5 Pillars of Financial Control #4 – Supplier Management
Supplier management is a pretty normal part of financial control, and a lot of people will pass the buck routinely down to procurement, which isn’t necessarily the best thing to do.
Obviously, we are going to once again draw upon the wisdom of our experts, Caroline Adams, Former Senior Finance Manager, Debenhams, Sam Ryan, Global Process Owner P2P, ITV and Paul Sutton, Head of Financial Compliance, UCLH NHS Foundation Trust and talk a little bit about supplier management. Is it the responsibility of the procurement department? Is it down to another part of the company to make that decision? Is it something everybody should know about? Let’s talk about it.
Not just Procurement jobs?
So, the first viewpoint we will take a look at is Samantha’s. Samantha takes the view that when it comes to supplier management, it’s not about procurement. She presented her thoughts as so:
“I can’t remember any company I’ve worked in where procurement was the one handling the master supplier file. It was always the responsibility of someone else, like AP, or P2P, or even a separate specialist data management team… AP in particular really knows what’s happening with suppliers, which means that they’re going to be working with them more often”.
Her comments essentially gear around the idea of having a proper management system for suppliers, which is fair enough. To just pass the responsibility down to procurement isn’t necessarily the best course of action because they’re not always qualified for the job. It’s often understood that AP has a better understanding of suppliers, what they’re going through, what they are feeling, and they deal with payments, which sometimes makes them the best choice.
The other side of the coin?
It’s a pretty rare situation that our experts disagree with each other so completely, but Paul has an entirely different perspective on supplier maintenance. He believes that it should be given to procurement. He does outline his thoughts on this quite well, as follows.
“ At UCLH, we used to have supply maintenance in the hands of AP, and up until a couple of years ago, I would have been in complete agreement that it was the best way to do it. However, as time has gone on, it’s become obvious that what we really need to do is put supplier management back in the hands of procurement, give them the necessary tools and resources to handle it, and make it their responsibility on an official basis.“
It’s an interesting perspective, and it basically boils down to Paul’s belief that the assignment of duties is fine, so long as you afford departments the proper tools for doing it. Procurements are more than capable of handling the master supplier file, but they just need the proper systems in place to handle the processes, do the checks, and take care of supplier management in a cohesive, organised way.
The Middle Ground
As the sort of tiebreaker that we have, Caroline‘s approach is unique. She refers to a series of things that happen every time a company starts work with a new supplier, and she outlined that like this:
“When a new supplier was set up, there were three things that we did. First of all, we would allocate a part of the company to serve as the owner of that supplier, which meant that they handled the reporting and everything else that went with it. Second of all, if we could allocate a category for the spending, we would do that because that helps to keep track of things. Thirdly, we would follow up any contact with a phone call and put them through to the right department, and talk to them about every part of the process, to make sure there was nothing left misunderstood”.
It’s clear to see that this middle ground effectively implements the sides of the other two experts but manages to find a unique balance. It employs a distinctive three-step process to assign ownership, categorise the spending, and make sure that everybody understands what is going on.
So, when it comes to supplier management, there are a couple of different schools of thought. Some people believe that procurement should never be part of the process, instead of leaving it to something like AP. There are others who think that procurement should be given the resources and adequate dispensation to deal with supplier management. Finally, in the middle, you have the idea that supplier management should be designated to individual departments as necessary. The broad spectrum of different opinions means that there is no right way to do things; it’s just what works for the business at the time.