Is your supplier data valid?
Having access to an accurate and up-to-date database of supplier information is a critical first step for any buying organisation wishing to gain a full understanding of its supply base. Using reliable supplier information plays a very significant role in reducing a buyer’s exposure to supply chain risk. But the problem facing many companies is in ensuring that the information held on its supplier database is not only accurate and up-to-date, but is also valid.
In many instances, suppliers are invited to register information on a buyer’s in-house system, with the onus on the supplier to keep their data up-to-date. Unfortunately, there are a number of flaws with this approach to building a repository of supplier information. For suppliers, too, this is not the most efficient means of providing data to buyers.
First, suppliers are often reluctant to enter information on to a proprietary system, particularly given the sensitive nature of some of the financial information required. So buying organisations are placed in a difficult position where they need to expend considerable effort and resources in getting suppliers to complete the questionnaire. Numerous phone calls and emails are frequently required, costing time and money.
Getting information on to a proprietary system is the first step. The data must be kept current, which requires the supplier to remember to update their information on a regular basis. Just how likely is it that a supplier will remember that the information they entered for a particular buyer is in need of updating a year later? For the supplier, this is a laborious process that often needs to be managed across a number of key customers. What’s more, the information required by each customer is likely to differ.
The greatest danger to a buying organisation comes from data provided by a supplier that is accepted on to the system without being validated. Validation is critical to ensuring the integrity of the information. Has a supplier entered the correct figures relating to its financial performance? Are the insurance documents submitted the appropriate ones for the contract or pertinent to that particular operating division? Are they valid or have they expired? Are health and safety certificates in place and in order? All these aspects of a supplier’s submitted data must be cross-checked and validated if it is to be of any use to a buying organisation and if the supplier’s risk to the buyer is to be managed correctly.
Undertaking the validation of supplier information is a time-consuming activity that requires expert knowledge and attention to detail. For the buyer, this action is essential. For the supplier, the validation process is important too, as certificates may have expired without the knowledge of the supplier.
To give an indication as to the number of errors that can be included on a proprietary system that uses self-registration with no validation of data, we return 70 per cent of questionnaires to suppliers for further clarification because they do not meet the data quality levels required by the buyer community.
Working in a collaborative community of suppliers and buyers aligned to the railway sector as we do, economies of scale make thorough checks on data a viable and highly efficient option, bringing cost and operational benefits to both buyers and suppliers. By being part of the community, the costs are shared and data only needs to be maintained at one central location, where it is checked by one centralised resource – all of which makes life easier for suppliers, too.
* Annette Poehl is director rail and transport at Achilles
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Don’t panic, purchasing. As professionals, suppliers’ visits are indispensable during tender evaluations. Often, they are beyond suppliers’ knowledge. At all times, purchasing and supplies people are obliged to appraise suppliers’ performance regardless of considerable resources, say, time and money. Probable deviations from specifications and supply problems will be safeguarded. For some organizations, quality assurance / control people will take up such preventive mission.
In theory, to have a centralised validated supplier database which is continuously updated and relevant to modern procurement would be a key asset in selecting suppliers and delivering value for money. The practice however is a couple of generations removed – supplier details are not current, key information is not validated, obvious market leaders are missing, suppliers are not registered in relevant categories and new to market suppliers are reluctant to be coerced into paying significant membership fees.
Proprietory (private) systems on the other hand, invite our established suppliers, are flagged to identify information that must be kept current, ensure that suppliers are only registered in relevant categories and that their capability is confirmed, can invite market leaders and welcome new to market suppliers (after validation) – all at no cost to the supplier. Yes, there is an cost to validation and weeding out those few suppliers that claim competence but cannot deliver but the customer bears the cost either way – I would rather define my requirements, make the investment in my suppliers and recognise the internal costs of supplier assurance.
Creating and maintaining an accurate and up-to-date proprietary supplier information database, using self-registration, isn’t actually as hard as this post makes out: hundreds of thousands of organisations around the world do it and benefit from the cost and resource savings it offers.
Many SIM products, like ours at Trade Interchange, offer automatic alerts to remind suppliers to update their entries and integrated dashboards to track supplier progress, both of which help keep the supplier data current. Current SIM products also enable to you collect the right information from each supplier. You can tailor questions for different categories and manage different tiers of question, depending on how you are working with potential and actual suppliers.
What’s more, using a proprietary SIM system, the organisation ‘owns’ the information provided by the supplier and can then integrate this data into other business systems like contract management and supplier performance management. This delivers important business efficiencies right across the organisation, affecting more than just the procurement team.