5 Procurement nightmares and effective management of supplier database

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What’s the difference between HUL, Hindustan Unilever and Unilever? These are 3 different names frequently exchanged for an FMCG giant “Hindustan Unilever Limited”. Why should you care? Well, It may be the same company doing business with you having registered 3 times in your supplier database!

Read on, how inconsistent supplier database is costing you heavens.

This is for the supply chain managers, supplier relationship managers, Procurement professionals, people responsible for managing supplier database, and other stakeholders in the procurement function. Sharing two stories of global companies who are hell-bent on saving cost at every function and their operational efficiency is treated as a benchmark in the industry.

The first incident is caught as an audit exception. A Korean electronics giant has a global contract with a large PC manufacturer; a local division based in Singapore negotiates a contract with the PC manufacturer to procure 150 laptops and pays the price which is around 130% of the negotiated global contract. The local division was not aware of this global contract and did a reverse auction to get the “Best price”!

The second incident A global automotive giant negotiates a sub-contract with one of the software technology suppliers recommended by a big 4 consultants and bids for a government project which requires certain technical, security and process certifications. The supplier while applying for the project filled the information without a supporting proof. The project required the automotive giant to put an earnest money deposit worth millions, the company won the contract, but came to know about the false information submitted by the supplier about a security certification which was mandatory to proceed with the project. The company stands a chance of losing the earnest money if the project is not started in time.

While your favorite procurement consultant may be selling you procurement tool as a magic wand, accuracy in supplier data and spend analytics would very much depend on your implementation strategy. If you are forcing procurement tool on your procurement department or there are no synergies of data across the various intelligent systems you use, the information will very soon become a burden on you, forget about getting analytics out of it.

Synchronization of your data will very much depend on the policy you adopt at the organization level, the way you handle change management, how strong is your master data management, etc.

Let us discuss some of the hazards which an inconsistent supplier data can cause to you

  • Supplier information is everywhere:

If you are looking to procure something urgently, which is the first repository you should refer to, in order to get a supplier for that category? ERP or supplier database or the personal reference you have by virtue of dealing with suppliers? Every division is negotiating on its own or you want to have a globally negotiated price for all standard categories?

  • One supplier or three suppliers?

It’s possible that one of the suppliers you are dealing with is getting a business worth millions of dollars all in pieces from the bottom of pyramids procurement departments in your various off-site locations. A centralized database could have helped you negotiate a better global deal with them.

  • It’s bouncy

Your favorite supplier has reinvented himself. They changed their legal name, email id, website and physical address. He informed you by sending a letter which are you not able to locate right now. Email sent to old ID has bounced, letter sent to the old address is returned back; all of a sudden you find yourself batting on a bouncy wicket. According to the US census Bureau, on an average, every hour, around 240 companies change their address, 150 companies change their contact information (phone, email etc.) and 4 change their names.

  • You fired an employee (Supplier)

Your employees carry the supplier information wherever they go! Even outside your company? You have been dealing with a supplier and the communication you had with him is not saved anywhere, except in mailbox of one employee whom you fired recently? It’s high time; you need to find this information to clear the audit process, but how? You may be able to locate it, but at a cost of your and other people’s time.

  • Doing business with a blacklisted supplier

To your utter surprise, one of the suppliers whom you blacklisted last year over a compliance issue is still doing business with another department in your office. You removed it from your department’s supplier database but he is still there in others.

Can you avoid it?

Effective data management and synchronization across the systems is the key in saving you from all these hazards.

  • Keep clean, consistent, centralized supplier information accessible to all right people. The negotiation details, catalogues, contract rates, procurement policies should be communicated in a crystal clear manner.
  • Treat your supplier as an extension of your information system; create a self-help system where they can update their information, keep a track of all changes.
  • Make supplier on-boarding easy; keep a central repository of all compliance and legal documents received from your supplier.
  • Make sure that all supplier communication is centralized and tracked using an automated system.