Vendor Master Management is one of the most critical parts of the procurement and accounts payable business functions and often it creates inefficiencies in the processes and stops their movement towards a leaner supply chain. This failure of system controls due to unclean, redundant or ambiguous data in vendor master can result in duplicate and erroneous payments, missed potential discounts, delay in check realization, un-applied or misapplied credits, reporting errors for tax and fraud etc. There is a strong business case to maintain a healthy vendor master so that the vision of lean supply chain becomes reality as soon as possible for an organization. The steps that we need to take care of, for a well maintained vendor master are:
- Identify the right owner: While every organization has an owner for the vendor master but it is equally important that the owner know about the vendor master requirements, its standards, data quality-accuracy-consistency maintenance ways etc.
- Deploy Master Data Management Solution: Modern MDM solutions are an excellent value-add for maintaining your master data and vendor master being one of most critical masters, will benefit a lot from this initiative. It will ensure that you have enough controls, automation, access-create-modify-delete rules in place and are being monitored by management regularly
- Clean the data and deploy cleaner rules: It is well known that duplicate, redundant and inconsistent data spoils the whole procurement cycle in terms of reduced effectiveness and efficiency and it has bullwhip impact on the end to end supply chain. Many a times, this data inaccuracy robs an organization to claim volume discounts, deflation etc. from suppliers. We not only need to clean the data but also make rules stringent enough so that the data stays clean
- Standardize naming conventions: No need to mention that if a supplier is named as Alkes Info Systems and AIS and Alkes and all of them are coming as different vendors in your report, how in-effective will be our vendor management policy. We need to standardize the naming convention of naming vendors, items etc. so that no duplicate data is created – Most of this will be taken care of if you have right owners and an MDM solution in place
- Separate out one time vendors with regular vendors: Often, one time vendors (or less than 5 transaction vendors) inflate the data in vendor master and the supplier reporting MIS gets skewed. Explore strategic sourcing and the use of p-cards to reduce need for one-time vendors. For lowering the risk of duplicate payments, consider not allowing manual or electronic data interchange transactions with vendors on p-card programs
Other than above, smaller measures like purging the unused records, retaining the right records, updating the policies regularly etc. will also help in keeping the health of vendor master as good for supply chain.