Critical Questions Organizations Should Consider Prior to Implementing a Supplier Lifecycle Management Solution
Table of Contents
What is Supplier Lifecycle Management?
Supplier Lifecycle Management (SLM) is the process of managing a supplier from the start of the relationship to its conclusion. The supplier lifecycle starts with the identification, vendor risk assessment and onboarding of the supplier. It concludes with the suppliers being phased out of the supply chain and the business relationship concluded.
As suppliers are a vital factor in the success of an organization’s supply chain, the processes implemented through SLM should encourage organization and transparency. They should also be centered around ensuring that disruptions from external events are kept to a minimum. When implemented, it promotes mutually beneficial supplier relationships and easy-to-follow and transparent workflows that ensure streamlined interactions between organizations and vendors.
SLM should be a key consideration for organizations due to the considerable impact on operational efficiency, risk management, cost savings and competitive advantage it delivers. Organizations investing in supplier lifecycle management enjoy a key differentiator in highly competitive markets compared to those that fail to do so.
Due to its complex nature, especially for large organizations, many businesses often choose to focus on only one aspect of it. However, although SLM should be broken down and ‘phased’ based on the business’ priorities and resources, the overall scope and objectives should be considered and planned for from the very outset of its implementation.
Implementing Supplier Lifecycle Management in an Organization
Implementing an SLM system in any organization is a considerable commitment. Significant investment and meticulous planning by key stakeholders is required. Before commencing, there are a range of critical considerations that need to be taken into account for successful implementation.
Are key terms defined?
Understanding and clarifying definitions of key terms, including what constitutes a supplier, a location, a parent company and a headquarter company, is crucial. These definitions will inform the basis of the organization’s SLM processes and remove any ambiguity or confusion that could otherwise lead to errors occurring in the long term and data corruption.
Are processes designed & aligned globally?
For organizations operating globally, ensuring global alignment of processes is also key. Evaluate whether processes apply universally, or if local regulations and practices demand a bespoke approach. Adherence to regulations is critical from a sustainable procurement perspective, for example, and to ensure that the organization does not have its reputation impacted due to failing to comply with local legislation and regulations.
Who owns the supplier data?
Is the ownership of supplier data clear? Who owns the master data? Who owns the other risk/performance data?
Establishing data ownership from the outset prevents disagreements and ensures smooth and streamlined data management throughout the supplier lifecycle. Data ownership refers to the assignment of responsibility for data accuracy, legality and quality. It is imperative that organizations have a detailed understanding of this due to the following reasons:
Data integrity
The party responsible for owning the data should be accountable for its accuracy, consistency and trustworthiness for the entire duration of its lifecycle. This should ensure it is updated on time and inconsistencies are identified and resolved as early as possible. The overall aim should be to make sure that data quality standards are upheld throughout the supplier lifecycle.
Data governance
The data owner is responsible for defining standards and guidelines for data management, including who has access to the data, how it is used and what security measures are implemented to protect it. Clearly defined data governance within an organization contributes to better decision-making, higher levels of regulatory compliance and operational efficiency.
Risk & compliance management
Data owners are often responsible for managing and mitigating risks associated with the data, including privacy, security and adhering to regulatory compliance. These stakeholders should implement appropriate safeguards to ensure that sensitive supplier data is always protected. A single data breach could severely affect an organization’s reputation and how prospective vendors perceive it.
Do we have a comprehensive change management plan?
Change management is an essential aspect of implementing an effective SLM system. A detailed plan outlining how changes will be communicated, managed and integrated into the organization is an essential aspect that should be clarified at the start of SLM implementation.
Data ownership is often split into two distinct categories: These are master data and risk/performance data. Master data includes critical business information, usually consistent across the organization, including supplier names and contractual terms. Risk/performance data is related to the supplier’s performance in specific areas, audit results, or risk assessments.
While the master data is usually managed by Procurement, the ownership of risk/performance data can be considerably more complex as it involves various stakeholders across the organization, meaning that defining ownership and responsibility is paramount. Not only does this assist in data quality to ensure the organization can make better informed decisions, but it also ensures that SLM processes that are implemented are as accurate and reliable as possible.
Have potential risks and mitigation strategies been considered?
Data security risks
As Supplier Lifecycle Management involves handling sensitive supplier data, there is also the ever-present risk of data breaches. Therefore, organizations should ensure that they opt for an SLM solution that adheres to stringent security standards.
This should include robust measures including encryption, secure access control and regular and ongoing security audits. There should also be consideration given to how data is stored, transmitted and disposed of to mitigate the previously highlighted risks.
Resistance to change
Organizations of all sizes will often face resistance to change from staff members when there are established processes in place that they are comfortable with and confident in using. This should be pre-empted by developing a detailed change management plan that clearly communicates a new system’s benefits, conditioning training sessions, and providing ongoing support.
