Managing many connections with suppliersManaging supplier information is becoming an ever-more complex and involved process for organizations of every size and across all industries.   Through our work at Lavante in automating recovery audit  and supplier management processes, we are constantly learning from our customers, prospects, and industry analysts how organizations are dealing with this critical issue.   We recently partnered with IOFM (Institute of Finance and Management) on a comprehensive market research survey where respondents answered a series of questions related to the key tasks and/or projects involved in managing supplier relationships.   After spending time at several industry conferences talking extensively with a host of AP and Shared Services practitioners, and reviewing the results of this survey, several themes or issues have emerged which I wanted to share here.

First is that the complexities and scale of tracking and managing suppliers is overwhelming for most companies.  This is in part due to the many different tasks that have to be performed – on-boarding, validating tax ID’s, gathering insurance documents, W9s, W8s, maintaining regional differences, etc. – which are often treated as disparate tasks or projects.  And although there are usually processes built around performing these functions, they are seldom combined into one seamless process that can be automated, and thus streamlined.  This means that every change requires  a lot of extra work to accomplish.  Take for example the potential change to the W9 collection process in 2010, where organizations would have been required to collect W9s for new categories of suppliers.  We talked to hundreds of companies that were under considerable stress with the prospect of:

a) gathering together W9s from their current suppliers;
 
b) identifying which vendors were missing W9s, and and then determining if they needed one to comply with the new legislation;
 
c) contacting the supplier to request the document;
 
d) finding the correct information if existing data was incorrect, and reaching out to them again.
 

If you only have a handful of suppliers, this wouldn’t be such a daunting task.  But even mid-size organizations we talked to had thousands of suppliers, with larger global enterprises looking at verifying tens of thousands of contacts.  Given these numbers, this task becomes a monumental project with the risk of heavy penalties if not conducted in a timely, accurate manner.  While this legislation was eventually overturned, it left many finance professionals with the firm belief that it can and will happen again, and that being reactive wasn’t a good way to approach the issue.

It struck me that this one project of collecting W9s was intricately related to so many other tasks involved with supplier management.  And linking these seemingly disparate tasks together into one seamless process,  powered by technology, results in a continuous, on-going process which can scale to handle an unlimited number of suppliers.  With an ability to collect, track and manage any type of required document, and allow total control over this process, it would dramatically simplify the complexities involved in the supplier management process.  An automated process would also allow finance professionals to instantly comply with new regulations and internal processes.

Next week, I’ll share some other thoughts related to this continuous process, and how simple it really can be.  As usual, please let me know your thoughts about this important topic.