Although creating a functional supplier profile might seem to be supplier management “101”, many organizations still manage supporting information with a combination of spreadsheets and/or disconnected vendor/supplier databases existing outside the commercial data in the business system/ERP. Altogether these tools lack the ability to qualify suppliers’ capabilities or connect with spend-management category identifiers that go beyond just a supplier’s address or contact name.
In the current, rapidly paced sourcing landscape, the ability to easily add and then categorize a supplier based on their known capabilities, as well as make that information usable to buyers making decisions about which suppliers to include in a sourcing event is a huge contributor to both the speed and breadth of your sourcing events.
Additionally, to deliver a true market test of a sourcing event, Buyers often need to include suppliers not already vetted or even entered into the business system/ERP. A sourcing application should be able to track a supplier’s evolution from initial contact, to inclusion in an event, through to full validation and addition to the organization’s Approved Supplier List (ASL) and ERP Supplier Master.
Storage and Tracking of “Expiry Dated” Documentation
Part and parcel of a functional and current supplier profile is the ability to access, view and assess any and all required compliance documentation that serves to validate the commercial relationship. This data is often critical to mitigating exposure to risk, particularly third-party risk from your suppliers’ suppliers. This can include reviewing documentation related to tax information, such as a W8, that may expire or is under scrutiny by regulatory bodies; ensuring that there is a valid certificate of insurance; or confirming that protections like an NDA are in place prior to executing or renewing a contract with a supplier.
A truly functional Supplier Management system must also have the facility to not only store but also to request and collect the required documentation from suppliers, facilitating with an easy process for meeting your requirements and submitting the information. In the perfect world the information is received into your database as well as connected to the supplier’s profile without any manual intervention.
Understanding the Impact of your Spend
While the foregoing examples may be handled by a system vendor or supplier management system, the linkage of sourcing and procurement activity (transactions) related to supplier management processes becomes a competitive advantage when trying to understand how important a supplier relationship may be to an organization. Some of the advantages include the ability to quickly view approved suppliers in relation to criteria such as; suppliers representing a percentage of spend, the number of POs or invoices associated with a supplier, or items purchased from that supplier in the last twelve months.
Flexibility in Sourcing and Selection
Finally, in a situation of needing to immediately include a supplier — maybe in a true “market test” situation — where the buyer does select a previously “unknown” supplier, there is a distinct advantage in having clearly defined processes, ideally integrated ones, in which different stakeholders can be involved to move a supplier from selected to validated to sourced. Gathering and validating the required supporting information from suppliers within the Sourcing application either before or during the e-RFQ event, can move the supplier into the “production” system much more effectively.
For example, when the legal department can leverage the Sourcing system for any additional needed elements from the supplier, e.g. NDA, SLA etc., while an end-user is already creating a requisition/purchase order that can then immediately be sent to that supplier for fulfillment saves time, ensures compliance and reduces risk. This inherent agility also makes it easier to seize opportunities in terms of access, pricing and other variables.
Remember, the starting point for all suppliers should be through your sourcing system. The earlier your organization begins to gather the required information from suppliers the more knowledgeable you will become earlier in the process and the lead time from Request, to Awarded to Purchase Order will decrease.