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Supplier Management for Sourcing

Extending Supplier Profiles for Improved Sourcing Activity

Although creating a functional supplier profile might seem to be supplier management “101”, many organizations still manage information with a combination of spreadsheets and/or disconnected vendor/supplier address-master databases in ERP or other systems, that together lack the ability to create supplier capability or spend category identifiers that go beyond an address or contact name.

 

In the current 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 those deciding about what suppliers to include in a sourcing event is a huge contributor to 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 ERP. A sourcing application should ideally be able to track a supplier’s evolution from initial contact and 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 validates the relationship is critical to mitigating exposure to risk, particularly third-party risk from your suppliers’ suppliers. This includes 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 a contract with that supplier.

A truly functional Supplier Management system must also have the facility to request required documentation from suppliers, while also providing them with an easy process for meeting your requirements and submitting the information. In the perfect world the information is received into the 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 80% 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 eRFQ 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 “assigned” 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 Source, to Awarded to Purchase Order will decrease.

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