OPINION PIECE: As procurement aligns with a range of business needs, it's essential to invest in technology to maintain higher-quality supplier data.
The role of procurement has changed immeasurably in recent years. Gone are the days when simply getting the best deal was a mark of success. Today, procurement is about much more than simply saving money. Procurement must look at each need of the business and make a compromise across a wide range of factors to achieve the best outcome. But to be able to make an informed judgement, you need good data to back you up. And many organisations face a massive challenge in maintaining high-quality supplier data.
What factors contribute to procurement success in the 2020s?
In an age of increasing disruption and uncertainty, procurement needs to ensure that each supplier remains true to its word. The supply chain as a whole must work in unison to deliver the business strategy. So what are the considerations that play a part in the initial decision to contract with a supplier, and what needs to be monitored throughout the relationship? Key decision factors include:
Is the supplier of good quality, and have they performed well for us in the past?
Are they quoting a fair price?
Do we have other suppliers already on our books where we can leverage economies of scale?
Are we comfortable with the terms of payment and delivery?
Is the supplier compliant to our minimum standards?
Are we comfortable with the level of risk?
Have we considered any local factors such as site access and local regulation?
Can the contract mitigate any concerns we may have?
Will the supplier contribute to our ESG commitments?
Does the supplier align with our interests to diversify the supply chain?
I’ve met some incredible people on my journey into procurement. But even they would admit that nobody can assimilate all the data points listed above for each supplier to ensure the best outcome for the business. And of course, this is ongoing: you need to continue monitoring these factors throughout the contract lifecycle. That's a massive ask, and after all, we're only human.
Many organisations are hampered by their tech stack
The obvious solution is to leverage technology to do the heavy lifting in making the right supply chain decision easier. And yet I’m shocked at the inadequacy of the tech stack most procurement professionals are working with today. For at least 60% of the market, procurement must make do with two bastions of the 1990s IT: Microsoft Excel (or equivalent), and an ERP (enterprise resource planning) system. That's even more the case among small- and medium-sized businesses.
Of course, Excel is a powerful universal tool for localised data analysis, but it's entirely manual, and it's limited in its ability to collect and securely share data with others. Meanwhile, the finance team usually controls the ERP. Too often, they're primarily only interested in data associated with supplier transactions (such as bank details, PO numbers, transaction amounts, and exchange rates).
Forget trying to make the right supply chain decisions with this setup. In fact, the security contradictions alone should be enough to send even the most complacent compliance officer into a spin. The onus is often on suppliers to pass a lengthy information security test. Yet some organisations collect bank details in a freely accessible Word document sent to a generic 'suppliers@' email inbox.
What's wrong with the RFP?
Data feeds everything we do in procurement. To know how to pay a supplier, we need their bank details. To decide whether to order from them again, we collect feedback from our buyers. To determine what indemnity levels to include in the contract, we assess the level of risk the supplier poses. Even something as simple as what the supplier does, where they do it, and whether they're a ‘preferred’ supplier, needs to be captured securely and made available to the relevant people.
Most procurement teams begin their tech journey with a request for proposal (RFP). It’s the highest engagement stage of the overall procurement process. It often involves comparison between a large pool of suppliers by different stakeholders. It's an obvious process to target when trying to improve supplier selection decisions.
The problem is, RFP can only address a small part of the overall problem we’ve described, for three main reasons. First, it only gives you insights at a snapshot in time. Secondly, it's based on a supplier’s sales pitch of what they might be able to do if selected, rather than what they are doing for you. And thirdly, very few supplier engagements will ever go to RFP anyway, due to the complexity of the process and the level of spend.
What needs to change when it comes to supplier data?
Procurement needs to get its arms around the whole supply chain, not just high-value strategic suppliers. And it needs to manage each supplier relationship throughout the lifecycle across the full range of factors described above, not just at the point of selection. The challenge is to build high-quality, trusted, and complete datasets about each supplier, and establish the means to quickly access, interpret and utilise that data to achieve the best possible outcomes for the business.
The problem is that there are no true repositories of trusted and consistent supplier data in most organisations today. Whether because of rapid growth, a lack of process, or M&A activity, supplier data is incomplete, siloed into multiple documents and files, and stored in people’s inboxes scattered across the organisation. Just consider for a moment if you were to quit your job tomorrow. How quickly could your replacement get up to speed with even the most basic details they need to know about the supply chain? Even more tricky will be picking up whether suppliers are still compliant with your required standards (for example, on ESG), and what level of risk they pose.
A ProcureTech investment that really works
Organisations are relying on procurement more than ever before, and supplier data is the key to unlocking their potential. The winners will be those who invest in making it happen. Implementing your first piece of dedicated procurement technology can take you from having no visibility of a supply chain to having complete visibility. And from having no control over risk and compliance, it can move you to having automated controls. Canopy is here to help get you from 'zero to one' when it comes to supplier data.
To find out more about how our award-winning supplier management platform, Canopy, can help with your procurement supplier data issues, contact one of the team today.
Post by Nick Verkroost
Nick is an experienced business leader and the COO 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.