How to Save Money with Supplier Information Management
Table of Contents
According to the Logistics Bureau, strategically reducing supply chain costs can substantially boost net profits, while the scope for potential reductions remains wide open. This underlines the importance of taking a structured approach to savings within organizations’ supply chains, in which a customized Supplier Information Management platform can act as a catalyst for uncovering hidden savings and driving operational excellence.
Supplier Information Management (SIM) should be a key consideration for organizations looking to save money in Procurement while increasing profitability, in particular for those seeking to scale and obtain a more significant market share. This is especially the case as supply chains become increasingly complex and digitalized.
Supplier Information Management can reduce the cost of certain activities across a range of areas, such as those related to:
- Managing the technology landscape
- Managing supplier data
- Managing documents relating to suppliers
- Managing contracts
- Managing supplier relations and communications
- Managing risk and compliance
In this article, we evaluate activities in these areas and how supplier information management can save associated costs, both in the short to medium term and on a longer-term basis.
Establish a savings framework for your supply chain
Understanding the value that could be derived by investing in Supplier Information Management software is key. A meticulous comparison of the current costs related to how a process or activity is being undertaken today, versus the same expected costs in a SIM-enabled landscape can provide the comparison. The cost comparison should consider either the direct costs in hard dollars, or cost in terms of time or resources.
Creating a savings framework involves thoroughly examining efficiency improvements and the time allocated to core supplier activities, leading to a more nuanced understanding of cost reduction possibilities.
Managing the technology landscape
Integration with other systems
It is important to understand the existing landscape set-up in terms of the current integrations, and integrations that are desired but not yet possible or deployed. To uncover the cost reductions, it is necessary to review any manual processes, and the resources involved due to any lack of integration, poor integration, or the cost of any middleware or data transformation activities that are also required.
Ensuring stakeholders understand how SIM aligns with other organizational tools is critical to maximizing its impact and achieving the required holistic approach to supplier management. Stakeholders should understand that amalgamating SIM with various management systems and ERP software offers a range of additional benefits. Integration means operations are more streamlined, and supply chain resilience is bolstered thanks to supplier master data management software creating reliable master data across different platforms, reducing data discrepancies and improving operational coherence.
New processes, custom workflows
The ability for business users to safely build custom workflows to support new or changing processes is a key advantage of a SIM-enabled landscape.
In order to appreciate the cost reductions that SIM will unlock for the business, a thorough assessment of all end-to-end supplier-related processes from across the entire business should be undertaken. For example, how much time is required to add, change or localize a specific process, who is able to make these changes, and how much resource is required?
In many cases, and without SIM in the landscape, these types of requirements can take too long and deliver sub-optimal cycle times once initiated. Depending on how often such changes are required and how efficient they are will help to demonstrate how costs in this area can rack up and show how potential savings can be made.
Future readiness: New systems, new technologies
Enterprises are subject to frequent change – mergers, acquisitions, new technologies being introduced, old technologies retired.
This is positive. Technology and innovation, meanwhile, stand to reshape how supplier management is handled. Artificial Intelligence, Blockchain and Cloud Computing developments are providing new possibilities for organizations regarding storage, access and the verification of supplier information. Organizations that are able to prioritize adopting these technological advances will benefit from more efficient and secure supplier information management, especially as supply chains become even more digitalized.
In terms of the cost savings from a SIM-enabled environment perspective, consider how much (and how disruptive) any changes, removals or additions of systems within the current landscape might be, including data migrations and transformations.
To compare to SIM, consider that a flexible supplier data model as supported by a dedicated solution means that systems can be easily swapped in and out as needed, as the integrations are handled at the right level of the supplier data hierarchy.
Managing supplier data
Costs that can be avoided or reduced include those relating to:
- Inaccurate or inconsistent data. A single-entry point for data, in conjunction with data validations that take place upfront and before the data enters the enterprise – and with the right governance in place – means that data cleansing activities are avoided.
- Missing or incomplete data. Calling suppliers due to missing email addresses or phone numbers can be made more efficient and less time consuming in a SIM-enabled world. This is due to the more rigorous onboarding and the single-entry point for data, which means higher supplier adoption, centralized governance and flexible and/or automated workflows.
- Inability to act in the event of a supply chain disruption due to missing information
Managing documents relating to suppliers
Looking for or following up on missing supplier documents is another arduous and time-consuming task. A business should be aware of how often documents relating to specific suppliers may have become unavailable due to either being stored in an inconvenient location or because they have expired, and the time invested in having to close these gaps.
Instead, these documents should be centrally organized and managed and linked to the supplier master data for quick and easy reference, along with a trigger for a workflow that can request new documents if these need to be updated regularly, for example on a yearly basis or upon point of expiry.
Managing contracts
Costs that can be avoided or reduced can include those relating to:
- Researching supplier contracts
- Liabilities due to lack of knowledge from a lost contract
- Missed early payment discounts or rebates
- Cost related to off-contract spend
Managing supplier relations and communications
Focusing on making onboarding processes smooth, understanding what tech your suppliers need, and keeping them engaged throughout the entire lifecycle can lead to great partnerships that drive innovation and give an enterprise that edge in the market. On the enterprise-side, costs that can be avoided or reduced include those relating to:
- Managing alerts related to a supplier
- Cost of help desk resources required for managing supplier requests/complaints
- Training on supplier systems due to high turnover in Procurement/AP
Managing risk and regulatory compliance
Organizations are increasingly becoming aware of the importance of supplier information management in terms of supplier risk management. When risks are identified and mitigated at the earliest opportunity, organizations can ensure that their reputation is not impacted and any financial ramifications are avoided. Supplier information management allows insight into solutions to manage supplier performance and risk factors, making it an essential part of organizations’ supplier risk management solutions and strategies.
On the other hand, failure to comply with industry standards and compliance can lead to considerable financial penalties for organizations and a loss of standing within the market. Supplier information management allows businesses to ensure compliance is adhered to by helping organizations maintain accurate and up-to-date supplier information, reducing those instances of non-compliance. This is especially important as there is a greater focus on and expectation for sustainable procurement across various markets.
Insights into return on investment
Analyzing the return on investment of supplier information management implementation provides stakeholders with insights into the financial benefits that it gives the organization.
The approach should be holistic and concentrate not only on the costs of the initial investment in the supplier information management software and the ongoing operational costs, but also the financial gains reaped from improved supplier relationships and the organization being more efficient. When armed with this information, stakeholders can ensure that the organization’s leaders are fully onboard and willing to invest more in supplier information management in the longer term.
Customization and scalability
As the organization grows, it can take advantage of having a tool tailored to its specific needs and that can grow in tandem with the organization, ensuring that supplier information management remains a valuable feature in driving success. Organizations must focus on a platform that provides both adaptability and scalability to ensure their ambitious growth plans can come to fruition.
Key stakeholders involved in the implementation must be proactive and ensure adherence to best practices. This will ensure that the organization is harnessing the full potential of SIM, enhancing supplier relationships and achieving tangible cost reductions. Organizations must be prepared to overcome these challenges to ensure a smooth transition and successful implementation.
Rather than viewing SIM as just a piece of software, organizations should consider it an essential asset that helps reduce costs across the organizations while increasing overall efficiency in the supply chain. For businesses with ambitious growth plans, it can be a core component to helping them reach their targets, especially with the advent of new technologies emerging within supply chains and wider technological advances.
Article updated September 24
