Written by Marijn Overvest | Reviewed by Sjoed Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Supplier Master Data — The Ultimate Guide

Supplier Master Data is what you call the crucial information that contains everything you need to know about your supplier. Basically, it is a primary guide on the supplier within your database. As simple as it sounds, handling it is an entirely different thing.

It is not a one-stop shop where you can input it in your procurement database, and leave it be. It requires careful attention and maintenance from your procurement team.

This article will help you understand what Supplier Master Data is. Additionally, it will provide you information regarding its management, the processes to follow, its benefits, and most importantly, its challenges.

What is Supplier Master Data?

The supplier master data is the critical information about your suppliers. In detail, it includes procurement history, purchase invoices, contract data, supply categories and other vital procurement information regarding your supplier.

The information that the supplier master data contains may be simple, but its variety is what makes it complex. Additionally, onboarding new suppliers makes it necessary to update.

Why is Supplier Master Data Important?

As mentioned earlier, it contains relevant information about suppliers in your strategic sourcing portfolio. It allows you to streamline your procurement process by ensuring the smoothness of data, and its accessibility.

Furthermore, it helps with the maintenance of existing processes with suppliers such as contract management, purchase orders, and costs management.

What is Supplier Master Data Management?

Supplier Master Data Management, or SMDM is the process of handling the supplier master data. This must not be confused with Supplier Management, as the latter focuses on supplier acquisition. Instead, SMDM ensures that all the procurement data regarding your suppliers remains documented, accurate, and up to date.

Supplier master data management provides a comprehensive data framework that can be easily accessible for the company. This can help them manage important data that is incorporated in risk assessment, spend optimization, and procurement efficiency.

The Importance of Supplier Master Data Management

Supplier Master Data Management is crucial in handling the complex data SMD contains. Through streamlining necessary information, the procurement team can make more informed decisions. Consequently, avoiding risks is much easier, and calculating costs and reducing it can be possible. In the end, SMDM helps a company build a stronger supplier portfolio that helps them evaluate and assess their suppliers.

Key Processes of Supplier Master Data Management

Implementing an effective SMDM is crucial for a company that wants to organize its suppliers. This can further help them with opening opportunities, and recognizing potential risks that need avoiding.

1. Creating Supplier or Supplier Onboarding

Creating a supplier, or commencing a business with the supplier is the crucial first step. This establishes a new venture for the supplier and the company.

Usually, it begins with a request for information, a process to smoothen their transaction by providing the necessary data. It helps configure a contract that is satisfactorily agreeable to both parties.

2. Extending your supplier

Extending your supplier is already straightforward as it is. Doing this includes a re-assessment and re-establishment of terms with your supplier.

This ensures that you are still negotiating a contract that satisfactorily applies to both of you. Additionally, it updates your existing data of the supplier.

3. Updating your supplier

Updating your supplier is a crucial activity to maintain the accuracy of your supplier master data. However, updating supplier data requires tackling other data to maintain consistency.

A procurement team can utilize procurement software to reduce effort and inconsistency with the complex task.

4. Deactivating supplier or supplier off-boarding

Also known as Supplier Off-boarding, this process involves removing a supplier from the company’s systems once a contract is finished. Making a request starts the process.

The ones handling the database will make the necessary blocking to remove them from the company’s ERP and P2P systems.

5. Reactivating supplier

Supplier reactivation is an overlooked process that often involves idle suppliers. If a supplier relationship remains dormant within a period, re-establishing terms is necessary.

With supplier reactivation, a company reconnects with a supplier that still wants to conduct business with the company.

The Benefits of Supplier Master Data Management

Definitively, managing your supplier master data can provide you with benefits that can improve your company. It helps you organize this data and use it to create informed decisions. Moreover, it helps you assess and evaluate your existing suppliers, to know if they are performing well. The benefits include:

1. Data Accuracy and Consistency

Supplier Master Data Management helps create accurate and consistent data. This ensures that everything is up to date and helps make operations more efficient. Additionally, it makes for a source of reliable data that eases transactions with potential suppliers.

