Manufacturing companies can benefit greatly from bringing order to their vendor data to capture the significant potential for better decision making and quicker time-to-market.
But first, I want to explain in what sense I use the word vendor here.
The what and why of vendor data are relevant questions because vendor data is often used synonymously with supplier data. This is not surprising as the common definition of a vendor is: "the crediting business partner of an organization". According to this definition, an organization would purchase goods and services from a vendor. Many ERP systems adhere to this definition, keeping information about the "vendors" that "supply" an enterprise in a vendor master database.
However, from a supply chain and master data perspective, you could argue for treating “supplier” and “vendor” separately.
Vendor or supplier - the difference
In fact, for manufacturers, the terms "supplier" and "vendor" can be said to refer to two different relationships to the business they are dealing with at opposite ends of the supply chain.
Suppliers and vendors are at opposite ends of the supply chain
If you are a manufacturer of consumer-packaged goods (CPG), your supplier would be the business
partner providing you with ingredients or semi-finished products that you require for your manufacturing process. Your vendors, on the other hand, would be retailers, distributors or wholesalers, who sell the finished products to end-consumers.
- The supplier comes first in the supply chain and the vendor comes last
- The supplier is B2B, the vendor is typically B2C
- The supplier mostly deals with bulk quantities aimed at resale, vendors with small quantities aimed at consumption
- The supplier deals with farmers and raw materials, the vendor deals with end-consumers.
Drawing attention to these differences is not an attempt to be hairsplitting about the use of words, but instead to underline the different business processes associated with two different data domains.
I will make this distinction in the following when referring to vendor data.
Why you need trustworthy vendor data
With good vendor data, you are one step closer to achieving data transparency across the supply chain.
Having solid vendor data is also important because, from a manufacturer’s viewpoint, vendors are your customers and your sales channels. Your vendor data must be correct and updated because it enables you to:
- Secure correct billing and prevent fraudulent transactions
- Provide you with a 360° view and help you to negotiate better deals
- Quickly upscale and expand with new vendors
- Achieve compliance with vendor and end-consumer demands
- Adjust production and the number of SKUs
Manufacturers would benefit greatly from achieving a consolidated view of their vendors (distributors, retailers and wholesalers), which are their customers and business partners. The ecosystem of vendor data often spreads across several siloed operating companies, divisions and ERPs. Consolidating vendor data ideally includes developing a clear, shared customer hierarchy, logical classifications and information enrichment across disparate systems. A single source of vendor data enables downstream analytical processes for trustworthy reporting and improved decision making.
Having access to a 360° view of their vendors, organizations would be able to allocate resources at the right time with the right vendor (customer) for the right reasons. They would be able to perform segmentations, resource assignments and trade assessments based on true and trusted insights.
- Manufacturers need to understand exactly who they are selling to in order to mitigate risks and assess the customer value.
- They must view and organize their customers and business partners for analytical purposes.
- They must optimize their trade spend and promotions which means engaging with the right business partner for the right product at the right time.
But for that to happen, they must manage and understand the complex interactions across business partner functions. Essentially, they need data visibility across master data domains, e.g., corporate relationships, party-to-party relationships, product-to-vendor, customer-to-location etc.
The vendor landscape is highly complex and amasses data
The vendor landscape is often incredibly complex. Large retailers’ sales structures consist of multiple lines of businesses, locations, territories, divisions, operating companies and sales channels. As a result of that, manufacturers must engage in different business processes and systems depending on the type of interactions with their vendors and even on the type of product purchased.
This complexity of how vendors are organized and how they operate generate a massive amount of vendor master data to be managed. A high data quality and accessibility would enable the manufacturer to streamline their vendor-related processes, distribute work more efficiently and monitor the progress.
Eventually, manufacturers will be able to:
- Deliver orders at required speed
- Optimize their end-to-end processes
- Provide data transparency
- Reduce costs and risks
- Improve invoicing and logistics
- Plan strategically with more confidence
Vendor data is a sub-category of customer data that has different attributes than end-consumers. Vendor data can also include ledger data in as far as accounts and contracts are important attributes. In addition, location data plays a big role in the vendor data model because of the importance of logistics. This includes warehouses, distribution centers, routes and packaging data.
Management of vendor data – forget ERP
Vendor data is often managed differently across different instances of ERP systems of a single enterprise. Not only can ERPs become silos of data, impeding collaboration, they are also designed to manage data for specific purposes such as price management and invoicing.
But manufacturers have to be able to perform a multitude of tasks related to their vendor data to drive deeper insights than what traditional ERPs allow. This includes:
1. Data cleansing
Having inaccurate and duplicated data that resides in disparate systems provides a siloed view of business partners. It slows down operational efficiency and makes managing the vendor ecosystem difficult and often more costly.
Reporting derived from duplicate and unconnected data makes it difficult to segment your customer base correctly, assess values and risks and ultimately to understand exactly who you are selling to. Being able to trust your analytics data reduces the amount of returned products and enables you to allocate your resources more efficiently.
3. Separating operations
Not everyone needs all the data. It actually makes sense to decouple sales from other operations such as creating new retail stores for a specific retail chain. This process is driven by an operations specialist who does not necessarily need insight into invoicing and the distribution of goods. The operations specialist needs to set up a framework of location and finance master data for which the ERP does not provide the best tools.
What you need to achieve a high data quality and the business benefits of a 360° vendor view is a single, centralized MDM solution that can gather vendor data from multiple sources and data pools and create trusted data.
You also need a proper data governance strategy that includes monitoring, controlling and maintaining master data.
A vendor-based MDM solution provides opportunities that expand beyond ERP capabilities and lets you:
- Leverage workflow-based monitoring, data-quality policies, reporting, dashboards and KPIs
- Facilitate onboarding and sharing master data across the enterprise
- Identify and visualize hierarchies and relationships
- Ensure master data is fit for purpose through data verification and enrichment services
- Enable centralized authoring of vendor data driven by an efficient governance model
- Streamline vendor onboarding, compliance, as well as credit and legal risk assessment
Create a Digital Business Hub for vendor data
To further increase the data quality of your vendor records, you can integrate your MDM solution with third-party sources and data providers such as Dun & Bradstreet, Experian and Loqate.
Connecting first-party data with Dun & Bradstreet can help you build robust customer profiles and gain a clearer view of customers and vendors. Use Experian to validate email-addresses and Loqate for address verification.
For manufacturers, it makes sense to treat suppliers and vendors as two separate data domains and to increase the focus on vendor data management given the complexity of the vendor landscape and the importance of controlling the processes.
For retailers it would be equally important to manage suppliers and supplier data, but that’s a different story.
Learn more about how to drive efficiency and insight across multiple data domains with Multidomain MDM.