One of the primary requirements for effective Spend Control is a central directory of properly qualified suppliers covering all important categories. Your organisation can only be expected to buy from better value, low risk suppliers if such suppliers are available to them at purchase time.
But many organisations find themselves today with supplier records that are duplicated across multiple systems, incomplete, and out of date. Many of those suppliers just ‘showed up’ when someone purchased something from them and were never properly qualified to determine the relative value they deliver, nor the risk they entail.
This puts the organisation at risk in some very crucial ways:
It also causes the organisation’s cost basis to be higher than necessary:
- High potential for operational disruption and indirect liability from unqualified suppliers
- Insufficient supplier coverage in important categories
- High cost of supplier information maintenance and miscommunications across multiple parts of the organisation
- Reduced Procurement capacity for competitive sourcing due to the time needed for basic supplier management
- Suppliers unwilling to offer their best prices because it’s hard to do business with the organisation
- Low supplier compliance in day-to-day purchasing due to lack of visibility
In order to move toward improved Spend Control, Procurement almost always needs to start by improving the quality of supplier records and implementing consistent supplier management processes.
All that is required is a proven, efficient approach, and this is what we will address in Part 2
of this article.