What is supplier normalisation and why does it matter?

Supplier normalisation (or, if you’re from the States, supplier normalization) is the process of giving your existing suppliers/companies a common name or grouping. It’s also known as supplier standardisation and supplier harmonisation. Supplier normalisation is widely used in procurement, for spend analytics to show how much your organisation is spending with one supplier throughout the business. It’s also beneficial to normalise your suppliers if you work in supply chain, finance, sales or marketing.

Hang on a minute...

It sounds silly, right? Surely companies must know how much they are spending, selling or using with their suppliers. And while most do, the problem is that many organisations will have multiple versions of the same supplier in a database, CRM or ERP. It is THIS that causes the lack of visibility that’s so important when it comes to decision making.

Why do organisations have multiple supplier descriptions?

There are several reasons why you might find multiple supplier descriptions in the same business. Here, my friends, are five of the most common ways that duplicate accounts are created:

1.?????? A global presence. Each country has their own system and have named their suppliers using local conventions or different legal entities. This makes global reporting and analytics amazingly complex.

2.?????? Inconsistent suffix usage. Inc, Ltd, Limited... I won’t go on. The result is the same - multiple versions of the same supplier.

3.?????? Independent divisions within a company. Each division has its own naming conventions. Each division has its own nomenclature. Guess what this means? Yep – duplicate accounts.

4.?????? Human error. The human factor causes all sorts of duplications. I’ve seen typos, incorrect spellings and old company names, for example ‘International Business Machines’ for IBM, or ‘Twitter’ instead of ‘X’.

5.?????? Mergers and acquisitions (M&As). Inheriting another company’s data can cause a whole new world of pain when it comes to reporting and analytics.

Why does supplier normalisation matter?

Supplier normalisation matters, because ultimately, you could make bad business decisions if you don’t have the correct information.

Here are a few examples:

Let’s say, you work in procurement. You might have local arrangements with a supplier, which means you pay a different price for the same item depending on your region. Normalising your data would give you a clear view on what you’re paying, allowing you to negotiate a better, global pricing agreement.

Perhaps you’re in sales and are analysing global customer sales. You’ll want to make sure you have the right information. You might think you are selling X amount to Customer A, but once you’ve normalised your data, you could find it’s a lot more than that. This could affect rebates, commission, sales forecasts, marketing plans and production planning…

Knowing all this helps you understand if you’re treating that customer fairly with the appropriate discounts and customer service. Can you afford to lose this customer, or is there the opportunity to upsell to them? You can’t make any of these decisions without the right information.

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Here’s another way that supplier normalisation can make your job easier

If you work in procurement, you may be targeted with rationalising the number of suppliers you have agreements with. Supplier normalisation is an exceptionally efficient way of doing this. It’s like eating chocolate without the calories. Yum!

Normalise your suppliers to save money in the long run

Data accuracy is an investment, not a cost. Although addressing issues at the beginning may seem costly, you’ll undoubtedly spend less than if you have a to resolve an issue further down the line with a time-consuming and costly data clean-up operation. [la4]?[SW5]?

Spend data classification shows you the whole picture, as long as it’s accurate.? You can get a true view of your spend, allowing improved cost savings, better contract compliance and possibly the most important – preventing costly mistakes before they happen.

The problem with supplier normalisation

Perhaps the biggest problem with supplier normalisation is how long it takes to do properly. It can take anything from days to months to get your team to do this. Until now that is…

Introducing Samification

Samification is the first self-service, on-demand supplier normalisation tool, and is backed by a team of experts curating and refining the data. It’s so easy to use, your granny could do it!

Curious to give it a go? Then sign up for a risk-free, no-obligation trial at Samification.com to normalise up to 250 suppliers completely free of charge, or book a demo to find out more.

Visit Samification.com