Your poor procurement data probably means you’re losing money without even knowing it.
How?
Messy procurement data is the invisible fiend lurking in your business operations, silently draining your resources day after day. There are countless examples of how incorrect vendor or material master data can cost your organisation dearly.
Many of these expenses remain completely hidden from view until you start actively looking for them.
7 Ways Poor Procurement Data Costs You Money
So, let’s do just that, and first check out 7 ways that you can stop pouring money down the drain.
We’ll then move on to show how digital procurement technology can help fix these issues, without it costing a fortune or taking years to plan and implement.
1. Outdated or Incomplete Material Master Data
Material master data typically costs you in two critical ways:
- Lack of regular checks and updates can lead to obsolescence issues, or purchasing of outdated components
- If a material lacks the minimum data requirements needed in order to find an alternative source, it can unwittingly lock you into single-supplier relationships.
The bare minimum needed in material master data is:
- Manufacturer
- Manufacturer’s part number
- Specifications such as drawing or issue numbers.
- For raw materials and production parts, purity grades and tolerances for ensuring consistent quality.
If you don’t know the specification, alternative vendors can’t read your mind!
And if a generic specification would work just fine, note that too—otherwise, you might be needlessly paying premium prices for brand-name parts or over-engineered solutions when standard alternatives would suffice.
Not having complete data makes switching vendors unnecessarily difficult. This limits your negotiating power and potentially increases costs by 10-30% compared to competitive market rates.
This single data issue can be responsible for $ hundreds of thousands in unnecessary spending, especially in mid-sized companies where procurement typically is more tactical than strategic.
2. Incorrect Lead Times
When your system shows shorter lead times than suppliers actually deliver against, you risk supply chain disruptions and critical stock-outs of essential parts. This can lead to emergency expediting fees, production downtime, and frustrated customers.
Conversely, if suppliers can deliver faster than your data indicates, you’re missing valuable inventory optimisation opportunities that could improve cash flow. You may be carrying weeks of additional inventory that isn’t actually necessary.
It’s vital that supplier lead times are properly documented. Even if you don’t have formal supply contracts, lead times should appear in price lists, and delivery dates should be confirmed with each purchase order.
Accurate lead time data drives better planning and reduces both shortages and excess inventory costs. For many businesses, this single improvement can free up significant working capital that’s currently tied up in unnecessary safety stock.
3. Inaccurate Transport Costs or Incoterms
Incoterms can be a notorious can of worms that create surprising costs.
The essential question: Who’s responsible for paying freight costs? This needs clear specification in pricing, contractual agreements, and, most importantly, master data records.
Incorrect incoterms frequently cause supply chain disruptions and unexpected expenses. If you suddenly need to scramble to find a customs broker because you belatedly realise it’s your responsibility, you’ll face additional costs and delays. These are completely avoidable with proper data management.
Transport costs are also rarely checked properly by accounts payable teams. Many businesses unknowingly pay for transportation twice: once in the product price and again as a separate line item on the invoice.
It’s worthwhile auditing delivery terms for key materials and supplies, comparing invoiced charges against agreed terms. The discrepancies might surprise you, and prompt important questions about invoice authorisation processes.
Procurement professionals can often discover 3-5% in recoverable costs, especially if the previous state was non-managed.
4. Duplicate Vendors
This straightforward issue is surprisingly prevalent across organisations of all sizes. When multiple employees can create vendor records without proper governance, duplicates inevitably appear:
- WH Smith
- W.H. Smith
- WH Smith Ltd.
Beyond poor housekeeping, why does this matter?
You could potentially purchase identical items at three different prices with three different payment terms, leaking money without realising it. Your negotiated volume discounts become diluted across multiple accounts, reducing your purchasing power.
Duplicate records also undermine any rebate or bonus agreements you’ve negotiated with suppliers.
Cleaning up vendor data is absolutely essential before running any meaningful spend analysis. Without this foundational step, your analytics will be fundamentally flawed, leading to incorrect strategic decisions and missed opportunities.
5. Payment Terms Discrepancies
Payment issues typically arise with tail spend vendors. While they’re not core suppliers, they still represent significant amounts of spend, when viewed cumulatively.
Your standard terms might stipulate 60 days net, while their documentation specifies 30 days net.
Without formal contracts or negotiated price lists (which you likely won’t have for occasional non-core purchases), you often face “the battle of the forms”.
Whose terms were communicated last?
This ambiguity creates inconsistency in how your organisation handles payments.
The real cost isn’t in the cash flow impact of paying earlier than necessary. It’s in the administrative burden of having to constantly resolve these disputes.
You’re unlikely to face legal action over payment terms on minor purchases. But you’ll waste valuable time resolving these disputes and potentially paying under duress.
Your buyers might spend hours each week addressing preventable issues, rather than focusing on more strategic initiatives.
6. Out-of-Date Contact Data
When COVID hit, many companies scrambled to contact suppliers to understand potential disruptions, only to discover their contact information hadn’t been maintained for years. This communication breakdown severely hampered crisis response efforts.
If we apply the typical Pareto principle, data for your top 20% of suppliers (representing 80% of spend) is typically well-maintained. But what about the other 80% of vendors in your long tail spend that still deliver critical components or services?
Whether it’s a key raw material ordered weekly or a spare part needed once every two years, both can halt production if you can’t reach the supplier when urgently needed. The cost of a production line shutdown can easily run into thousands of dollars per minute.
These suppliers rarely receive active management from procurement.
When vendor contact data isn’t regularly updated, you risk significant disruption during critical situations. This single data point—ensuring you have current contact information—can make the difference between minor hiccups and major operational failures.
