How Accurate Supplier Data and Risk Analysis Can Make You a Procurement Hero
Supplier performance has a direct impact on the quality, robustness and health of the whole supply chain, and is tangibly linked to the efficiency of your business and its exposure to risk. It’s a business-critical corner-stone we could say. Yet we don’t always have the mechanisms in place to monitor, forecast or analyse that performance and, importantly, the events that do, or may, impact it. Lack of access to both internal and external useable data, apart from the inaccurate, inconsistent and often incomplete data we have housed across disparate systems or premises, is a sure way to meet disruption head on.
Why we need supplier data
Procurement needs, and wants, all sorts of strategic-level information about its suppliers, and not just those at the top level: what is happening beneath the surface is equally important if it aims to stem the risk that lurks in the opaque corners of the supply chain. This is especially true for firms that have, or would like to have, CSR and sustainability sewn into their DNA.
While Procurement needs this information for many reasons, to analyse spend, SLA performance, or measurement and benchmarking for example, the greatest need for supplier information is risk-related. That is, information about the supply base and market activity that is not necessarily connected to contracts, obligations or relationships, although they are important too.
If we don’t have a handle on risk, then the other measurements could become obsolete – if the worst happens, there will be little left to measure. Without visibility of accurate business-critical supplier-related metrics, like financial histories, health and safety reports, regulation compliance records, ethical sourcing practices, or the location of their suppliers – which should all be collected, verified and made accessible at pre-qualification stage – we cannot be sure we are choosing the right suppliers who can deliver to contract, meet all our compliance standards and help to avert risk.
Knowing about risk
Procurement has long complained of lack of visibility, whether that be the supply chain manager, the compliance officer, the category manager, they all feel the same pain. Risk is a huge category within supplier information management because it crosses so many touch points and can affect any business, at any time, for no fault of their own. Traditionally this has come in the shape of reputational risk, avoidable and unavoidable risks that are man-made or natural, financial risk and geo-political risk. But of course today we have the newer concerns of cyberattack and drone interference. Whether foreseeable or not, the most effective way of tackling supply chain risk is to put big data at the centre of your supplier sourcing strategy.
This is where a rigorous supplier pre-qualification questionnaire comes in, which is far more than a survey tool. It enables suppliers to be scored against specific buyer needs, to ensure they have the right information on which to base supplier choice. It captures competency of the supplier, its capacity, commitment, consistency, track record, control over its own supply chain, sustainable practices, and many more metrics including the staple diet of H&S and financial health. Gathering all this data together, with least inconvenience to the supplier, can be a long and laborious task for the buyer, especially if they want to reach all tiers of the supply chain.
But it’s not enough to base selection purely on supplier pre-qualification response. Verification of what the supplier is saying is crucial for the buyer to make evidence-based decisions. Validated correctly, this data (whether supplier-volunteered or independently audited) can improve the way we respond to volatile demand or supply chain risk.
And we cannot know where this risk lies unless we have easily accessible and up-to-date supplier data that we can rely on to translate into actionable insights.
What data do we need to do that?
We need big data – and by that we mean data that is deep and detailed: the kind of information that can provide a buying organisation with a single source of truth for all the key factual information related to a supplier. This means 100s, sometimes thousands, of data points collected for each supplier which buyers can easily integrate with their ERP system for analysis and strategic sourcing, scenario planning for supply chain resilience or business continuity planning. Of course, unless the data is good quality, it is not valuable. So these huge amounts of data must first be scrutinised and validated before being shared with buyers to use effectively.
Many P2P providers offer this assertion, but few go to the lengths of actively checking supplier responses: Achilles is one of them.
How authoritative is the data?
With a global team of validation experts, with access to specialised and authoritative third-party data sources, Achilles’ validation methods include on-site visits, one-to-one questioning and document checking. It trawls external bodies for information on financial health, industry/legal and regulation compliance, CSR, H&S vetting, worker satisfaction, historic company performance, breaches of regulations, and so on to produce a complete supplier picture.
But even that alone is not enough – data assurance must also be ongoing, monitored, verified and validated over time and based on tried-and-tested validation markers that are designed and developed according to region, industry and legislation.
At the heart of the Achilles machine sits such a data engine, a rich knowledge-bank of all supplier information retrieved from many sources, not just that provided by the supplier, but externally sourced data to complement it. Having been pulled into the machine, data that usually is difficult to get to, is pushed out to the customer in a meaningful and useful format, measured, scored, benchmarked and identified as assured firms to do business with.
Data is power …
All of this adds up to immeasurable amounts of data for the user, but crucially, on a scale that previously was not available or in a useable format.
That is the downside to having so much data: people become overwhelmed, and can’t make sense of it. These are the two sides of the big data coin: you have all this powerful information, but it’s useless if you can’t understand it. Data is power, but only if it is reachable, easily interrogated, communicable, and not buried in pages of reports: it is no use a buyer trying to identify a nugget of information that is right down on page 64 line 27!
Achilles has developed a presentation style of data that allows buyers to sift through big data and draw on key insights that will help them to make strategic decisions and tactical responses. They can use the insights for example to improve LTI on sites, monitor continuous improvement of key suppliers, ensure supply chains use suppliers that are aligned to their CSR goals, and so on.
Having the insight to inform you of the best suppliers for your needs, being able to identify the exact suppliers in your chain that pose the most risk, or just being aware of the products or services you should keep an eye on, because demand might rise and prices with it, or where to look for alternative suppliers in the event of disruption, gives the holder of that information a very valuable status.
Imagine having the ability to go to your CPO with information that backs up your advice to open up negotiations with a new supplier, because of a foreseen event. People who can do that will be the ‘supply chain heroes,’ avoiding potentially damaging situations that might result in product overruns that can’t be fulfilled, or spiralling costs because of demand, or being at the back of the queue because you weren’t prepared. Big data can be made incredibly insightful if we have the right tools to use it, to turn it into actionable advice about our supply chain on which we can base good decisions.
… And it will grow
As technology becomes cheaper and smarter, capturing more and more information, as AI, VR and IoT make further inroads into our lives and businesses, data volumes will explode like never before. And like never before, we will see a demand for accurate, reliable and up-to-date information in a useable, understandable and communicable format. As global trade stresses increase, as natural disasters become more present, it will be harder and harder and more expensive to gain transparency, especially of the bigger picture and the depths of the entire complex supply chain. And as new suppliers enter the market, as supply shifts and supply chains change, new risk enters the picture. Who in the organisation will have the foresight to even think about this, let alone track it? Procurement is strategically placed once it is in possession of the right intelligence.
Upcoming event on ethical supply chains
Supporting Achilles’ commitment to ethical and sustainable supply chains, the firm is running a half-day event called ‘Supply Chain Ethics’ where global organisations will be talking about how they address the need for, and challenges of, sustainable and ethical supply chains, and how real time data is essential to their success.
The event takes place on the morning of November 20th in London. Find out more here.
This is a Brand Studio article written for Achilles, not as Spend Matters’ analysis or news content.