The process of managing suppliers can be a daunting task for organizations that deal extensively with a complex supply chain. This is largely due to the fact that in most organizations’ supplier information is split across various departments and data is collected using various applications. This creates issues when it comes to seeing the holistic view of the supplier relationship and how to best manage it, due to inaccurate and inconsistent information.
When organizations don’t have a consistent way to work with suppliers, even if departments are adding, changing or correcting information in one system, information isn’t automatically updated across different systems. As a result, organizations can struggle to get a single view of the supplier so they can understand the total supplier relationship across the business.
To effectively manage suppliers, organizations must be able to quickly and easily answer questions about their suppliers’ companies, contacts, materials or products and performance. Supply chain information management (SIM) offers a rich set of supplier data collection, validation and management services across an entire organization. Most procurement professionals agree that implementing SIM is highly beneficial and necessary in order to better streamline and manage the relationship with your suppliers, but there are a number of considerations when establishing the right framework.
By building a strong SIM foundation and adding risk and performance management capabilities, organizations can accurately assess supplier risk management and compliance, improve supplier collaboration, evaluate supplier spend management, and closely monitor a supplier’s performance.
Key elements needed for SIM
SIM includes all relevant data and documentation that your company would need to perform and optimize interactions and transactions with suppliers. Including basic information (address, bank account, etc.) to credentials (e.g., insurance certificates) as well as compliance requirements (e.g., diversity status).
A proper SIM solution spans the entire vendor lifecycle, from selection to onboarding, credentialing, enrichment, spend analysis, profit recovery, invoice/payment visibility, and analytics. Having a SIM solution in place offers organizations an impactful set of benefits that will help to save them time and money while helping to avoid risk, fraud and unnecessary operational costs. In order to have a proper SIM solution, there are some key elements to remember.
- Having the right information is key – Having the right visibility into your suppliers can help make or break the manufacturing process. Data is the core element for any process, and a successful SIM solution ensures the highest possible collection of accurate supplier data.
- Know your supplier’s quality and performance – Getting the right picture on who your supplier is, what their processes are, and having a quality check in place are key in helping to implement SIM. Getting the overall picture into a supplier’s general performance can help in deciding whether or not to move forward with that supplier, to invest and develop that supplier, etc.
- Learn the risks – Risk management has a lot to do with choosing and implementing a SIM solution. Organizations need to ask questions such as does the supplier have the right certificate of insurance to do business with you? Are they meeting the industry regulatory standards? Do they handle any customer data?
In manufacturing specifically, a more detailed risk assessment is required and often centers around questions such as:
- How financially stable are they?
- How much are they investing in their machinery?
- How much capacity do they have to supply me as a company?
Quality control helps SIM solutions succeed
Having the right information, asking the right questions, and assessing your risk are all vital in the process of implementing a SIM solution that works for you.
Knowing who your suppliers are and having the ability to manage them and assess things like their quality and knowing who their customers are, is something that you would think would be the norm, but it’s not something that is really regulated and not something that companies are doing as much as they should.
Organizations need to begin thinking of supplier management as more of a strategic goal in order to obtain better visibility across all of your suppliers. How you manage the master data of your supplier and how is that being set into your financial systems is a huge challenge for organizations because they think this is too expensive to solve or something too big to take on. Understanding the benefits of implementing a SIM solution will help in providing clean, consistent and connected supplier information for a more accurate view of suppliers’ performance, compliance and risk.