How Good Is Your Supplier Data?

Unlike decades ago when supplier information gathering was limited to phone calls, face-to-face meetings, and some clunky back-end enterprise management tool, procurement managers now have many different ways to keep tabs on suppliers.

Today, in addition to Web-based ERP and MRP platforms and email, purchasers can get information from Web search engines like Google or Yahoo, follow companies on Twitter and their executives on LinkedIn, create customized RSS feeds, sign up for licensed market intelligence services, and set up business interactions in the cloud. Companies need lots of supplier information to assess suppliers and risks, especially in uncertain economic times, and new tools and social media have expanded that data-tracking capability.

As the Aberdeen Group Inc. said in a report titled "Managing Supplier Risk With Third-Party Supplier Data," organizations that leverage third-party supplier data "demonstrate lower rates of supplier failure and better performance from their suppliers." (You can access the free report here until Nov. 2, but you have to register.)

Basically, this means that gathering supplier data from sources other than the suppliers themselves has become incredibly common and widespread. Aberdeen found that only 11 percent of its 132 survey respondents do not collect third-party-generated information on their suppliers.

But, having incomplete data is a significant business issue. Forty-three percent of survey respondents said "incomplete information regarding corporate supplier relationships is a top business pressure affecting supplier management."

While Aberdeen found that 56 percent of respondents are doing third-party data tracking with critical suppliers, but best-in-class companies surveyed are doing more: They are monitoring and collecting third-party data from a majority of their suppliers.

There are measurable benefits of doing this kind of work. "Organizations using third-party data to monitor more of their supplier base had fewer suppliers experience catastrophic failure (i.e. environmental disaster, geo-political issues, bankruptcy) in the past 12-24 months and a higher percent of suppliers demonstrating on-time delivery or meet commit/projection completion dates," the report noted.

All of this is to say that best procurement practices again are shifting, and supply chain managers and purchasers can create competitive advantages if they figure out ways of mining the information highway to manage supplier risk.

What Aberdeen doesn't really touch on and what raises red flags for me is: "How good is all the data that's out there?" Sure, we have an endless wealth of information available literally at our fingertips, and we use it exponentially more than we did just a few years ago. But as supply chain managers and purchasers widen their information and data-collection field, they also have to become savvy on how to quickly process and analyze this data and create the right context around how to use all this third-party information.

Without developing a plan of action around how to dissect data in a way that supports supplier relationship management, companies will be left with an alphabet soup of tweets, press releases, and stock reports.