In episode 416 of the Let’s Talk Supply Chain podcast, host Sarah Barnes-Humphrey engaged in a dynamic discussion around the top supplier management challenges with Ryan Walicki, CEO and founder of Relish, and Matt Montgomery, Senior Director of Product Marketing at SAP, to uncover the top challenges organizations face.

The Tangled Web of Supplier Data

One of the fundamental hurdles was the sheer difficulty surrounding supplier data.

As Ryan aptly put it, “You’d think it’s a pretty simple thing. If you’re a supplier, we want to know who you are, what products or services you offer, and how to pay you, right?”.

However, the reality is far from straightforward.

Suppliers are bombarded with requests for information in countless formats – different portals, emails, and forms – leading to a dissemination of data that is often inconsistent and inaccurate.

• Validation nightmares: Verifying crucial information like tax IDs and bank details can be a cumbersome and manual process, often relying on outdated methods.
• Data silos: Within organizations, supplier information can exist in multiple versions across sourcing, contracting, supply chain, and finance, creating a “Frankenstein” of disconnected records.
• Human error: Simple typos can lead to significant discrepancies and the creation of duplicate records.
• Beyond basic information: Modern supplier management demands more than just payment details. Compliance with regulations, certification levels, and adherence to sustainability goals are increasingly critical. The fluid nature of supply chains and logistical changes further complicates data maintenance.

Matt added that historically, the focus was primarily on payment data, but now it has expanded significantly to encompass a broader view of risk and compliance.

The need to track sustainability goals and the evolving supplier landscape, with new suppliers onboarding and others leaving, adds another layer of complexity.

Deciphering the DNA of a Supplier Profile

Understanding the “DNA of a supplier profile” is crucial for effective management, extending beyond basic contact information.

Matt explained that while initial data might be simple, it expands as the relationship grows, encompassing certifications, due diligence requirements, and adherence to specific standards.

This due diligence can even involve on-the-ground validation for critical suppliers.

Ryan emphasized the internal stratification of supplier data, highlighting how category management requires understanding the supply base through various lenses like NAICS codes or UNSPSC codes.

The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data of the U.S. business economy.

The United Nations Standard Products and Services Code® (UNSPSC®) is a global classification system of products and services used to classify products and services: in the case of suppliers, to classify the products and services of their company.

Ryan humorously recalled his early corporate experience at a bank where differentiating suppliers who were also customers was a critical data point.

Ultimately, the DNA of a supplier profile is multifaceted, influenced by industry regulations, company values, and the specific needs of procurement and supply chain functions.

Each department may have its own unique information requirements from a supplier.

The Perilous Path of Payments and Banking Validation

Payments and banking information present a significant challenge due to the sensitive nature of the data and the need to prevent fraud.

Ryan described the limitations of current validation methods like penny tests and manual phone calls.

The ideal scenario, a “Holy Trinity of account number, routing, and account ownership” validation, is difficult to achieve as there isn’t a single, secure source for this information.

The risk of fraudulent activities, where malicious actors attempt to change bank details for their own benefit, is a constant threat.

The onboarding process is often slowed by the need for thorough validation, highlighting the tension between security and efficiency.

Proactively Navigating the Risky Landscape

Both Ryan and Matt underscored the importance of proactive risk management in the supply chain.

While many companies actively assess risks (reputational, financial, environmental, geopolitical), the challenge lies in moving from reactive to predictive approaches.

Ryan pointed to examples like hurricane season forecasts, where understanding potential disruptions and having contingency plans is crucial.

Technology plays a vital role in becoming more predictive, leveraging data for validation, verification, and ultimately, forecasting potential risks.

The Transformative Power of Technology and AI

Matt highlighted AI’s ability to synthesize vast amounts of information from across the supply chain, logistics, and even external events like natural disasters or geopolitical issues.

This enables organizations to understand the potential impact on costs, delivery timelines, and revenue.

AI can also play a crucial role in:

• Identifying and validating alternative suppliers in case of disruptions.
• Automating due diligence processes and accelerating the onboarding of new suppliers.
• Providing coaching and recommendations based on past behaviors and risk assessments, guiding users towards more reliable suppliers.

However, Ryan cautioned that AI needs context to be truly effective.

High-quality, comprehensive supplier data is essential for AI to analyze trends, make accurate predictions, and provide valuable insights.

Simplifying the Complex IT Ecosystem

The complexity of the IT landscape is often a significant barrier to effectively resolving top supplier management challenges.

Ryan noted the trend towards simplifying the technology stack, with platforms like SAP consolidating applications under a single cloud structure.

This integration is crucial for providing the context needed to leverage AI effectively.

Matt advocated for a shift in thinking, viewing supplier management as a horizontal function integrated across all relevant business processes rather than a standalone module.

He emphasized the importance of collecting the right information at the right time during the supplier lifecycle, rather than overwhelming suppliers with excessive requests upfront.

A one-size-fits-all approach to supplier management can be burdensome for both the organization and the supplier.

The Journey Continues

Tangible benefits come with automation in supplier processes.

Back in 2016, manual invoicing could cost as much as $16 per transaction. Today, with automation and partners like Relish, that cost can be reduced to as low as $3 per transaction – a testament to the power of strategic solutions.

Click here to easily estimate how much your org could save with AI invoice processing.

Common supplier management challenges will continue to persist, but with the right focus on data quality, proactive risk management, and the intelligent application of technology, the future for streamlined and secure supplier relationships looks promising.

Host Spotlight

Sarah Barnes-Humphrey

Sarah Barnes-Humphrey is an entrepreneur and influencer, with over 20 years of experience in supply chain. Her Let’s Talk Supply Chain™ podcast now sits among the top 1% of most downloaded podcasts globally.

Pod Guests

Ryan Walicki, Co-Founder and CEO at Relish.

Ryan is an entrepreneur at heart, striving to solve the most difficult business problems. After dedicating the early part of his career to enterprise applications operations and consulting, Ryan has spent the last several years focused on developing solutions to fill enterprise software gaps and enhance the user experience.

Matt Montgomery, Senior Director – Product Marketing at SAP.

Matt is an experienced global leader in Procure to Pay (P2P) management and operations.

He often speaks at industry conferences and webinars. His topics include managing shared service center operations, procure-to-pay maturity models, and best practice metrics. He also discusses analytics and process automation using six sigma and lean principles.

In his current role for SAP, Matt works with customers to implement best practices of technology and process.