The Future of Procurement: Accurate Vendor Master Data

We welcome this post from APEX Analytix, P2P optimisation experts, on the importance of accurate vendor master data for the future of procurement.

Accurate supplier data is the bedrock of procurement: any P2P process, underpinning companies’ sourcing, ordering, compliance, and payment processes, rely on it. Yet research we carried out recently with more than 350 executives at industry events in the United States and Europe has produced a startling statistic, namely, 94% of financial and procurement executives don’t completely trust their supplier master data.

Why not? The answer seems to go like this. First, companies find it difficult to find data validation and enrichment sources. Second, even if they find data sources, companies don’t know that the data provided can be trusted. And third, even if they decide that the data can indeed be trusted, using them to update and maintain supplier master data can be time-consuming and laborious.

So, what’s the alternative? Accurate supplier data is vital, but how can companies achieve it?

In contrast to some of the conventional wisdom that is out there, we don’t recommend relying on P2P automation networks as a workaround. Use of such networks tends to focus on transactions with companies’ high-volume, high-spend suppliers. The problem? The suppliers that might make up 80% of the transaction volume represent only 20% of the supplier base. And all of the suppliers that a business might deal with represent opportunity for errors, fraud, and compliance risk. For these, the difficulty of getting accurate data still remains. So P2P automation networks clearly aren’t the solution.

Smart, AI-leveraging supplier portals that cover 100% of the supplier base, on the other hand, are a genuinely effective way of enhancing the quality of supplier master data. Especially so, when augmented by robotic process automation capabilities and the ability to interrogate data sources known to be authoritative. In other words, use portals to onboard suppliers, and to solicit full and complete data at the point of that onboarding, and accuracy levels rocket.

And yet, such portals are very much the exception. For instance, 90% of supplier portals possess invoice and payment query functionality. But much fewer have advanced functionalities: only 53% of portals possess supplier onboarding and registration capabilities, and just 33% possess the ability for suppliers to view and update their account details. And only 17% are able to verify the data that suppliers submit. Clearly, with such limited levels of data capture and verification capability, data accuracy concerns are unlikely to ease.

What about ongoing data assurance -- monitoring, verifying and validating supplier data over time? Again, we recommend smart technology. Systems that use  government, regulatory, and third‑party data sources, including, as we do, the likes of individual country address books, Politically Exposed Persons lists, ‘prohibited party’ watch lists, country tax/VAT identification databases, banking information databases, and data sources for industry classification codes and Dun & Bradstreet DUNS numbers, are a requisite for enabling companies to leverage data from authoritative sources, evaluate it for accuracy, and automatically update supplier records.

The future of Procurement relies on accurate supplier data, and this should be an aspiration, not a dream.

 

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