One of the interesting things about consistently reading and hearing content from quality sources is that you start to notice trends. It is amazing how often the same topics arise at the same time in different places. We use this blog as a way to help you stay on top of the major themes in procurement and supply chain management.
Webinar Notes: How GE is Taming the Supplier Information Management Complexity Beast
Stop me if you’ve heard this one… an analyst, a practitioner, and a provider walk into a bar… okay, not exactly…
This week’s featured webinar was hosted by Aravo with speakers from Spend Matters and General Electric. The combination of speakers gave a nice balance of practitioner, analyst and provider perspectives on one central theme: supplier information management, or SIM. All three addressed how to manage incumbent and prospective supplier information to improve decision-making and relationship building.
The Analyst Perspective: Thomas Kase, Principal Analyst at Spend Matters
All organizations are dealing with complexity, both their own and coming from the supply chains that they depend upon. As complicated as your current data sets may seem, sometimes the greater complexity exists in the second and third tiers of your supply base, in systems you don’t have any visibility into. SIM helps gain control to these types of complexity.
Even if you already have an ERP vendor master, the data may be dated, inflexible, difficult to share, and full of duplicate records. The expectation is that SIM should be much more flexible than an ERP implementation.
The goals of SIM should be aligned with the goals of procurement and sourcing: to lower total product and service costs, to find and engage the right vendors, to reduce risk exposure, and to improve supplier relationships over time. The vision of a SIM implementation should tie to the overall corporate strategy and P2P objectives, but think big - don’t be limited by IT or AP.
The supplier registration process should include direct, indirect, incumbent, prospect, large, and minority/diversity suppliers. It is important to incorporate selective internal visibility and multiple levels of data cleansing. When possible, take advantage of automation and let others in your organization get involved. Tie in data from other internal solutions as well as third party data enrichment, and let suppliers express themselves as much as possible.
There is a real opportunity to partner with finance to make a SIM implementation happen. The entire organization will benefit from having a ‘single source of truth’. One of the best way to ensure supplier cooperation is to establish a ‘No SIM, no PO, no Pay’ policy and to get AP on board. The value proposition applies to many other people in the organization because everyone is a buyer sometimes. Use this fact to find a way to work more closely with the business units.
The Practitioner Perspective: Thomas Hattier, Manager of GE Shared Sourcing Services
GE was founded in 1892, and currently has $150B in annual revenue, 300,000 employees worldwide, and customers in 100 countries. They also maintain an amazingly diverse range of lines of business.
In their SIM solution, they have 750K global suppliers. Before implementing Aravo’s SIM solution, they had a homegrown supplier management tool that was originally created to generate a common numbering system. In 2008, when they started considering alternatives, it was already 8-9 years old and needed more focus and functionality. Although their data was decentralized, it wasn’t visible or useable and the situation was getting worse.
Their implementation began in 2008, and they were live by Q3 of that year. All 750K supplier went online at the same time. There was a significant amount of data cleanup to be done, and the job bigger than they thought, but was still the right answer. Wherever possible, they drove responsibility for the data to suppliers. Their reason for taking a ‘big bang’ approach was the need to move faster, even if it required more cleanup. The business couldn’t afford having to many issues with the vendor master.
As the economy got worse and risk increased, a reduction in single sourcing increased the number of suppliers that had to be managed. In addition to this, GE was actively acquiring businesses and learning to face new regulatory changes. The focus remained on the reliability of the data (not the cost of collecting it). Compliance, accuracy and simplicity were the focal points of wanting to make changes in their supplier management process. The team believed that if it was clean and easy to share that efficiencies and benefits to the business would follow.
In the end, GE had one single global supplier list representing all parent-child relationships, and all of the spend from the AP databases in one system. This increased automation brought additional visibility to the entire process. Obviously their data has improved, but there are also some side benefits. They are able to monitor use of diverse suppliers in various locations and industries and slice and dice this information in spend analysis by congressional district. They use this when they talk about the volume of their supply base and customer base and volume in that district for marketing purposes. They also incorporated third party sources of information such as risk management, financial validation, and government watch lists.
There are some lessons they would share with other companies considering a SIM implementation.
- You can’t overstate the value of clean supplier data for risk, compliance, and regulatory issues.
- Getting buy-in from business units is a challenge. Although it takes longer than you plan for, and is more complex than you think it should be, it is worth doing. Once you get them on board they will see results sooner.
Looking forward, GE is focused on the regulations they have to comply with all the way through the supply chain, in particular conflict minerals like tungsten and gold. They are moving closer to true self-service by their suppliers and are considering opening supplier self-registration.
The Provider Perspective: Robert Shecterle, Vice President of Marketing at Aravo
Aravo is a privately-held supplier lifecycle management (SLM) solution provider founded in 2000 and headquartered in San Francisco, CA. They see risk as a driving concept for their customers, particularly the risk associated with the many forms of outsourcing relationships: offshoring, nearshoring, rural sourcing, etc. Companies still need more than they are getting from other transaction-based data management solutions. The key to finding the elusive ‘single source of truth’ that so many seek is the right combination of software and best practices – not just automating what people do today.