Procurement Data Collection Best Practices

When your company hires a supplier or subcontractor, you share responsibility for their products and services. Traditionally, companies have staff devoted to reducing subcontractor risk through a series of vetting processes. But while verifying licensing, certification, and insurance coverage is crucial for protecting your company, it can also be a very labor-intensive process.

Keeping up with changing legal requirements and liabilities is often challenging for large companies with many subcontractors and suppliers. Unfortunately, even the smallest oversight can result in significant financial losses for your company.

To effectively manage supplier risk, procurement teams must focus on collecting comprehensive data, including supplier information, compliance data, performance metrics, risk indicators, contract terms, and risk mitigation plans. The following best practices for data collection for procurement can help you collect, verify, and monitor critical details to proactively handle supplier risk management.

Supplier Information

Efficient procurement systems can help you obtain crucial data about your suppliers, including their business details, financial history, and insurance policy information. 

Company Profile

Supplier data collection services and procurement data management systems can obtain and maintain information about your subcontractors and suppliers, including:

• Supplier name
• Supplier address
• Contact details
• Supplier business structure

Current details ensure you can contact the supplier quickly when necessary. They also help you determine whether you need to update your contract or switch suppliers if the subcontractor’s business structure or supply chain details change. 

Financial Stability

Procurement data collection lets you assess the risk of hiring a supplier or subcontractor and helps with third-party lifecycle management. A supplier or service provider with poor credit or unstable finances may not be a safe choice for your business from both a customer service and liability standpoint. 

Regular updates on your subcontractors’ financial status, including payment history, financial statements, and credit scores, can alert you to trouble. Rather than losing a critical supplier with no notice, you have enough information to see the writing on the wall and modify your supply chain accordingly. Remaining aware of your suppliers’ financial stability can also help you avoid issues with quality and timeliness that can occur if they are in dire financial straits.

Insurance Coverage

Insurance coverage requirements vary between industries and suppliers. Companies traditionally have staff to maintain insurance records, monitor insurance risks, and ensure supplier and subcontractor compliance. However, the process for a certificate of insurance (COI) tracking, verifying coverage types, confirming policy limits, and gauging insurance coverage periods can be repetitive and time-consuming. 

Data collection systems maintain this information and continuously provide policyholder risk assessments. If your supplier fails to renew their coverage or their policy is insufficient to cover potential subcontractor risk, you can make an educated decision about whether to continue your relationship or switch suppliers.

Compliance Data

Legal compliance is a crucial aspect of procurement and liability mitigation. As a company hiring a subcontractor or supplier, some of the risk transfers to you if they do not meet regulatory and legal requirements.

Regulatory Compliance

Subcontractor regulatory compliance will differ depending on the industry. Contract lifecycle management systems can track industry regulations and standards to ensure contractors meet legally required guidelines for quality and safety. Documentation of adherence to appropriate standards keeps your company’s risk low and limits liability. 

Certifications and Accreditations

Critical compliance data also includes proof of appropriate industry certifications and credentials, including International Organization for Standardization (ISO) certifications and Occupational Safety and Health Administration (OSHA) requirements. With an automated contractor management system, you don’t have to manually monitor your suppliers’ certifications to reduce potential subcontractor risk. The system can track the required certifications and accreditations and request updates as needed.

Performance Metrics

Analyzing the supplier’s metrics can help determine whether they are a good fit for your company. Historical performance and key performance indicators (KPIs) let you monitor their activity on an ongoing basis so you can address concerns before they become costly problems.

Historical Performance

Use automated data collection to obtain and review past performance details, including delivery times, quality of goods, service reviews, and problem resolution. Your risks are lower with a supplier or subcontractor who has a good record for timely service, high-quality products, and speedy issue resolution. 

Key Performance Indicators (KPIs)

Keep an eye on your supplier performance metrics to avoid liability issues. Monitoring metrics like on-time delivery rates, defect rates, and customer satisfaction scores can help you avoid costly mistakes that could damage your company’s reputation.

Risk Indicators

Keep your liability risks low by analyzing risk indicators. Periodic risk assessments, past incidents, and geopolitical data can help you avoid hiring a subcontractor that is more of a hindrance than a help to your business. 

Risk Assessments

Automated subcontractor management systems can synthesize data from risk assessment questionnaires and periodic audits. This information allows you to identify potential red flags and modify your business plans accordingly. 

Incident Reports

Your procurement team can also use tracking systems to monitor records of past and current incidents related to the supplier. They can review contract breaches, complaints, and other incidents quickly to determine whether a supplier presents too great a risk for the company.

Geopolitical Risks

Keep your supplier risk low by monitoring geopolitical situations worldwide. Automated contractor management systems can keep you apprised of supply chain risks and other issues that may arise in the supplier’s geographic location due to political instability and economic fluctuations. 

Contractual Obligations

Prevent unnecessary contractual risk transfer and enhance trust & safety by ensuring consistent contract terms and tracking any agreement changes as they occur. 

Contract Terms

Third-party risk management systems can help you draft contracts with appropriate legal terminology, including service level agreements (SLAs), indemnities, and warranties. Additionally, the system continuously monitors your suppliers to ensure they are meeting their contractual obligations throughout the third-party contract lifecycle.

Change Management

Contract management software can track and maintain records of any amendments or modifications to the contract. Contract lifecycle management systems can keep documentation current and accessible, so you can address any legal or contractual concerns as they arise. 

Risk Mitigation Plans

Once you have identified the risks a subcontractor or supplier may pose to your operation, you can create plans and strategies to mitigate damage and reduce your company’s liability. Risk management software helps you track these strategies and implement plans quickly during unexpected crises.

Contingency Plans and Risk Mitigation Strategies

Obtain a clear, detailed plan for contingency and disaster recovery from the supplier. Such a plan should be appropriate to their industry and location.

For example, if your supplier is in Florida, they should have an alternative plan for fulfilling their contractual obligations if a hurricane disrupts business. Keep information on how the supplier plans to manage and mitigate identified risks to ensure safety for your organization. 

Streamline Your Operations Using Efficient Data Collection Software From Evident

You can simplify data collection for procurement using state-of-the-art risk management technology and risk assessment tools. Evident’s state-of-the-art SaaS platform allows you to perform your due diligence by integrating data for procurement risk management.

Our cost-efficient, scalable solutions provide proactive risk management without the need for manual oversight. We maintain a comprehensive network of verified businesses on our automated platform to bolster your procurement efficiency.

Schedule a demo today to learn how Evident’s third-party risk management program can revolutionize your supplier and subcontractor relationships so you can focus on proactive risk management.