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Supplier Data: why organizations must know who their suppliers are

Who are my suppliers?

This may seem like a relatively straightforward question, but it is one that organizations often struggle to answer. As supply chains become more complex and globally interconnected, an understanding of who all vendors are and a focus on supplier relationship management have never been more important.

There is, of course, an ever-growing list of risks that can impact supply chains, ranging from product and material shortages and inflation through to geo-political conflict. These all have the potential to place substantial strain on the supply chain, meaning that organizations are under more pressure than ever to ensure increased visibility across the supply chain and to be able to act promptly when required to maintain ongoing supply chain operations without disruption to the business. This has led to more CPOs prioritizing areas such as effective supplier communication and collaboration strategies.

A successful modern supply chain strategy requires strong and dynamic supplier relationships built on trust. Leaders within organizations now recognize that the success of their business relies on having a robust supplier base, and prioritizing and investing in supplier experience management so that suppliers are set up to achieve their best work for their organizations.

As part of this, organizations need to have visibility into suppliers’ practices so that both parties can achieve this mutual success. This is especially important as legislation and regulations evolve and the focus on ESG and sustainable procurement increases. Failure to comply with legislation and being exposed as practicing unethical business practices have the potential to not only lead to significant financial penalties for organizations, but can also lead to loss of reputation within the market.

However, this applies not only to the organization, but across each tier of its supply chain. It means that vendors engaged in unethical business practices also have the potential to impact an organization’s reputation within the market and even influence the behaviors of its end consumers, especially as increasing numbers of people opt to purchase from businesses that align to their own ethical point of view.

Despite this, many businesses lack the visibility required, leaving their reputation and financial stability at risk. Organizations must therefore ensure they focus on building a transparent relationship with suppliers, where information and supplier data are shared in order to help each other reach mutually beneficial goals.

We will now explore these considerations in greater detail to understand the need for organizations to have a comprehensive overview of their suppliers’ performance and business practices and discuss various other benefits provided by organizations having a better understanding of who their suppliers are.

The importance of the regulatory compliance

Supply chain management regulatory compliance focuses on local, regional and national legislation. These are aimed towards ensuring that organizations are upholding standards that conform to ethical definitions of procurement and production, especially as an increasing number of countries begin to double down on issues such as sustainability and reducing carbon emissions.

These regulatory changes can impact how organizations manage their supply chains, including updating safety procedures and refining compliance requirements to ensure full compliance with new legal standards. Due to differing legislation in different countries, these changes can affect the services and products businesses offer and how shipments are processed across their global supply chain.

However, it is more than just themselves that organizations need to carefully consider. Businesses should also know their vendors’ internal processes and commitment to regulatory compliance. This is where knowing who your organization’s suppliers are becomes crucial. Non-compliance by any one supplier can impact the organization by association and cause a loss of reputation within the market.

There is also the issue where, if a vendor is discovered to have not adhered to regulations, their business viability could be impacted due to financial penalties. This, in turn, will also affect the organization as it will cause disruption in the supply chain and could lead to its products or services being removed from the market when there are issues related to how products have been produced.

Encouraging suppliers to embrace supply chain transparency is critical to ensuring regulatory compliance throughout the supply chain. Organizations should prioritize supplier compliance management to keep pace with the ever-increasing changes in supplier compliance requirements, including tax and business registration, sustainability, trade compliance, fraud prevention, etc.

Part of this should also focus on ensuring robust compliance capture and maintenance built upon the foundations of secure supplier data. Investing in supplier data management ensures that vendor data is complete and accurate and reduces instances of incomplete or inaccurate supplier data.

This also ensures that organizations can achieve their sustainability goals more easily – and part of this should include educating suppliers on why this is important and the benefits it will provide them.

Collaborating with suppliers to achieve these goals benefits both parties. This also extends to end consumers keen to avoid purchasing from businesses that engage in or are associated with others involved in scandals such as human rights abuses and child labor.

Organizations with in-depth transparency into their supply chain can assure current and potential customers that they are not involved in such practices, and acquire new customers seeking brands aligned with their values.

The need for stronger supplier relationships

Organizations of all sizes should invest in building strategic, dynamic relationships with suppliers built on trust and geared toward mutual collaboration and success. Investing in supplier relationship management within organizations leads to more robust relationships with suppliers. It leads to vendors being more receptive to collaborating with the organization to refine and enhance overall supply chain performance.

Businesses can benefit by having suppliers proactively assist in refining performance via supplier-led innovation, while the organization can also reap the rewards from suppliers’ market-specific expertise, enabling it to innovate and gain a competitive advantage within the market.

This encourages the relationship to move from a simple organization and supplier relationship to one in which both entities are partners and invested in each other’s success. Both parties are then able to build a working relationship with a genuine investment in collaboration, alignment and understanding of the mutual benefits both parties enjoy.

