Supplier Information and Lifecycle Management

June 24th, 2015

Amy FongSenior Procurement Advisor/P2P Program Leader

Supplier Information and Lifecycle Management

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Supplier Information

Management

Supply MDM

Supply Analytics & Intelligence require robust management of Supply Information and supporting Supply Master Data

Suppliers and related attributes:

Supplier type, status, contacts, certifications, etc.

Items / Catalog

Commodities / Categories

Contracts (inc. std. terms & clauses)

Roles / Employees

KPI Types / Definitions

‘Supply Drivers’:• Assets

• Products• Customers• Projects

ERP Master Files / Fields

Information (including external / unstructured content

and ‘metadata’)

Master Data (all internal

structured data)

Information Scope

InformationValue (H)

Cost Centers

Knowledge Mgmt (e.g., supply category strategy and supporting knowledge) Planning & Predictive Analytics (e.g., Price/Cost forecasting, supply planning, risk scenarios) Reporting & Ad Hoc Analysis (e.g., spend analytics, bid analysis, supply base analysis) Monitoring and Alerting (e.g., supplier risk/performance alerts) Performance Measurement (e.g., CPO/Supplier dashboards)

Supplier MDM

Vendor Master File

Maintenance

Supply Data Governance and Information Architecture

Supply Analytics & Intelligence

Increasing scope and integration

Transactional Data (ERP, eProcurement, etc.)Supply Information

Management

Enterprise MDM All master data IT/technically oriented Biased towards structured data

Metadata

Analytics

Intelligence

Today’s Discussion

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(select up to three)

Time spent adding new suppliers Times spent updating existing supplier data Ability to analyze supplier spend, performance, and risk Ability to enrich supplier profiles with additional data Internal compliance, risk, P2P errors Supporting multiple external regulations

What are your main issues with managing the supplier master file?

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There are many opportunity areas related to the supplier master file: cash, cost, service, risk

Supporting multiple external regulations

Internal compliance/risk and P2P errors

Enriching supplier data with external info

Analyzing supplier spending, performance

Time spent managing supplier data

10%

22%

33%

53%

68%

What are your Main Issues Relating to Managing Supplier Information (select up to three)

Source: "Driving Compliance, Risk and Bottom Line Benefits with Supplier Information Management“, ISM Webcast March 29, 2012

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Having Procurement approve supplier setup to insure alignment with preferred supplier strategy is a best practice

Peer Top Performer

26%

54%

23%

23%44%

23%7%

0%

No approval is required to setup a supplier

Procurement is responsible for approving PO/contract suppliers while all others are approved outside of procurement

Business Managers approve all supplier setup request

Procurement approves all supplier setup requests

Primary Responsibility For “Approving” Supplier Additions

(Percent of all Participants)

Primary Responsibility For “Setting Up” Suppliers(Percent of all Participants)

26%

42%

16%

16%

A separate supply data team is responsible for setting up all suppliers

Accounts payable is responsible for setting up all suppliers

Procurement is responsible for setting up all suppliers

Procurement is responsible for setting up PO/contract suppliers while accounts payable or supply data team setup all others

Increasing Trend

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For basic onboarding supplier setup checklists ensure broader supply management goals are considered

Activity Stakeholder

Verify all supplier contact information (company name, address, etc.) provided Accounts Payable, Purchasing Operations

Check that supplier does not already exist in system, check for parent/child companies as suppliers Accounts Payable, Sourcing

Check if there is an existing/preferred supplier in the system that can provide the product/service Purchasing Operations, Sourcing

Identify category codes applicable to supplier Sourcing

Ensure standard payment terms are established with supplier Treasury, Accounts Payable

Perform Financial Stability / Credit Reports on suppliers that are of significant value or strategic importance Corporate Risk, Sourcing

Verify Certificate of Insurance is on file for suppliers with significant onsite representation Corporate Risk, Facilities

Expected Spend (i.e. strategic sourcing effort warranted?) Sourcing

Identify that contract or standard terms and conditions are in place with supplier Sourcing, Purchasing Operations, Accounts Payable

Verify W-9 on file before any payments are released Accounts Payable

Check for P-card acceptance by supplier to encourage the use of P-card Purchasing Operations, Accounts Payable

Check supplier and parent/child companies against restricted party lists Corporate Risk, Accounts Payable

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Supplier master data is directly tied to sourcing and supplier management; procurement must be involved to establish data structure

Sourcing & Supply Base Analysis

Invoice & Payment

ProcessingPO and Requisition Processing

Supplier Scheduling

Supply Data Management

Receipt Processing Accounts Payable

Sourcing Execution Supplier Management & Development

Customer / Demand Management(e.g., NPDI)

ProcurementFunction

Management

Compliance & Risk Mgmt

P2P(Purchase-to-Pay)

Pay (Finance)Purchase

Source Manage

Plan, Support, Transform

Protect

Discovery

Spend / Performance

Evaluation

Onb

oard

ing

Self-service

Qualification

VM

F S

etup

Certify / AuditSimplify

Source: The Hackett Group Procurement Process Taxonomy

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Numerous Analytics Depend on Supplier Information. Do you want to analyze the data or wrestle it?

