How well do you know your suppliers?
Many organisations focus on investing in CRM systems but don't look at supplier data or ask the question: how well do you know your suppliers?
Good business is built on good decisions. To make the right calls, you need the data to back you up, so that you’re in the right place at the right time. Most organisations have great data when it comes to their sales, and CRM systems have become the bedrock of business. But when it comes to suppliers, access to good-quality data in the supply chain is often sorely lacking. And if you don't know enough about your suppliers, how are you going to have confidence in them? In moments of crisis, businesses which don’t know enough about their suppliers are more likely to go under. In this blog, we're posing a simple question: how well do you know your suppliers?
What you need to know about your suppliers
Broadly, supplier data fits into five buckets:
Fundamental trading information: who they are, what they do for us, and who to speak to. And as you don’t want to add new suppliers all the time, it's important to build up framework agreements to improve terms, starting with a preferred supplier list.
Risk management and compliance: you need to be able to understand and make conscious decisions about the risks inherent in the suppliers you choose to work with so that you can take mitigating action. You'll need reassurance that your suppliers and their subcontractors meet health and safety, and data security requirements, and that they don't pose a financial risk. You'll need to check they comply with anti-bribery and corruption (ABC) and modern slavery legislation, and that they hold all relevant permits (such as food safety) and insurances.
Performance assessment: of course, this changes over time, and you'll want to ensure this aligns with your broader business strategy, not least so you're operating at the correct risk level. You'll need to track whether you're getting value for money, including assessments of quality and total spend. And you may want to keep information about previous RFP submissions and reasons for selection or rejection.
Operational information: for example, your buyer will need to be able to answer questions such as whether they're a preferred supplier, what their PO status is, who in the organisation owns the relationship, and if the buyer is free to contact the supplier directly without the need to inform a business owner.
Ethics: you'll want to capture information about the supplier's social impact, encompassing the broader elements of ESG. For instance, you may have specific targets for reducing emissions so need to track your suppliers' carbon impact. Or you may be committed to working with suppliers that take diversity & inclusion seriously.
Where supplier data is held and how it's come by
In many organisations, supplier data will be scattered about the business. The finance team will hold PO and payment details for each supplier, but it won't necessarily be immediately obvious what goods or services that company supplies. Meanwhile, procurement might have a preferred supplier list, RFQs and catalogues, but may struggle to share this with the relevant people in the business. Legal will hold the contract, while compliance teams will understand the conditions by which the suppliers met onboarding criteria.
This data is unstructured and too often, it is held as attachments in email inboxes, in Excel spreadsheets, or in scanned PDFs. Some of this data will be on the ERP. But most are in silos, so it won't necessarily be easily shared, and it's certainly not searchable. Of course, companies gather a great deal of data when they onboard a supplier. Yet to assure compliance over time, assessment needs to be consistent and relevant. The problem is that with manual processes, updating this data is very time-intensive. And too often, organisations ask for sensitive information such as payment details to be sent to them insecurely over email.
Why it might be hard to get a handle on suppliers
Small businesses survive because they're agile. Individuals within those companies have the autonomy to act within certain rules. As an organisation grows, this can be a problem, as there may be no centralised procurement process that applies a consistent approach. It can be difficult enough to flex a procurement system when a company grows organically, for instance by expanding into a new market with a different legislative environment. But it can be even more difficult for procurement teams to cope with growth through mergers or acquisitions. How do you merge two ERPs and avoid a dangerously fragmented supplier base?
An even bigger problem is an under-resourcing of the procurement function in many medium-sized businesses. When compared with sales, procurement is often orders of magnitude smaller in terms of investment and human resources. How much do procurement professionals understand about the companies they are trading with? The answer is often: not much. That's because they don't have the time to do the research or a platform to record it. That means they prioritise for strategic suppliers but ignore other supplier relationships across their business. It took a pandemic for us to realise that your provider of cleaning supplies governed whether you were allowed to keep the factory open.
What if all your supplier data were in one place?
Of course, it seems easier to justify technology investment in sales than in operations. But we would argue that the two go together. Just as technology has transformed sales, so it can transform procurement too. ProcureTech allows procurement professionals to do their job better. And especially for medium-sized businesses, it can provide great foundations for future growth.
This is where Canopy comes in: a permanent online record of a supplier's full trading information, maintained by them, for you. Visibility of supplier data allows you to take control. Everyone across your business can see what’s happening in your relationship with each supplier – as can the supplier themselves. It'll be easier to identify preferred suppliers, and you can block non-compliant suppliers until they're back in compliance. You can take a more responsible stance on your own information security. And ultimately, you'll be able to make better decisions about your supply chain. Canopy is a way of making sure that you know your suppliers better, on an ongoing basis, and adapting to your business needs over time. With Canopy, you'll have everything you need to know about your suppliers at your fingertips.
To find out more about how our award-winning supplier management platform Canopy can help you get to know your suppliers better, 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.