For example, this could include suppliers identifying issues in sourcing materials before they impact the organization’s supply chain and engaging with the organization directly to work collaboratively to find a solution to the issues. This collaborative approach offers agility in the face of unpredictability. It ensures that supply chain disruption is minimized, market share is not impacted, and even grows if the same challenges affect other core competitors.

In this way, an organization moves beyond viewing the supplier as a commodity and instead provides them with the foundations to do their best possible work for the business.

Furthermore, adopting a supplier-centric approach in which organizations have an end-to-end view of the supplier experience through the lens of each type of supplier, including pre-onboarding and supplier lifecycle management through to offboarding will pay dividends for the organization. Investing in supplier experience management software empowers organizations to refine and deliver this supplier-focused strategy that can dramatically increase overall profitability once implemented by relevant stakeholders.

The need to become the customer of choice

Organizations that invest in fostering relationships that are built on transparency, knowledge sharing and mutual success will quickly become a vendor’s customer of choice. As suppliers begin to recognize the benefits of prioritizing openness, accountability and innovation, they will understand the need to prioritize working with the customer and investing in the relationship, including developing their own innovative practices.

By removing friction within the supply chain, suppliers are provided with the freedom to concentrate on product innovation that can support the customer. As the working relationship develops, suppliers will likely recognize pain points that impact business partners and develop solutions to reduce these, enabling organizations to become more productive, which, in turn, also assists the supplier in increasing its own profitability.

The requirement for reliable supplier data

As mentioned earlier, reliable data is the foundation of success and should not be underestimated. Organizations should have access to reliable supplier data across each tier of the supply chain. It is essential in driving market growth for both the organization and the supplier, and driving process automation and transparency between both parties. As automation has gathered pace in recent years, this will only continue in the years ahead, especially as technologies such as Machine Learning become increasingly prevalent.

This consideration also touches upon organizations’ quests to be more sustainable. Supplier risk management is very much part of this. To reduce risks, organizations must be assured that their supplier data is as accurate as possible throughout the supply chain and can be relied upon to create trust-based transparency with suppliers.

Knowledge of the supply chain and access to reliable supplier data also ensure that any future unforeseen disruptions can be mitigated through the organization’s ability to adapt swiftly. Access to comprehensive and up-to-date supplier data means that key stakeholders have access to all the information required to make informed decisions for the good of the business. By understanding each supplier across the supply chain in detail, organizations can anticipate kinks in the supply chain and take preemptive action to avoid disruption, including alternative sourcing routes or engaging with backup suppliers.

Using supplier data integration to aid digital transformation

As discussed, the supply chain sphere will become even more data-driven than it is now; as organizations shift towards more integrated data infrastructures, supplier data becomes even more critical. Integrating supplier data with ERP systems, CRM tools and advanced analytics platforms will help drive more informed strategic decisions. This includes predictive analytics forecasting supply chain disruptions and supplier performance monitoring against agreed SLAs. Integrated supplier data is central to this and gives organizations an undeniable advantage.

Better informed strategic sourcing

Strategic sourcing should not be focused on cost-saving; it is a core part of value generation and aligning purchasing decisions with an organization’s wider business goals. A detailed understanding of suppliers’ capabilities, financial stability and performance history can all inform a successful procurement strategy.

For example, if an organization focuses on achieving specific sustainability targets, supplier data that provides an overview of a vendor’s carbon footprint or use of renewable energies will be invaluable. In addition, having clean and comprehensive supplier data can inform contract negotiations and highlight areas where there are opportunities for bulk discounts and collaboration.

Business continuity planning

As highlighted earlier, unforeseen circumstances such as geopolitical events, economic downturns, or natural disasters can dramatically impact an organization if it does not have the means to remain agile and communicate quickly with its wider supply chain.

Access to comprehensive supplier data ensures that key stakeholders can be adequately informed and can make decisions based on provided data. Insights into each supplier, including second and third-tier suppliers, is invaluable in identifying areas where kinks and disruptions could occur, allowing organizations to take preemptive or corrective action.

Centralized data repository

Organizations that keep supplier data across different systems or in spreadsheets leave themselves vulnerable to data that is inaccurate or not accessible to stakeholders when it is required. Organizations that consolidate supplier data in a cloud-based system will be assured that the essential stakeholders across the business can access reliable supplier data when required. This also ensures that companies can maintain data integrity, uphold compliance with global data regulations and avoid potential financial penalties.

Organizations that understand the importance of supplier data and its strategic management can be sure that they are building a resilient yet agile supply chain that aligns with wider business goals and revenue targets, giving them the best possible chance of being achieved.

_{Article updated October 24}