• “Spent Analysis” (Basic)• Balance of Trade• Supplier Dependency• Supplier Segmentation• Supplier Performance (e.g., compliance analysis)• Diversity Reporting and Regulatory Reporting• Supplier Risk Analysis• Sustainability analyses• Regulatory reporting• Cycle times for supplier master adds• P2P error rates from supplier-related errors• Error rates (duplicates, miss-codes, etc.) • Level of supplier self-service• Supplier capability analysis• Working capital analyses by supplier• Others

10%

29%43%

60%75%

Percent of analysis time spent collecting, verifying, and compiling data versus performing analysis and making

recommendations?

• How good are your supply analytics?• How good is your supplier data feeding

them?• How well do you manage the supplier

data as a firm?• What could you do with the time spent

compiling it?

Source: 2011 Hackett Procurement Benchmarking Database

Supplier-related Analytics

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Poll: Which of the following supplier facing activities does your current technology infrastructure support(select all that apply) Setup of supplier payment data Setup of supplier terms and conditions Supplier financial screenings Tracking of supply chain locations Automated checks against third party databases (ex. FCPA, OFAC) Pre-qualification of new suppliers Performance management Risk management

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Supplier Information has undergone a transformation

Fragmented ConsolidatingSiloed x-Functional, x-referencedInternal ExternalStructured UnstructuredHistorical Predictive / IntelligentBatch Mgmt Real-timeReplicated Indexed / Self-ServiceProcess-driven Process-drivingData Info Knowledge/Intelligence

"For integrated systems, 75% of the effort and cost is process reengineering and data cleansing and creation, and 25% is the I.T. portion. When people say their systems didn't deliver, chances are they missed the 75% they should have been working on“

Larry Kittelberger, former SVP/CIO Honeywell

Traditional Vendor Master “SIM” or “SLM”

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Leaders are Evolving their SIM Capabilities

Vendor Master File

Focused primarily on ERP/e-Procurement fields needed to place POs, pay invoices, and analyze spend

Supplier Information Management (SIM)

Organizing and managing all key supplier information more efficiently and effectively.

Supplier Lifecycle Management (SIM

2.0)

Tying information into knowledge, intelligence, and analytics

AP and Purchasing Ops biased

Data governance (who can do what to which fields)

Data integration (e.g., across multiple VMFs)

Data quality for spend analysis

“Virtual Supplier Master” Starts earlier in lifecycle

(e.g., pre-registration via supplier portal)

Focus on hosted supplier self-service

Inclusion of document-based and/or external content

SIM application vendors: “SIM Platform”

Increasing level of bi-directional MDM integration

Workflows driven by custom supplier attributes and other rules (process, regulatory) to support: Supplier Performance

Measurement Regulatory Compliance Supply Risk Management

Intelligence from “Supplier Network”

Integrating supplier data to analytics (e.g., supply base segmentation analysis)

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Supply Information Mgmt is foundational to Supply Analytics & Intelligence, a core Procurement capability

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Yes – Procurement, Finance, IT and other supporting functions have clear roles

Somewhat – Could be better No – Supplier adds are not monitored and supplier content is not

harmonized

Do you have a clear governance model for supplier data?

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Supplier Information Governance shall….

…be the responsibility of Procurement / Business…and supported by IT

…be transparent, with clear visibility as to how and when supplier master data decisions were made and who made them

…have decisions, processes, and controls be auditable; they will be linked to stakeholder requirements

…support a global standardization of enterprise data, but also be tiered to support Global, Regional and Local governance

…ensure a common global definition of each supplier master data element and common global definition of business rules that apply

…continually monitor the quality of critical supplier data items

Guiding Principles for Effective Supplier Information Governance

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Key Principles to build into your Supplier Onboarding and Information Management Process

Collaboration – What is the role Procurement and AP play a role in approving and adding new suppliers?

Supply Base Strategy – Is the new supplier necessary? Is there a Preferred Supplier who could meet this need?

Risk Management – Has the supplier passed an initial risk profile screening? What ongoing management

P2P Channel Strategy – How will requisitioners buy from this supplier? How will they invoice? How will we pay them

Working Capital – Have standard payment terms been negotiated and setup? Do they match with the organization’s working capital strategy?

Performance Management – How are supplier KPI’s measured and how is performance managed?

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Adopt the “long-term quick fix” view– View SIM and “I” holistically. Not just MDM of ERP vendor master files. Build an

equally holistic business case with clear KPIs and capability metrics.

– Create awareness of the SIM-related risks and rewards. Find champions. Educate. ‘Benchmark’ and explore vendors to create excitement and buy-in.

– Use “organizational judo” to gain support: Risk, IT MDM, sourcing, diversity, ‘GBS’, Lean are all supported by SIM. Take an inventory of internal efforts. Integrate.

– Implement in waves and use self-funding, bundling, phasing, etc.

Work with IT and plot your overall solution approach– Pick the right solution approach before just searching for the silver bullet. What

do you really need now and in the future?

– Think through the architecture Work w/ IT, but build out your own CoE in this area a it relates to analytics and intelligence

Habits of Highly Successful SIM

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How to justify SIM to for supplier-information related needs?

1. Improve Efficiency of Supplier Master Data Management2. Improve Efficiency of broader SIM-related processes embedded

in other supply processes3. Improve Effectiveness of Supply Processes (operational and

analytical) that impact [spend] cost, cash, service, and risk Value of Supplier Identification/Innovation Value of Supplier Performance Management Value of Risk Mitigation Etc.

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Q&A

Amy FongP2P Advisory Program Leader

The Hackett Group

+1.408.887.7335afong@thehackettgroup.com

Vishal Patel

Tradeshift

Head of Solutions Marketing

+1.781.492.2525

vpa@tradeshift.com