Determine : The Impact of Supplier Management on Spend

Linking the Dynamics of Supplier Relationships with P2P.

In an environment of increased regulations and demand for compliance, organizations are placing their suppliers under increasing scrutiny. Yet, managing supplier information is often near impossible given the the inability of organizations to easily tie supplier information to procure to pay (not to mention contracts and enterprise data as a whole).

According to research from Levvel Research (PayStream Advisors), supplier relationships are often strained due to poor processes resulting from the lack of automation in managing them. In fact, more than one third of respondents noted problems arising from poor supplier data management as a major challenge to managing supplier relationships. Moreover, Levvel goes on to show that fewer than 25% of organizations have actively integrated more than 50% of their suppliers into their procurement and AP systems.

As we've discussed on the Determine blog in the past, Supplier Information Management (SIM) has become a major challenge for organizations that don't have an ability to fully comprehend the impact of their suppliers on their organization.

Whether you are onboarding a supplier to engage in a new relationship, trying to understand the nature of the relationship in terms of balance of trade, or just looking to pay a supplier invoice, a supplier relationship can have many dynamics. Here are just a few of them:

Going beyond basic supplier profiles

While creating a supplier profile might be supplier management 101, many organizations still manage information via spreadsheet or fragmented vendor/supplier master databases, and lack the ability to create supplier identifiers that go beyond an address or contact name. In the current economic landscape, the ability to easily attribute a supplier mailing address to payment terms, associate a preferred order shipping method for a particular location, or link a supplier profile to valid bank account information for preventing payment fraud is essential for a wide variety of stakeholders and situations.

Tracking of expirable documentation

Further, the ability to access and assess all the proper documentation from a supplier that relates to the relationship is critical to mitigating exposure to risk (including third-party risk from your suppliers' suppliers). This includes reviewing documentation related to tax information, such as a W8, that may expire or is under scrutiny by regulatory bodies; ensuring that there is a valid certificate of insurance; or confirming that protections like an NDA are in place prior to executing a contract with that supplier.

Understanding the impact of spend

While the foregoing examples may be handled by a system vendor or supplier management system, the linkage of sourcing and procurement activity (transactions) related to supplier management processes becomes a competitive advantage when trying to understand how important a supplier relationship may be to an organization. Some of the advantages include the ability to quickly view approved suppliers in relation to criteria such as suppliers representing 80% of spend, the number of POs or invoices associated with a supplier, or items purchased from that supplier in the last twelve months.

Promoting flexibility in buying

Finally, in a situation of needing to immediately onboard a supplier - maybe an emergency situation - there is a distinct advantage in having clearly defined processes (ideally, integrated) in which different stakeholders can be involved to initiate a process. For example, legal initiating any additional contracts needed with the supplier (NDA, SLA, etc.) while a user is creating a requisition that can immediately be 'assigned' to that supplier for fulfillment the instant the onboarding, verification and contracting processes are complete saves time, ensures compliance and reduces risk. This inherent agility also makes it easier to seize opportunities in terms of access, pricing and other variables.

What's your impact?

Collecting all this supplier information and establishing flexible processes in the context of P2P is an ongoing topic of interest for many organizations. If you are interested in learning more, check out our on-demand webinar on supplier management and P2P called 5 Processes that Will Reinvent P2P's View of Supplier Management, along with our other resources.

Ready to make a bigger impact on your spend with better supplier management? Schedule a personalized demonstration of Supplier Management, Procurement and other integrated, modular solutions on the Determine Cloud Platform.