One of the most compelling insights from last week’s expose Hewlett-Packard’s procurement risk management (PRM) program was PRM Program Manager Venu Nagali’s recommendation that supply managers should spend less time planning for unlikely risks — such as the next Hurricane Katrina — and more time controlling common, day-to-day operational risks.

Zen-like in its simplicity, this recommendation has profound implications for the supply management discipline. When pressed, supply management executives begrudgingly admit that they lack visibility into their operations and their supply base.

Previous Supply Excellence posts have examined the impact of poor visibility into corporate spending and contracts. But Nagali’s recommendation targets a little discussed phenomenon: few enterprises have a clear understanding of the capabilities and risks of the suppliers with which they do business.

I can hear the naysayers now: “We know all about our suppliers. We have a vendor master.” But ask yourself these questions:

• How clean or accurate is your company’s vendor master?
• When was the last time it was updated?
• Does it provide complete and detailed insight into supplier capabilities, health, and performance?
• And how many vendor masters does your company use?

If you wavered on any of these questions, you are not alone. (If you didn’t, you’re probably lying to yourself.)

A week doesn’t go without hearing a supply managers griping that they waste a large portion of the sourcing cycle gathering information on existing suppliers. And supply chain managers in ceratin industries, such as automotive and aerospace, increasingly report that they are scrambling to respond to new customer requests for audits of the risks and capabilities inherent in their sub-tier supply base.

These factors suggest that most vendor masters are in need of an upgrade — if not a complete overhaul. We’re not just talking about adding a few new fields in the vendor master to capture new supplier attributes, such as the latest ISO certifications. We’re talking about an Extreme Vendor Master Makeover!

In fact the vendor master concept itself is antiquated. Created by technologists as an extensions of financial charts and ledgers, the master has largely been a record that provides basic data to support registry of transaction with suppliers. It often lacks the information required to truly assess and manage suppliers and risks. Worse yet, most vendor masters are only periodically updated, at best.

These factors leave enterprises exposed to payment errors, regulatory non-compliance, and greater supply risks due to ill-informed purchasing decisions.

Effectively selecting and managing suppliers in today’s fast-paced and global supply chain, requires a more accurate, current, and holistic view of suppliers — from basic contact information to capabilities and attributes to active contracts and performance data. It also requires a new approach to gathering and maintaining this supplier record — one that leverages Web-based portal technologies to take the onus of updates off the internal supply management organization and empowers suppliers to maintain their own profiles and attribute information. 

This new approach can best be described as Supplier Information Management. Future Supply Excellence posts will examine Supplier Information Management in more detail and provide examples of how companies are already using it to track and manage performance and risks across their supply chains.

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