What’s the official company name for Coke? It’s not Coca Cola or Coke Corporation. It’s The Coca-Cola Company. Why does this matter? Inaccurate, inconsistent and disconnected supplier information or vendor information could be wreaking havoc on your supplier spend-management and supplier risk- management goals and costing you millions.
Fasten Your Seatbelt: How Two Companies Were Losing Millions
If you are responsible for supply chain management, supplier relationship management, procurement, purchasing our sourcing, keep reading. Let’s talk about three companies that lost millions and try to prevent these procurement nightmares from happening to you.
• The procurement leader at a global Oil & Gas company realized the company was wasting $2 million per year. Why? The downstream supply chain team, which was negotiating contracts and sourcing products from The Coca-Cola Company for thousands of gas stations was operating independently from the upstream procurement team that was negotiating contracts and sourcing products from Coke Corporation for hundreds of offices around the globe.
• The merchandising leader at a global retailer, which has a laser-like focus on lowering operating costs so it can keep prices low, realized the company was losing millions. Why? The buyers for North America who were negotiating contracts and sourcing products from The Proctor & Gamble Company for hundreds of stores and e-commerce sites in the U.S. and Canada were operating independently from the EMEA buyers, who were negotiating contracts and sourcing products from P&G for hundreds of stores and e-commerce sites in Europe, the Middle East and Africa.
Why Do These Procurement Nightmares Happen?
According to a 2012 report by the Hackett Group: “While companies often turn to spend analytics solutions to reduce purchasing spend, they quickly learn that accurate spend analytics ultimately depend upon the consistency and quality of the underlying supplier and product data across all relevant systems within the enterprise. Our experience also confirms that successful analytic initiatives must be based on a strong master data management foundation.”
But I think this quotation, which will be kept anonymous, sums it up more eloquently: “Our supplier information is crap. Suppliers often don’t get paid on time. We send payments to the manufacturing plant that supplies us and not the corporate billing department. Payments get lost in the shuffle. We have paid suppliers we shouldn’t have. You can have all the processes in the world but if the data is crap, they are not going to work and you end up doing a lot of manual fixes.”
So, what are the root causes of innacurate, inconsistent and disconnected supplier information?
• Supplier information is scattered across systems: Not all business-critical supplier information or vendor information is in one system. It’s scattered across applications such as ERP, Sourcing AP, and Supplier Relationship Management. To complicate matters, companies don’t typically have just one ERP system or AP System. One company we work with has 50 separate ERP systems and almost 400 separate AP systems.
• Inconsistent supplier identities: The Coca-Cola Company could be the name of the supplier in one system, while Coke could be the supplier name in another system. Supplier names could be in different languages.
• Supplier information changes all the time: According to the U.S. Census Bureau, every hour 240 companies move and their address changes, 150 change phone numbers, 5,769 people change jobs, 20 companies close their doors, and 4 companies change names.
• No automatic updates: When someone updates supplier information in their system, it doesn’t automatically update in all the other systems.
• Mergers, acquisitions & divestitures: Your company could merge with or acquire a company or divest a subsidiary, business unit or product line. Your suppliers may be doing the same. The integration of data from ERP systems that hasn’t been mastered often complicates the problem.
How to Better Manage Supplier Information to Save Millions This Year
As mentioned, effective data management and integration is key to preventing this nightmare. Support from data integration experts such as Informatica can help better manage supplier information on an ongoing basis; implementing a combination of data integration, data quality, master data management. In effect, this can help companies to:
• manage clean, consistent and connected supplier information or vendor information including addresses,
• manage corporate hierarchies (legal from D&B, for example, and location), contacts, contract and important documents proving suppliers meet business, legal and regulatory requirements,
• track changes to supplier information, so you can see what, when and who changed supplier information over time for auditing and compliance purposes.
In a recent business value assessment, we estimated one of the largest companies in the world could save $49 million per year by better managing business-critical supplier information to:
• negotiate corporate payment terms across global operations,
• accelerate and reduce the costs of supplier onboarding and certification,
• increase the efficiency of the supplier information management organization,
• improve the ability to analyze supplier risk,
• reduce potential exposure to regulatory requirements such as IRS 1099 reporting and the provisions to the 2012 Dodd Frank Act.
Thus, if your supplier information is inaccurate, inconsistent and disconnected, I wish you good luck rolling it up into a report to understand your company’s total relationship with global suppliers or vendors. Without this visibility provided by data management tools, it’s extremely difficult to make significant improvements in supplier spend management and supplier risk management across global operations.
Jakki Glivicky Geiger is Senior Director, MDM Solutions Marketing, Informatica. A a results-oriented marketing executive, Jakki has a 15-year proven track record of partnering with sales, generating demand, and building strong brand recognition to drive growth.