Supplier management is a critical element of any procurement function. It creates a bridge between the needs of the business and the capabilities of the supplier. At the same time, supplier management helps CPOs meet spend reduction targets and strategic objectives like reducing Scope 3 emissions.
The current procurement climate is one of sustained uncertainty. Economic pressures, climate instability and political turmoil can disrupt global supply chains at the drop of a hat. As a result, managing vendor relationships has grown more intricate and demanding. Not only this, but managing a supplier ecosystem effectively has never been more critical.
With the introduction of advanced technologies, businesses now have new tools at their disposal. As a result, many CPOs hope that AI and automation will allow them to streamline vendor management processes, mitigate risks, and cut costs. However, the success or failure of these technology applications is often directly linked to the quality of the data underpinning it. Many supplier ecosystems are obscure places, and gathering useful, trustworthy data more than a few steps away from the organisation’s own walls has typically been seen as more trouble than it’s worth.
Bad supplier data causes “substantial challenges” for procurement
In a 2020 survey by TealBook, insights emerged regarding the substantial challenges organisations face due to inadequate supplier data. Notably, they found that 93% of procurement professionals claimed to have experienced adverse consequences as a result of bad data regarding their suppliers. Approximately half of the respondents reported experiencing these effects regularly.
If data can be used effectively, however, it can not only create better outcomes for the organisation. Better data means increased procurement efficiencies, strategic wins, and more sustainable practice. It can also strengthen supplier-buyer relationships, making them more mutually beneficial, agile, and resilient.
Good supplier data can be used to predict supplier punctuality, identify recurring issues in supplier lead times, and reduce costs. Not only this, but (trustworthy) data can be used to reliably benchmark supplier performance—and incentivise improvement. Tracking supplier successes and failures can not only expose when suppliers aren’t meeting expectations, but also when they exceed them.
Additionally, better data can lead to better predictions of when suppliers fall short (something that a lot of organisations struggle to see about themselves, but that can be identified from an outside perspective), which can allow organisations to step in and work with the supplier to solve or avoid the problems causing the disruption in the first place.
Data should not just flow one way, however. Organisations that share relevant information with their suppliers can give a more fleshed out picture of their demand cycles and other critical elements of the business which can help suppliers work with them more strategically.
