Supplier information is integral to optimizing your relationships with your suppliers and for maximizing the value from your ERP system and other automated solutions. Used correctly, a well kept supplier master data file is a strategic asset that can be leveraged into time savings, resource savings and dollars to your company’s bottom line.
The biggest challenge to maintaining the quality of your supplier data is its near immediate decay after being recorded. Suppliers constantly undergo mergers, purges, acquisitions and employee churn that challenge the integrity of their data. Dun & Bradstreet (D&B) reports its database of businesses experiences annual changes of 20% for addresses, 17% for business names, and 18% for phone numbers underscoring how quickly and frequently supplier data decays. ERP systems perform some data quality measures at the time a supplier is set up, but they do little to preserve the integrity of the data over time. ERP systems are reliant on quality data, but they do not ensure it.
Allowing your supplier data to decay over time is very costly to your enterprise. Inaccurate data delays implementation of ERP systems and other automated solutions and can prevent those solutions from achieving their optimal ROI, effectiveness or their value over time. Failure to identify overlaps or relationships within your supplier population can lead to missed volume discounts or rebates as well as an increase of duplicate payments by up to 300%. Poor supplier data quality is also very costly in terms of lost efficiency and time. Bad addresses alone can lead to miss-sent shipments and checks. Quality supplier data is also vital to stay in compliance with various external regulations and internal controls. Failure to achieve this compliance can be both disruptive and very costly while causing great exposure and risk.
Collection and management of supplier data is more important now than ever. New 1099 tax legislation included in the funding provisions of the Patient Protection & Affordable Care Act (March 2010) requires companies to collect valid Tax Identification Numbers (TINs) on a much larger scale than pre-legislation levels. Today most companies are expected to perform 1099 reporting for less than 10% of their supplier population. When the new law takes effect, companies can expect reporting levels to rise above 90%. Companies will need to implement new policies and potentially even new systems to manage supplier information more accurately in pursuit of staying in compliance.
The question arises: How are you going to ensure the ongoing quality of supplier information to achieve optimal project ROI and on-going efficiency while maintaining compliance with controls and regulations?
Check back for part two.