In every SPM project I invariably get asked the same questions, what is DSE? is it part of the product? I will try and answer these questions here.
So what is DSE?
Data Standardization and Enrichment ensures the reliability of your spend analyses. DSE compiles global market data from external sources including diversity and risk, in order to validate and enrich your suppliers and classify your transactions.
1.Validation & Enrichment
Supplier identities are often vague due to poor data quality and lack of content. It's tough for an enterprise to maintain consistency across multiple systems involving supplier data. Let alone maintain parent/child relationships across the entire list of suppliers they work with. And because of this, procurement organizations are not able to analyze their spend by suppler and they cannot leverage total spend with a supplier parent.
Supplier validation and enrichment is the process of transforming unstructured and incomplete supplier data into valid, enriched information for reliable analyses and greater leverage. DSE standardizes the format and content of your suppliers, removes duplicates and then validates them against a global business directory. Once validated, the supplier records are enriched with information such as legal name, trade names, corporate ownership, risk indicators, and so on.
Before validation & enrichment
Supplier ID
Description
Spend
SAP001
SAP America
$5500.00
BOBJ01
Business Objects
$3500.00
SAP002
SAP
$2200.0
After validation & enrichment
Supplier ID
Description
Cleansed Supplier
Spend
SAP001
SAP America
SAP Inc
$5500.00
BOBJ01
Business Objects
SAP Inc
$3500.00
SAP002
SAP
SAP Inc
$2200.00
By creating linkages between supplier corporate parents and their children, procurement organizations will be able to realize that all spend is against the same supplier.
Additional enrichment facilitates strategic decision-making such as diversity status (e.g. Minority-owned, Women-owned, Veteran-owned), credit/financial risk, and other attributes supporting corporate initiatives.
2.Data Classification
Classification is the process of assigning purchases to a standard structure such as UNSPSC, eCLASS or Custom Structure. The issue at most organizations is that a single classification structure is not used for classification across all procurement and financial transaction systems. Hence procurement organizations are unable to effectively analyze their category spend across the entire enterprise. The benefits of using a single classification structure are:
- A standard view of all goods and services purchased across the enterprise
- The ability to leverage total spend to drive cost savings, monitor compliance, and rationalize suppliers
Below is a good example of data classification
Unclassified Data
Product ID
Description
Supplier
ERP Category
Spend
X08092010
Shoes
Athletic
Clothing
$5000.00
AJRD2009B
Shoes
Balance
Footwear
$2500.00
TP2008CRV
Blackberry
A-Mobile
Fruit
$3500.00
PX2009BD
Blackberry
B-Mobile
Telephone
$2300.00
Classified Data
Product ID
Description
Supplier
ERP Category
Standard Category
Spend
X08092010
Shoes
Athletic
Clothing
Footwear
$5000.00
AJRD2009B
Shoes
Balance
Footwear
Footwear
$2500.00
TP2008CRV
Blackberry
A-Mobile
Fruit
Telephone
$3500.00
PX2009BD
Blackberry
B-Mobile
Telephone
Telephone
$2300.00
Note: Supplier description is not the only field with which categorization is done. Depending on the vendor and the engine they use it involves lot many fields to correctly categorize your data.
Looking at unclassified data business is not in a position to find what is the total spend in Footwear or Telephone category, but once the data is classified this question can be answered correctly and accurately.
Although not mandatory it's very beneficial to use DSE process. So it's very important to talk to your business users and explain to them how DSE improves leverage. This is one of the important decisions that will drive project timelines. The next logical step is to decide which vendor you would like to work with.
As you have realized by now DSE process is not part of the SPM application. This is an additional service that data goes through. Which means (in most cases) you will need to send your unclassified data out of the SPM application to your 3rd party vendor for DSE process. Each vendor has their own way of processing data. Following are some questions that you might want to ask yourself and your DSE partner to ensure the process is smooth:
- How frequently do you want to send your data for DSE process
- How extensive is your DSE vendor's business directory (number of businesses, geographic distribution, type of content)
- What supplier enrichment attributes are needed by your business users (diversity, risk, sustainability, clinical, parent/child linkages, franchises, sales, geocodes, etc.)
- What categorization structure (UNSPSC, eCLASS, Custom Categorization) would business like to use
- How long does it take your DSE vendor to pass your data through their engine for the first iteration and how long does it take for subsequent iterations.
- Last but not least what do they charge you for this process
Note: Usually DSE partners do take more time during the first iteration as their engine is still trying to learn your data. Subsequent iterations generally take less time.
In my next blog I will talk about how the SPM application handles all this DSE in its data model.
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