Supplier Information and Lifecycle Management

June 24th, 2015
Amy Fong
Senior Procurement Advisor/P2P Program Leader
Supplier Information and
Lifecycle Management

2© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
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
Information
Value (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

(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?

There are many opportunity areas related to the supplier
master file: cash, cost, service, risk
10%
22%
33%
53%
68%
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
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

Having Procurement approve supplier setup to insure
alignment with preferred supplier strategy is a best practice
26%
54%
23%
23%
44%
23%
7%
0%
Peer Top Performer
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

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

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)
Procurement
Function
Management
Compliance &
Risk Mgmt
P2P
(Purchase-to-Pay)
Pay (Finance)Purchase
Source Manage
Plan, Support,
Transform
Protect
Source: The Hackett Group Procurement Process Taxonomy

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%
Bottom
Decile
Bottom
Quartile
Median Top Quartile Top Decile
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

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

Supplier Information has undergone a transformation
Fragmented  Consolidating
Siloed  x-Functional, x-referenced
Internal  External
Structured  Unstructured
Historical  Predictive / Intelligent
Batch Mgmt  Real-time
Replicated  Indexed / Self-Service
Process-driven  Process-driving
Data 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”

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)

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

 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?

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

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?

 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

How to justify SIM to for supplier-information related needs?
1. Improve Efficiency of Supplier Master Data Management
2. Improve Efficiency of broader SIM-related processes embedded
in other supply processes
3. 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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place.
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B2B Network &
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Automation
Working
Capital
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Supplier
Management
Apps
A Supplier Collaboration Platform

Q&A
Amy Fong
P2P Advisory Program Leader
The Hackett Group
+1.408.887.7335
afong@thehackettgroup.com
Vishal Patel
Tradeshift
Head of Solutions Marketing
+1.781.492.2525
vpa@tradeshift.com

Supplier Information and Lifecycle Management

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