed locally will feature heavily. Costas explains, “It’s a decision, the same as harmonizing forms. You agree which elements are common and which aspects are going to be local, business unit-led, or regional, for example. It’s a conversation about definitions, and then managing it appropriately,” he continues.
Jerry adds that BAE Systems approaches this through the use of a data steward, who is responsible for global level data with respect to supplier information. “This is data that is common to all of our business units, such as name, tax ID, the addresses and so forth. Then, within each of our business units, we have a local data steward that is responsible for the sets of data that pertain to that relationship only, such as ERP ID, or perhaps payment terms and various other local fields.”
Jerry explains that these are not full-time roles, so there is not vast amounts of work involved in managing that information to make sure that it is consistent, but it is core to the master data management philosophy. Additionally, BAE Systems utilizes working groups to review data management and address new opportunities that co-ordinate with business units to ensure alignment.
The supplier perspective
The discussion turns at this point to the viewpoint of the supplier, on which Costas explains, “I think it is important to view it through the lens of the supplier, because it helps you to better understand the issues as an organization that you might have and fix it in a way that adds a lot of value. Some organizations do not realize that they have problems and that is partially because they are not looking at it through the right lens.”
His advice is to think about the various segmentations of suppliers that exist, such as a segmentation for innovation, a segmentation for risk, a segmentation for compliance and so forth. This unlocks the next layer of hyper-segmentation, which requires a deeper understanding of what specifically is required from each supplier, as not every compliance initiative applies to every supplier, for example. By using hyper-segmentation, the experience for the supplier can be simplified, which also enables them to provide better data to the enterprise, while improving efficiency for them.
Jerry points out that suppliers nowadays have more and more portals to log into and more passwords than ever to manage, adding therefore that, “Certainly, this process has to be equally about them as it is internal.”
In terms of benefits being enjoyed by suppliers, Jerry believes that many fall into the category of helping them to navigate processes efficiently, reiterating the benefit of having to register only once as one example. “Having a harmonized process, having harmonized forms, having a single portal to submit information once, I think that’s a big benefit to them.”
Another example is helping suppliers to remain compliant, not only in terms of BAE requirements but also in terms of industry requirements. “Again, having good supplier data allows us to communicate more accurately with them. Not only on BAE requirements, but on new regulations that are coming out, or even when events occur – it gives the ability to help them navigate through those, such as COVID, or weather events, or cybersecurity requirements. It’s the ability to communicate with them and help educate them, to help keep them compliant with everything that’s going on,” he adds.
Furthermore, with the invoice portal, suppliers are also benefiting from faster payment. With centralized information, A/P teams, for instance, who notice a missing invoice address are now able to efficiently access the data to add the location, which then integrates into the ERP system and allows them to immediately process the invoice and avoid delays. Without the centralized system, A/P otherwise have to log into multiple systems, which they may avoid by sending it back to the buyer to handle, which can add time to the process. A process that previously might take two weeks can be completed within minutes. Additionally, the suppliers have more visibility, which helps them rectify any issues that might otherwise cause delay.
This transparent information exchange goes further in terms of results. As Jerry explains, there have been 400,000 initiatives that have been issued to suppliers to date and over 92% of them have been completed. This highlights the high level of supplier engagement and yields better quality of data.
Jerry says that there are new initiatives being rolled out all the time. BAE Systems will continue to work through internal processes, digitizing and automating them so that all supplier information can be provided as a one-stop shop for both BAE Systems users and suppliers.
At the moment, they are working on recording all NDAs in the system and will use the ability to automatically track those that are due to expire. As Jerry explains, this is another example of cross-functional collaboration that has “gone all the way up to legal group to try and produce consistent NDA forms,” with further harmonization taking place.
There is also further integration into internal systems, such as the supply chain risk management tool. Jerry highlights, “We can bolt supplier information onto the information, as one source of truth.”
BAE Systems is currently mapping out all supplier access points, to understand where suppliers go to obtain information, with the aim of using HICX as a single sign-on experience portal to provide one front door for all supplier needs.