Master Data Management

8 Tips to Help Procurement Optimize Supplier Master Data

Jarrod McAdoo, Senior Product Marketing Manager, Ivalua

Gartner predicts that by 2023, organizations that don’t optimize supplier master data management (MDM) could have wrong information for half of their suppliers! That’s significant. Accurate supplier master data (SMD) is essential for procure-to-pay (P2P) automation, accuracy and analytics, but connecting data to users and systems sometimes gets bumpy. Use these eight tips to optimize your SMD for smoother processes, more accurate information and better business value. The advice comes from this report: Gartner Supplier Master Data: Gain Control Over Your Supplier Master Data Before It’s Too Late.” It includes best practices for moving to a modern model for supplier master data ownership and maintenance, so you’ll want to get your copy.

Tip #1 –  Use holistic data modeling to optimize organizational needs.

To cover your full master data needs, Procurement should work with all internal stakeholders to map out the supplier lifecycle from end to end. This cross-functional collaboration is critical for building a complete MDM model with fewer bumps and gaps. The data modeling process should identify all the systems and tools that use supplier-related data and where and when multiple systems get involved in the supplier relationship life cycle. Note that the data model doesn’t need to contain every piece of information on a supplier, but mainly on data that two or more systems must use. The model should also include the best source for each piece of master data, whether it’s the supplier, an internal group or a third party like D&B. The building of the holistic data model will reveal where common data needs to be captured and routed for downstream processes. Don’t forget about processes to manage data creation and maintenance.

Tip #2 – Optimize by establishing a framework for master data governance and stewardship.

Include internal stakeholders early in the process of building your data governance and management model. Use a framework (such as that described in the Gartner report) to specify who has decision rights and who’s accountable for data. This establishes clear guidance for a responsible, accountable, consulted and informed (RACI) matrix for the data. The Gartner report goes into detail about setting up master data governance.

Tip #3 – Managing your supplier data must be ongoing, so plan that way. 

Supplier data changes constantly, probably more than many people realize. D&B finds that 20% of business addresses and 17% of business names change each year. If your business has 10,000 suppliers, you’d need at least 2,000 updates a year to keep supplier data accurate. Expect to pay constant attention to your data to keep up with changing contact names, phone numbers and more. Making this an ongoing practice reduces stale data and other problems that arise from neglecting MDM, which slows down other processes. 

Tip #4 – Look at data models, collection and management to establish data ownership. 

In the supplier master data report, Gartner notes that uncertainty about data ownership is one of the main obstacles preventing MDM success. Determine who has primary ownership and accountability for supplier master data. The group with the most control over data sources should typically own the supplier master data.

Tip #5 – Optimize broadly by looking across the full supplier life cycle.

To get the full view of your master data needs, Procurement and other internal stakeholders should map out the end-to-end supplier life cycle. Organizations must align process ownership with data ownership, or risk rapidly escalating operating costs and reduced spend visibility. This means optimizing in all directions. To amplify the impact of data optimization, extend your view into other areas that are impacted by SMD, and this cross-functional collaboration reduces problems downstream.

Tip #6 – Optimize around who really needs what data in Procurement. 

Create a governance plan as early in the project as possible to help organize responsibility for supplier master data. While Procurement owns the overall supplier relationship and process, you probably don’t always interface directly with every supplier, such as tax advisors or cleaning services. Procurement also doesn’t need to engage with every bit of master data needed to build your complete data mode, such as access suppliers’ banking information. Focus your MDM optimization on the types of data that Procurement actually touches.

Tip #7 – Enlist suppliers to support data maintenance and reduce inaccurate information.

A cost-effective way to get supplier data updates into your systems is to delegate the responsibility to the people who own the data – the suppliers themselves. They know their information better than anyone else. Engage your suppliers in data maintenance by making them accountable for data quality in new and renewed supplier contracts, with penalties for nonperformance. Of course, this must be done with the appropriate approval workflow.

Tip #8 – The process of optimizing SMD can also optimize supplier quality.

Make supplier data updates part of doing business with you, and see who’s on board. Suppliers who accept responsibility for maintaining their key data elements have an advantage in winning business over those who do not. Taking issue this relatively simple request is often a telling indicator about a supplier’s willingness to work with you. 

Optimizing Supplier Master Data Has Positive Results

Optimizing your supplier master data is definitely a worthwhile exercise. Gartner found that 75% of organizations using enterprise information management to align, link and leverage their data and analytics investments will achieve improved business outcomes. Where are you on your Procurement journey? Find out with this self-assessment tool from Forrester. You’ll learn more about what you need to do to optimize your processes and your data. 

If you would like to discuss your Master Data Management needs please get in touch

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