7. Expired Certification
Certain supplier records and certificates must be maintained for regulatory compliance or internal processes:
- Liability insurance certificates that protect both parties
- Cybersecurity certification for IT suppliers
- Quality or environmental standards documentation proving adherence to ISO or industry standards
- Supplier diversity records, such as minority-owned business status for compliance reporting
Industry-specific requirements often necessitate additional certifications.
For pharmaceutical, aerospace, or food industries, these requirements multiply significantly. Keeping these up-to-date can be a substantial administrative burden that’s easily overlooked.
Not having current certifications could lead to legal issues or compliance-related fines that directly impact your bottom line. In regulated industries, these penalties can be severe.
How Much Is This Costing Your Organisation?
While it’s impossible to calculate the exact figure without a detailed audit, one thing is certain. It’s significantly more than zero.
In a recent report from Dun & Bradstreet, they state that it is far more cost-efficient to prevent data issues than to resolve them. If a company has 500,000 records and 30% are inaccurate, then it would need to spend $15 million to correct the issues versus $150,000 to prevent them.
That alone warrants closer examination. What gets measured gets managed, and procurement data quality is no exception.
If your data is letting you down, it’s time to take action. With clean data, you’ll discover more savings opportunities, improve supplier risk management, and certainly reduce the amount of invoicing issues. Many organisations report 5-10% improvements in procurement efficiency after data cleanup initiatives.
Think of data cleanup as an infrastructure investment.
It won’t deliver the clean 12-month ROI your CFO might want, but doing nothing creates a long-term drag on your P&L and puts you behind competitors who are leveraging accurate data for strategic advantage.
For deeper insights, check out my interviews with Susan Walsh, The Classification Guru, on Series 1 and Series 3 of The Procurement Software Podcast, where we dive deep into practical approaches for tackling these challenges.
How Digital Procurement Technology Can Help
The procurement technology landscape is diverse and rapidly expanding, with solutions for every aspect of data management. These generally fall into three categories that address different dimensions of the problem:
Material Master Data Cleansing
These solutions offer manufacturing businesses the possibility to maintain clean material master and BOM data. Failure to do so risks obsolescence, quality problems, or production machinery breakdowns that can cost thousands per hour in downtime.
Different approaches include:
- AI-powered classification and cleaning for raw materials and parts, which uses machine learning to standardise descriptions and categorise items properly
- OEM spare parts verification systems that check recommended spares against your material master data to ensure compatibility and availability
These solutions ensure your ERP system contains up-to-date technical specifications and accurate part information.
Best-in-class implementations of data governance and Master Data Management can lead to substantial reductions in data errors, resulting in significant improvements in procurement efficiency and reliability.
Vendor Intake and Management Solutions
One of the simplest ways to improve vendor master data quality is making it accessible in a cloud-based platform. With supplier access, this becomes a single source of truth where suppliers themselves can complete and update their records during onboarding and throughout the relationship lifecycle.
Adding new vendors shouldn’t be a bureaucratic monster taking weeks and requiring endless form-filling. Modern solutions can reduce onboarding time from weeks to days or even hours while improving data accuracy.
Similar to self-service procurement, transferring data accountability to suppliers frees up your team’s time while improving the supplier experience. When vendors can track their application status and update their information directly, everyone wins. Your procurement team can focus on strategic activities rather than administrative data entry.
The challenge here is meeting your suppliers where they’re at…which is usually in their email inbox!
If you’re trying to force them to log into a new system, it probably isn’t going to work. If they can click a link from an email and update/verify their data, that’s going to be a more frictionless process.
Numerous solutions exist for various budgets and automation levels. Regardless of your size and requirements, you’ll likely find a suitable solution.
Tail Spend Management
We’ve examined material and vendor master data—the final puzzle piece is tail spend management. This is where data problems multiply because of the sheer volume and complexity procurement teams face when dealing with hundreds or thousands of occasional suppliers.
Imagine how many incorrect emails, phone numbers, and payment terms lurk in vendors you never actively engage with or negotiate with. This data deteriorates rapidly without regular use, creating invisible risks throughout your supply chain.
Enter tail spend management solutions, which offer comprehensive approaches to this challenging area:
- Guided buying from approved vendor lists, preventing endless database expansion
- Leverage AI from aggregated customer data to suggest alternative suppliers with better terms or pricing
- Automatically refresh contact information through regular verification processes
- Use an autonomous sourcing and autonomous negotiation platform or AI agent to purchase non-complex, non-strategic items.
More advanced solutions can actively source products and services for non-strategic spend, eliminating the need for buyers or stakeholders to contact vendors at all. Instead, they simply guide and monitor automated sourcing and negotiation processes, achieving better results with less effort. Without direct buyer intervention, this significantly reduces administrative burden, while ensuring compliance with procurement policies and buying from approved suppliers.
When digital solutions handle these vendor interactions, their records are automatically maintained in aggregated databases managed by the technology provider, solving your data problems by design.
A Balanced Approach Is Key
To effectively address procurement data issues, you need both manual cleaning and checking, but with technology to do the heavy lifting.
Neither approach alone is sufficient for comprehensive data management. Start with a thorough assessment of your current data quality and identify the highest-impact areas for improvement.
Data management is inherently complex with no simple fix, but ignoring the problem only guarantees it will worsen over time!
It’s time to take action now. The investment pays dividends through enhanced decision-making capabilities and competitive advantage in increasingly challenging markets.
Remember: in procurement, your data quality directly impacts your bottom line.
How much longer can you afford to let poor data drain your resources?
The answer is clear: you can’t. The time to address these hidden costs is now.
