Finding Meaning in Your Supplier Master Data
- Vendor master data management is vital to bail procurement out of the current crisis
- Master data lays the foundation for data- and insights-based decision-making
- Sophisticated tools are now available to clean and standardize master data
Many businesses continue to struggle with unstructured supplier master data, primarily because the data is often stacked in multiple systems and departments.
Different teams within an organization — finance, IT, marketing, HR — use their own versions of supplier data and maintain individual records, relying on their own version of the truth to make decisions.
Master data, which is a shared or common asset within the organization, becomes a source of information that is often incomplete and difficult to find insights from.
When different teams use different data, there are likely to be questionable business decisions.
The wiser move would be to revisit your supplier master data and leverage a system that can clean and structure this voluminous data while checking for duplicate entries, errors, fraud and other issues.
This becomes even more vital, considering the fact that companies making insight-led business decisions from intelligent data are predicted to take $1.8 trillion annually from competitors who lack data-driven capabilities, according to this report.
And supplier master data can be one of the key areas where procurement teams can find opportunities for insight-driven strategy and decision-making.
What is Supplier Master Data Management?
Supplier master data management (MDM) is a framework that a company uses to manage a comprehensive set of records about its suppliers. This data includes all relevant information about the goods and services being sourced from the suppliers -- procurement history, supply categories, inventory data, contract records, purchasing records, and other key information about supplier relationship.
These records are vast and have many data points. Supplier data typically includes:
- Details about contact person/point of contact
- Location and address information
- Details of goods supplied by the vendor
- Legal form of the company
- Details of certificates provided by the vendor
Challenges in maintaining supplier master data
Your business may have thousands of suppliers. How do you ensure that the master data is accurate and up to date?
Also, as volumes of transactional data continue to expand, how do you make sure that the master data model you use is scalable for the future?
The answer to both these questions is to look beyond ERP systems towards fully equipped, AI-powered solutions that are better designed to do the job.
Today, there are unified platforms that use algorithms and machine learning to normalize the data through cleaning and standardization.
The key feature of a good Master Data Management (MDM) system is having a high accuracy of managing data. It should consolidate all data into a common format, replace missing values, standardize those values and remove duplicates. It should distil one valid record from multiple records and then feed it back in the ERP system. Additionally, it should continue to nurture data and scale with it appropriately.
Benefits of accurate vendor master data
The accuracy of vendor master data impacts your ability to maintain correct financial records and reduce costs. Efficient vendor master data management ensures complete visibility of your business ecosystem. It enhances the quality of data and improves decision making in this process.
By centralizing and standardizing data across the organization, it makes it easy to accomplish critical business tasks such as reporting, onboarding and integration of vendor data in back-end systems.
The ability to provide correct information on vendors can also prove critical during an audit. This information may also be required when your business is striving for an additional round of venture funding.
Additionally, with accurate vendor master data, you can make timely payments and keep track of suppliers easily. All this helps strengthen supplier relationships.
A clean and common dataset for all vendors can help you make better sourcing decisions. It can eliminate the possibility of error, duplicate records or fraud.
In case the master data is not accurate, decision makers can under- or over-estimate spending with a given supplier. They do not have a clear understanding of which departments are purchasing from the same vendor. They may also miscalculate their tax obligations.
As the uncertainty in business environment continues to grow, reliable supplier master data is a must-have asset for your business.