This blog post focuses specifically on supplier normalization.
What is Supplier Normalization?
Supplier normalization is the process of taking supplier names with multiple spellings, mis-spellings, abbreviations, etc. and normalizing them (cleaning them up so that they’re all spelled the same) either manually or using data rules.
For example, finding all suppliers spelled “Federal Xpress” or “FedEx” and replacing them with “Federal Express.
When does Supplier Normalization Take Place?
It takes place at the beginning of a spend analysis project when data is collected and integrated from numerous company data sources, such as:
payments in AP, items in PO, PCard expenditures, expenses, financial data, and more.
On an ongoing basis, all new data should be normalized following the same rules initially set up to ensure consistency.
Why is Supplier Normalization Important?
Normalizing supplier names ensures that you are reporting and analyzing your true spend with a given supplier. This in turn ensures that you are achieving the greatest volume savings potential, as well as managing the number of suppliers you work with. Using the Pareto Principle, or Pareto Analysis, you would want 80% of your spend to come from 20% of your suppliers.
Hopefully, that covers everything you ever wanted to know about supplier normalization.