Author: Margaret Gilbert
The supplier database – does this make you shudder? It often does as the database is not always managed well. It is ‘there’ and sometimes has multiple purposes which dilutes the purpose and effectiveness.
There comes a time when buyers have suppliers in procurement categories in which some are used, some are not and some are used twice a year and the admin cost of keeping is more than the transaction value. This situation is often never dealt with due to time pressures and business as usual. The question becomes: at what point is it time to manage and streamline?
There is no right answer but at regular intervals wold be best. There is little point in keeping suppliers that are used only minimally at best. It is easy to remove. The objective should be to have a supplier database that reflects frequently used suppliers.
Before removing, notification should be advised to the suppliers. Some buyers ‘remove’ but have a secondary database. This reasoning to me is unclear and can cause confusion as to which database is the latest or most accurate
The database has to have:
- Frequency of purchase
and other relevant information.
The use of some suppliers occurs due to some staff finding a supplier where the location that is close to them as well as not having approval to be a supplier. It is obvious that buyers should operate ‘within contract’ rather than ‘out of contract’ spend that is not known and often is not included in the known yearly spend. Documentation of all suppliers is required prior to approval. This will reduce the likelihood of staff ‘going down the road’. It should l be made clear that unapproved suppliers will not be paid. Letters to all suppliers stating this should occur.
It is useful to take the time to streamline and then review every 3 months which will make it easier as time goes by. Once streamlined then procurement should advise the organisation of the preferred suppliers for each procurement category.
How many suppliers do you have for different similar categories?
- Do you know the frequency of use of suppliers?
- How often do you cull?
- Do you send out notification of removal from supplier database?
- Do you have a review schedule?
- Do you undertake regular spend analysis?
It is also essential to keep the supplier database separate from other and for it not used for other purposes. It would not take long for the database to lose its value and accuracy.
Accurate information is key and having 2-3 suppliers in each procurement category is sufficient. There is no need for, say, 10. Suppliers with yearly transactions of $100.00 and under are prime example for removal.
The cost of keeping unused suppliers is not worth the staff time in relation to the administration cost. The objective should be to have an accurate database that reflects the organisation’s use of suppliers.
It is useful to undertake the exercise so there is some degree of certainty. Certainty of procurement is essential and having an accurate database can assist in this.
Streamlining the supplier database is a part of good contract management. Clarity of information is essential especially when the information is required and he result is confusion and time needed to resolve. Streamlining regularly will make the process much easier going forward.