Author: Kevin Burr
I have had the pleasure of working with a few large national retailers who source products from local suppliers. This is a great business model that allows these companies to provide back to and develop strong relationships within those communities. Regional buyers have control over the purchasing decisions in their regions which affords them the opportunity to lower purchasing costs by reducing shipping costs, offering potentially fresher products (think produce) or products that can only be sourced in that area, and it provides the enterprise an opportunity to reinvest back into the community, strengthening their bonds with suppliers and customers alike.
This operating model provides challenges to mastering the enterprise’s supplier information. The regional centers maintain their own “system of record” for their suppliers with whom they purchase from; typically in this case it is usually small “mom and pop” suppliers. Retailers I’ve spoken with tend to centralize the billing and payment processes. This silo of information leads to delayed payments and incorrect or out-of-date supplier contact information, which results in higher costs to maintain their suppliers. Additionally, internal audit functions for legal processes such as tax exemption certification occurs reactively rather than proactively. These challenges result in higher manual intervention and could potentially add costs of doing business in the event compliance procedures are not followed.
The solution to these challenges is to centralize the supplier data across all organizations in the enterprise and provide a single interface to manage supplier information for all regional suppliers. Implementing a Master Data Management solution will cause some organizational challenges. My observations suggest that centralizing this information may be perceived as a loss of control from the regional buyer’s perspective. Additionally, given the potential number of distributed spreadsheet silos across the nation, it is challenging for the MDM project team to acquire all relevant and up-to-date supplier information. Finally, the technical appetite for suppliers varies and is often based on the size of the supplier. A farmer providing just tomatoes to a local grocer may be less inclined or not even have access to use technology for providing and maintaining their information with the buyer.
While this is by no means an exhaustive list of challenges and benefits of a Master Data Management solution , they are however, consistent for retailers with similar business models. When embarking upon a journey to master supplier information, the following should be taken into consideration: first, as with all Master Data Management journeys, a C-level executive sponsorship is crucial. This should come from the business side of the enterprise as they can correlate and communicate the benefits in business terms such as increased revenue, reduced operating costs, and increased profitability. It is important to ensure IT participates in this process as well and often this C-level sponsor has responsibility over both the business and its associated technology, along with the purse strings to adequately fund the journey.
Next, ensure the regional buyers or their representatives have a seat at the table as stakeholders in this process. Communicate early and communicate often. Their buy-in and support is critical to the success of the project. They must feel comfortable and understand the benefits of consolidating the data into a single enterprise trusted view of supplier information. This data consolidation effort should not impact regional buyers' ability to make purchasing decisions. In fact, it should enhance their decision-making process and aware them of additional suppliers of products they may like to carry that were previously unknown.
Finally, the system implemented must be easy to use. While there is some control over the training of internal resources such as the regional buyers, there is no control over the suppliers. The solution should be intuitive and quick for them to provide or update their information. The interface and features must provide the right functionality required by both large national suppliers and small local suppliers. While the largest of suppliers will appreciate the effort, small local suppliers may pose a challenge.
Successful implementation of a Master Data Management solution will open new opportunities for businesses to streamline their operations and better manage the relationships between their suppliers. With the correct sponsorship, stakeholders, and technology, mastering supplier information will reduce costs, increase revenue, and drive further profitability.
Kevin Burr is Vice President, Product Strategy for Customer Data at STIBO Systems. His experience includes product management and services delivery for Initiate, IBM, and Tata Consultancy Services. He has over 10 years of experience in technologies that include master data management, stock market data, and professional consulting services.