2. Supplier Onboarding Efficiency

SMDM streamlines supplier data that helps with onboarding more suppliers. Reducing research time for potential suppliers is much easier, with the necessary information already available. Additionally, it helps reduce costs and pour resources with an already efficient process.

3. Improved Supplier Relationship

SMDM helps improve supplier relationships through reliable data, and proactive engagement with them. Additionally, through supplier inclusivity, you can work closer with them to ensure data validity.

The benefit can spread through making your procurement process more efficient. Overall, it helps you create an organized network that consistently provides you with quality goods and services.

4. Improved Decision-Making Processes

Supplier Master Data Management allows you to access more accurate and valid data. Effectively, this can help you identify more opportunities involving potential suppliers. This helps you reduce cost, and further optimize the direction of the company.

5. Risk Mitigation

Lastly, SMDM helps you recognize more risks, with data being more consistent and available. It helps you move through potential risks with identified suppliers. This can help you develop more effective procurement strategies.

Conclusively, it protects your company from potential losses from transacting with suspicious suppliers.

The Challenges of Supplier Master Data Management

Here are some of the challenges of supplier master data management.

1. Data Quality

Data variety grows with more suppliers. In fact,maintaining it is one of the daily hurdles that SMDM tackles.The procurement team needs to deal with it consistently. Without proper data management, recognizing opportunities may be harder.

2. Data Regulation

Consequently, the large data makes it hard to regulate. An inefficient SMDM may increase the probability of risks and problems that the company may face. Potentially, it may decrease company value, as quality cannot be assured.

3. Data Traceability

Tracking data is harder when there are various and continuous flows of information. Additionally, the various sources require categorization and segmentation, to efficiently access it.

4. Data Governance

Having a centralized database is an important challenge for SMDM. Moreover, it requires the procurement team to smoothen pre-existing problems with accuracy and consistency. Without a streamlined flow of necessary data, risks, compliance issues, and even data consistency remains high.

5. Service Consistency

The company’s SMDM must remain and prove to be reliable to customers. However, maintaining a consistent service flow, and managing large data is a vital task for the company to address daily.

Supplier Master Data Management Tools and Software

The technology used in handling SMDM must be efficient in data capturing, and able to manage the complicated workflow. Additionally, applying these technologies can help augment the existing procurement processes.

Here are some examples of SMDM Tools that can help you improve managing your supplier master data:

1. Datasheet templates

A technological service that allows data accuracy and acceleration. Additionally, it helps with handling the likes of multi-vendor sourcing, contracting, and procurement operations. Datasheet templates allow you to streamline the foregoing procurement information.

By having an easier access with vital procurement data, you can reduce significant time lag that requires you to process it.

2. SMDM A.I. Technology 

Incorporating A.I. in SMDM helps automate processes that require information gathering, and data categorization. With AI integrating these tasks becomes more efficient, and tasks can be stored, evaluated, assessed, and consolidated more easily.

A.I. can help you automate these certain processes, which makes it easier for both parties to work. With A.I. smoothly guiding your suppliers, you can address more procurement tasks for your team, improving overall efficiency.

3. Supplier Portal Interface

User interfaces with supplier-oriented technology allows the supplier to easily interact with the company. The added flexibility and convenience of this technology allows a company to interact with various suppliers at the same time.

Through seamless organization of supplier inputs, a company can gather and evaluate more opportunities with these potential suppliers. Supplier Portal Interfaces also minimize the risk of information inputs, as it tailors specifically with their interaction.

Conclusion

Supplier Master Data contains the necessary information to create a strategic supplier portfolio. On the other hand, Supplier Master Data Management is the process of handling this necessary data.

Handling supplier master data helps a company leverage competitively in a business. Moreover, it helps them create informed decisions, and mitigate risks. Effectively, this allows them to recognize opportunities that can further help the growth of their company.