Advice and Information for Finance Professionals

The Importance of Effective Supplier Qualification Management

Angela Wilson
Senior Solutions Architect, CSS
This is a syndicated post, view the original post here

Effective supplier qualification management isn’t just about finding the best provider for the job. It’s a critical step in protecting your business against compliance violations and other risks. At CSS, we work with clients across industries, from engineering to consumer packaged goods. From a compliance standpoint, there are a lot of industries that showcase how a lack of supplier qualification management can be very damaging. The good news is that the right technology and internal processes can help you vet prospective suppliers. Here’s a closer look at how small-to-medium businesses (SMBs) can make sure their supplier qualification management program stands up to scrutiny.

Supplier Qualification Management: What Goes Wrong?

Depending on your business model or industry, there can be multiple business reasons that you have to vet suppliers. At a basic level, you might be verifying their status in business, industry certification, insurance coverage, and more. However, increasingly, you may be required to check business or independent contractors against government lists that look at issues like conflict minerals, terrorist watch lists, or sanctions. In many cases, you’re also required to retain records of these searches for a certain period of time in case a violation does occur. One look at the headlines shows how costly a single misstep can be in this area.

While some SMBs perform these processes manually, it quickly becomes tedious to track, and the process is subject to human error which introduces a high level of risk to the company. Instead, fast-growing companies are turning to technology to not only onboard vendors and register them in the system with more accurate data, but they are digging deeper into their qualifications through more advanced evaluations of their products and services.

How Technology Helps Streamline Supplier Qualification Management

When a business approaches us for help streamlining their supplier qualification management procedures, that usually involves a few key areas. The first is establishing a checklist each supplier must go through—both initially and on a regular basis—in order to be validated. Defining that process and then incorporating the right technology keeps everything connected and moving forward. The system can identify missing information, alert you to upcoming deadlines, or highlight a prospective problem automatically.

The second issue organizations are focused on is centralizing documentation. During the supplier qualification process, you gather data as well as supporting documents. Under current systems, small business status, insurance information, and a W-9 might all be stored in different places. By integrating these documents, you begin to build a supplier profile that’s easy to reference and provides a much more holistic, accurate picture of the individual or organization you’re dealing with.

Finally, we’re seeing businesses that want to take advantage of the more robust type of evaluations, like vendor site vetting, monitoring terror watch lists or looking for sanctions. Organizations sometimes have different requirements around when to conduct those evaluations, so they want to leverage technology as a tool to help them keep track of when and where in the business process these evaluations should be performed. For example, should that be before you award a contract, before you source, or at another specific time? By clearly defining your process, outlining each necessary step, and then relying on technology to support you, the entire process is easier to execute. No step is missed, and the results are easily accessible if a question or legal issue arises.

Improving Supplier Qualification Workflows

The supplier qualification workflow itself is intensive. It involves a significant number of questions, documents, and verifications. With a supplier qualification solution such as Oracle Procurement Cloud, SMBs can engage with suppliers directly through the portal. In many cases, it’s possible for a supplier to log in, see what information you need, and upload the files directly to your system. Eliminating administration and shifting some of the workload back to suppliers helps your procurement team focus on strategic execution.

With the analytics and dashboards, you’re able to see exceptions, expirations, and potential problems instantly. Critical issues are less likely to be overlooked, and procurement teams can take action instead of spending time digging through emails for related documents.

A final word on the importance of supplier qualification for small-to-medium businesses: We routinely see companies that miss critical steps in the supplier qualification process. Often times it is a missing critical document, an oversight, or just having completed a step but not having proof that step was completed, but the issue of lapsed insurance or an expired certification can cost thousands or millions of dollars in fines. That responsibility falls back onto the buying organization. It’s their responsibility to track, manage, and validate they are purchasing or contracting with ethical vendors. With the right technology, it’s easy to make sure that you’re compliant, up to date, and doing business with the right suppliers.

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