The state of supply chain data and how to fix it

Digital transformation is becoming integral to procurement success. In fact, 77 percent of companies have adopted peer-to-peer (P2P) and source-to-contract (S2C) systems. However, acknowledging the importance of digital transformation and taking full advantage of its benefits are two very different things.

Yes, procurement technologies can provide organizations with a competitive advantage and improve operational efficiency, but these benefits are only possible when there is a trusted supplier data foundation. Even as leaders look to digital technologies to accelerate their procurement processes, they run into a consistent and demoralizing roadblock: low-quality supplier data. Whether it’s inaccurate, piecemeal or missing, bad supplier data can lead to extensive time spent on manual outreach, a reliance on supplier portals and conflicting data sources -- ultimately hindering the progress of digital transformation.

Inaccurate supplier data costs organizations billions

Inaccurate data costs U.S. organizations more than $600 billion annually. In the procurement department, these expenses can add up quickly through direct penalties and indirect costs.

For example, consider the indirect costs associated with delayed supplier sourcing -- one of the many consequences of poor supplier data. Procurement and sourcing executives say it takes five weeks, on average, to identify a new supplier. But why aren’t procurement departments able to pivot to new suppliers quickly? The answer always comes back to inaccurate supplier data. Without trusted data across all of their systems, procurement teams don’t have the context they need to make fast sourcing decisions. They’re left to do manual research and sift through conflicting data, costing the organization time, money and resources.

The bottom line? Business success starts with data reliability. And to maintain reliability, companies need a thorough supply chain data management strategy.

Why supply chain data is so hard to trust

Supply chain leaders and finance executives looking to draft a data management strategy should consider the following common problems when it comes to supplier data:

1. Supplier portals are usually updated manually.

Traditionally, organizations have relied on suppliers to input their own data into supplier portals, but this is an unrealistic expectation. Suppliers are busy and don’t have time for manual updates. When organizations leverage data from supplier portals, it’s often out of date, contains spelling errors or missing attributes, which could result in misinformation about spend, diversity reporting, ESG and economies of scale.

2. Procurement professionals have prioritized software, not data.

To solve the supplier portal problem, many organizations have implemented software to cleanse data and better understand it. But this solution is a band-aid because these solutions are often unable to integrate, leaving procurement teams with multiple conflicting sources of data.

3. It’s been traditionally viewed as a procurement problem, not an organizational one.

From sourcing to diligence and onboarding -- not to mention maintaining, integrating and validating -- it takes multiple steps to get just one supplier record integrated within your organization’s systems. But this hindrance shouldn’t stop you from prioritizing a thorough approach to data validation and sourcing. Instead, it should motivate you to adopt solutions that automate the time-consuming aspects of managing supplier data.

Adopting the right procurement technologies can help the whole organization with its data problems. After all, bad data impacts all functions of the business and limits procurement’s influence. When procurement is the driver behind good data, other teams will also benefit, creating a more cohesive and organized data strategy for your organization. For example, good procurement data can enable more informed financial decision-making.

4. You don’t know what you don’t know.

You can only understand your supplier relationships based on your organization’s prior experiences. Without good data, it’s hard to understand how your suppliers interact with the world. Consider the direct penalties organizations incur as a result of bad data. Organizations are responsible for the compliance and reporting of their own outputs as well as the outputs of their downstream suppliers. Organizations that contract with a non-compliant supplier -- say, a supplier that is not disclosing their carbon emissions -- may be liable for non-compliance fines. Without a solid supplier data foundation, organizations will never know how compliant their suppliers are.

The solution: Invest in a supplier data foundation

Consider the variety of data sources your organization probably interacts with, from ERPs and CRM systems to vendor databases. In all this noise, it’s challenging to determine the most comprehensive source. That’s where a supplier data foundation comes into play. This technology autonomously collects, verifies and enriches supplier data across your data lakes, existing applications, tools and systems and provides a centralized source for accurate supplier data. By leveraging a supplier data foundation, your procurement team can gain deeper insights into your existing suppliers, make better-informed sourcing decisions, eliminate your dependency on supplier portals and improve spend analytics.

According to TealBook research, 41 percent of supply chain executives say a supplier data foundation can limit consumer-facing disruptions by limiting delays and facilitating informed decisions during a crisis. In turn, consumer loyalty is not only maintained -- it’s improved.

Data is a high-stakes game, particularly for procurement leaders. But don’t let bad data haunt your organization. With the proper mindset and tools, accurate supplier data can evolve from being your department’s weakness to becoming its greatest strength.

Image Credit: Manczurov/Shutterstock

Stephany Lapierre is CEO of TealBook.