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Examples of bad practice when it comes to on-boarding suppliers

March 3, 2017
Posted by adjuno

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Supplier Management or Vendor Management as its also known is a discipline that enables businesses to control costs, drive service excellence and mitigate risks in order to gain increased value from suppliers during their relationship lifecycle.

However, the cost of managing suppliers can be expensive – but it needn’t be. A report by Informatica cites that companies could save up to $6M annually in supplier spend by improving trusted supplier data quality. Now, let’s look at some examples of bad practice that begin from the stages of on-boarding and how it could be losing your business money.

  1. Operating with multiple profiles for all your suppliers

Operating with multiple supplier databases is a breeding ground for data inaccuracy and a drain on your admin resources due to the need for version control, cross-referencing and double-checking of data. For example, if your supply chain team is sourcing raw materials and products, whilst negotiating contracts independently from your purchasing team, it’s likely that there will be multiple supplier databases in play. Therefore, it will also be near on impossible to get central visibility of what your supplier relationships are company wide, and on a global scale. It will be even more difficult to gain visibility of who all your sub-contractors are, or even third party managing agents for outsourced products and services. The end result, is there is no single view of real-time supplier information. In addition, trying to get this true picture will be costing your business considerable time and money. There will also be the question mark over whether the data is even accurate and up-to-date by the time the data is gathered and the process is due to start again.

Instead, you need to create and provide access to a central supplier profile for your entire organisation. Providing transparency across your entire, business and supply chain process. What’s more you could give access to suppliers through a portal so that they can input the information directly, leaving your supplier management teams with more time to focus on strategic relationships.

  1. Not having a single defined process for supplier authorisation

You may have a central database for supplier profiles, but no process in place that uses intelligent logic to guide the authorisation process. If your whole business does not understand the steps and business functions a supplier needs to go through in order to become approved, then potentially risky suppliers could slip through the net. Moreover, this scenario could cause long-term damage to your business if the supplier is discovered to be using slave labour, or hazardous materials for the end-consumer and the environment, for example. The bad publicity and legal costs as a result could be sizeable.

Instead, you need a system that has a set authorisation workflow, which identifies the functions across your organisation that need to be involved. As well as what checks need to be in place and by who. You should have a central, predefined method of determining exactly who needs to review and approve each supplier in order to become fully authorised. The system should also have the capability to upload all required documentation so everything is in one place and easily accessible. Working in this way is best practice to ensuring your business is operating with those companies who meet your organisations minimum standards across multiple compliance measures, from credit ratings quality assurance and safety through to corporate social responsibility and ethical standards.

  1. Not cleansing data and working with expired documentation

You may have a central database for supplier profiles and store all of your supplier documentation in one place alongside them. You may also have a defined workflow and process in which to setup and authorise new suppliers across your entire business. In addition, suppliers could also be accessing your system directly so that they can input the most up-to-date information to save you time. However, if the information that is added goes out of date, or documents expire and you do not know about this, then this single set of supplier information is still inaccurate and data quality is key for a true view of your entire supply chain operations in order to make informed decisions.

Therefore your system needs to have rules and alerts in place that tell you when data has changed, when it needs to be checked, or when a new audit or authorisation process needs to take place. It is no good having access to a single set of data if it is still wrong and it will not protect your business against any non-compliance as a result.

In summary

Saving costs is often about saving time, as there is no getting away from the fact that time is money. When it comes to the on-boarding of new suppliers it should be a streamlined process that takes into account all of your business functions and their requirements, as well as ensuring that data is always the most up-to-date. What is most important is that you have the time available to you to strengthen supplier relationships in place and that you have the time available to look for strategic opportunities such as developing new innovative products or exploring new initiatives and markets.

 

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