Time should be taken to ensure that all key management within the organizations are invested in the implementation of SLM, as this can assist in overcoming resistance. Aim to educate staff members on the benefits of SLM and how it has the potential to complement their daily tasks and empower them to perform to higher standards.
Operational Disruptions
During the transition to a new SLM solution, there may be disruptions to daily operations. To mitigate this risk, consider a phased roll-out strategy that minimizes impact on operations. This ensures that any issues can be identified and resolved before they have a wider impact on the organization.
Review of Existing Data and Handling of Duplicate Instances
Before implementing an SLM system, reviewing and understanding the current supplier data is crucial. This should not be restricted to reviewing the data available but also its format, accuracy, consistency and any potential issues or missing data that could impact its use within the proposed new system.
A vital part of this process is having a plan to overcome issues related to duplicate supplier data. Unfortunately, this is particularly an issue in larger organizations. A clear strategy should be developed and implemented to identify instances of duplicate supplier data and determine which record is retained.
The creation of a master version ensures that the issue is resolved and can be seen as a definitive source of information for each supplier across the organization.
Once the organization’s supplier data has been thoroughly reviewed and duplicate instances removed, the next stage should be to develop a detailed plan for system integration and operational governance for SLM to be implemented effectively.
Will there need to be a system integration?
In most cases, an SLM system must communicate and share data with your existing systems, including Enterprise Resource Planning (ERP) platforms. This makes sure that operations are seamless and that a consistent flow of information occurs throughout the organization.
The SLM solution should also ensure that it can take future data requirements into account and any changes in existing systems. Potential updates should be considered while ensuring that the SLM system can avoid interruptions should any changes be required.
Operational Governance considerations
Establishing the right operational governance for the SLM system is also essential. This should include deciding:
- Who will be accountable for the continuous operation and maintenance of the system?
- How will changes, additions or updates to the system be managed?
Before implementation, defining a governance structure that considers these questions will ensure the long-term accuracy of the SLM system’s implementation.
Defining the Scope of SLM Implementation
Understanding the comprehensive scope of implementing an SLM system from the outset is essential. The priority should be to define a clear vision for the project that takes into account a full understanding of the business processes involved.
This starts with the supplier master data, the foundational information that feeds into all SLM activities across an organization. The scope of the implementation should then build upon this to cover the supplier lifecycle in its entirety and the different business processes involved, including supplier onboarding solutions, supplier performance and risk management, supplier master data management and supplier compliance.
This broad understanding of the scope of the project from the outset ensures that instances of inefficiencies in the SLM system can be eradicated. Detailing a clear, comprehensive implementation scope ensures a strategic approach, and one that considers the organization’s priorities and resources while focusing on the overall objective.
Stakeholder Engagement & Buy-In
Ensuring that there is engagement and buy-in from the key stakeholders is essential. Every area of the organization, from Operations to Procurement, needs to understand and align with the overall strategy, especially the heads of each department. Each of these stakeholders will have a crucial role, hence the need to have their complete buy-in and active participation.
An effective SLM includes a clear sequence of capabilities, ranging from foundational data-related activities to more strategic aspects related to risk and performance and compliance management. Despite this being in place, without full stakeholder buy-in, even the most well-thought-out and detailed strategy will not succeed.
Those involved in implementing SLM must ensure stakeholders are aware of both the strategic vision and operational processes and the numerous benefits of implementing SLM, including how it will help their departments succeed. This helps to encourage full engagement and a desire to ensure the implementation is as successful as possible. This is also especially important when considering the global alignment of processes across the organization, where stakeholder buy-in becomes even more critical.
As SLM encompasses numerous departments across an organization, often over different geographical locations, achieving harmonized and effective supplier management heavily relies on stakeholders being willing to collaborate, share information and meticulously follow and comply with the defined processes and standards. This is why stakeholders’ engagement and buy-in should not be seen as only formalities in the SLM implementation process. Instead, they should be seen as being central to ensuring its long-term success and maximizing its potential to the organization.
Successfully implementing SLM is not only about adopting a new process or integrating a new system. It is a comprehensive change and approach that requires a clear and detailed understanding of its objective, an effective master data strategy complemented by a well-planned execution.
It should be carefully planned and tailored to your organization’s needs rather than seen as a one-size-fits-all solution. It should also be viewed as an evolution within the business requiring ongoing monitoring, reviewing and refining. Rather than being seen as an isolated function that serves a particular purpose, its intersection with various areas of the organization should be well understood, influencing and being influenced by them.
“Productivity, as Paul J Meyer stated, “is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.” This sentiment is particularly the case for SLM. Organizations that dedicate time, resources and collective efforts to planning their SLM strategy will reap significant long-term benefits, including enhanced supplier performance, risk mitigation, higher levels of compliance and, most importantly, a more resilient supply chain that generates increased revenue.
Article updated September 2024
