With procurement teams under pressure, improving supplier data and management processes through ProcureTech delivers immediate benefit
Tell me if this sounds like you. A fantastic ProcureTech startup pitches their proposition. You know it would deliver value to your procurement operations. But after much deliberation, you decide you’re too busy at the moment and politely say, “it’s just not the right time.” Does that sound familiar?
Well, here are five compelling reasons why you need to get started right away with adopting a vendor master data platform.
1. You're losing real money right now
It's costing you real money to maintain manual processes. Well-paid people in your team spend a significant amount of time onboarding new suppliers. It takes a minimum of 30 minutes to create a supplier record in ERP and keep the information up to date. In a supply chain of 1,000 suppliers, that equates to nearly four months of effort per year. Companies that leverage self-service technology for managing supplier information such as certifications and banking details save an average of $430 (£350) per supplier [Source: AMR Research]
Besides, manual processes risk duplication within supplier category. Why onboard a new supplier every time you need to do something, when you have a perfectly good supplier who has performed well already on your books?
Now's the right time to get on top of admin processes, which often have hidden costs to your team. The bottom quartile of companies spend 60% of their category manager’s time compiling data, where the top quartile spend less than 30%. This equates to $5 million (£4.1 million) per year in value lost per every billion in spend. [Source: The Hackett Group, “World-Class Supply Analytics and Information Management” 2012]
Mistakes in your supplier data cost money, whether it's a wrong supplier, a wrong order, delayed shipments, or delayed payments. The Hackett Group found that organisations with high data quality achieved an average supplier cost reduction of 4.4%, compared to just 0.6% for organizations with low data quality. [Source: The Hackett Group: "The CPO Agenda: Procurement's Key Issues in 2021" >> https://www.thehackettgroup.com/research/2021/cpo-agenda-2021/].
And the International Association for Contract and Commercial Management (IACCM) found organisations are overpaying for goods and services due to inaccurate or incomplete data. Poor data quality can result in an average of 2% to 7% of 'spend leakage' [Source: ACCM report: "Benchmarking the Quality of Contract Management" >> https://www.iaccm.com/resources/?id=10653]
2. You are currently exposed to significant business risk
How many of your suppliers are insured? Do you even know if you could claim against them if something went wrong? Do you know which suppliers are working on site with you today? Do you know what they’re doing for you? Are you able to live with the consequences if something happened? Meanwhile, it's estimated that 40% of UK companies are failing in commitments on Modern Slavery. As the case of Boohoo.com shows, not being aware of exploitation in your supply chain can have devastating consequences. The company lost 80% of its market capitalisation because of a Modern Slavery breach by a supplier in 2020.
Non-compliant trade is rife, with suppliers having not been audited or re-assessed since they were first onboarded. This means you only have visibility across a tiny portion of your supplier base. We recently audited a client's ERP data, which exposed gaps across 62% of vendor master data points. Living in a world of 'unknown unknowns' will only lead to a catastrophe you never even saw coming.
3. Your Executive Team has made promises you can’t measure
Nearly every organisation now has targets for diversity and ESG (environment, social, and governance) as part of their broader business strategy. You may be committed to working with a certain percentage of diverse businesses, measured on a number of demographic characteristics, such as ethnicity or gender. How are you going to determine those suppliers that are diverse and those that are not?
As for ESG targets, you need to collect real CO2 and Scope 3 emissions data, but you have no reliable mechanism today to collect it. Do you really think an expensive ESG consultant's educated guess is a substitute for the real data? Two-thirds of the average company’s ESG footprint lies with suppliers, so procurement teams have a decisive role to play. We have the platform that helps you capture the data directly from suppliers.
4. Suppliers will go elsewhere if you don't invest in ProcureTech
Suppliers now have choice about which organisations they will supply to. You need to make yourself attractive to work with. Something as simple as the user interface with which you engage your suppliers can make all the difference between winning their custom or losing out to another buyer.
Suppliers expect efficiency, but the experience today consists of multiple paper forms flying in from all directions. They'll often be hearing from stakeholders they've never met, and with little communication about where the supplier is in their journey. It's enough to encourage a supplier to go elsewhere.
5. Your competition is investing; you can’t afford to be left behind
Total global investment in ProcureTech in 2022 was £5.4 billion ($6.7 billion, according to Fortune Business Insights). That’s a lot of investment by your competitors into tools that will make them better able to combat the supply chain challenges we face in this new era of economic uncertainty. (After all, the UK's 'salad crisis' in Q1 2023 is just the tip of the iceberg lettuce).
More efficient supplier management operations mean your competitors who've adopted ProcureTech can identify cost savings more quickly. They'll be better able to compete on price. They'll also attract suppliers who might otherwise supply to you. And they'll be able to respond to incidents far more rapidly and with minimal disruption to their supply chains.
They say that hindsight is 20:20. So why not be kind to your future self and have 20:20 foresight in 2023. Canopy can provide immediate benefits to your team, as well as allowing you to deliver value in the longer term. Head off any regrets by finding out more about how to get hold of the Canopy supplier management platform today.
To find out more about how the time is right for the Canopy supplier management platform to sort out your vendor master data, contact one of the team today.
Post by Nick Verkroost
Nick is an experienced business leader and the CEO for Canopy (OCG Software), the rules-based Supplier Management platform. Nick's focus is on commercial and operational excellence and ensuring our clients maximise the opportunities that Canopy offers.