Why the supplier master grows, and why it matters
Every time someone needs something the usual suppliers do not carry, a new supplier gets onboarded. An imported part, a specialized repair service, signage printing for a mine site. The purchase happens once, but the supplier stays in the master forever.
Over the years, it is common for a large share of registered suppliers to have received one or two purchase orders in the last year, or none at all. That volume has concrete costs:
- Maintenance labor hours. Labor and social security certificates, safety documentation, insurance and bank details that must be requested and reviewed periodically, even for suppliers that are hardly ever used.
- Fraud and error risk. More vendor records mean more chances of outdated bank details, unverified account changes and payments to the wrong supplier.
- Duplicates. The same supplier registered two or three times under different names, which fragments spend and hides how much you actually buy from them.
- Little negotiating power. Spend spread across hundreds of small suppliers leaves no room to negotiate prices or terms with any of them.
Step 1. Extract 12 months of data
You need two ERP extracts: the full supplier master and the purchase orders from the last 12 months (or 24, if your company buys seasonally). For each supplier, calculate the number of orders, the total amount and the date of the last purchase.
Step 2. Segment your suppliers
| Segment | How to spot it | What to do |
|---|---|---|
| Strategic | Account for most of the spend or are critical to operations | Keep, with a contract and performance reviews |
| Recurring | Frequent low- or mid-value purchases | Keep and consider framework agreements or a catalog |
| One-off | One or two purchase orders a year | Consolidate (step 4) |
| Inactive | No purchases in 18 to 24 months | Block (step 3) |
| Duplicates | Same tax ID (RUT) or same bank details in more than one record | Merge them and block the extra records |
In most companies the result looks the same: a few suppliers account for almost all of the spend, and a long tail of one-off suppliers accounts for many of the orders and almost none of the value. That tail is where the work is.
Step 3. Block inactive suppliers and merge duplicates
This is the fastest, lowest-risk part. Block suppliers with no activity in the defined period for purchasing and payments, without deleting them, so you keep the traceability of historical orders and invoices. For duplicates, choose one main record per tax ID, reassign anything still open and block the rest.
Let user areas know before blocking. If a blocked supplier is needed again, reactivation goes through a document review, not a full onboarding from scratch.
Step 4. Consolidate one-off purchases
Blocking inactive suppliers shrinks the master, but it does not stop it from growing: one-off suppliers keep appearing. There are three ways to deal with that, and they can be combined:
- Framework agreements by category. One industrial hardware or PPE supplier covering what you buy today from ten. It works well in categories with a stable catalog.
- Broad-catalog distributors. They reduce suppliers in MRO and consumables, although they do not cover services or purchases outside their catalog.
- A provider that manages the tail. A third party, onboarded once, that buys from end suppliers on the company’s behalf. That way, one-off suppliers are not onboarded in your vendor master.
Step 5. Set an entry rule
Without a rule, the master grows back within one or two years. A simple rule: no new supplier is onboarded for a one-time purchase below a certain amount. Those purchases go through an existing supplier, a framework agreement or the provider that manages the tail. Every new onboarding request must state who is asking, for which category and how much is expected to be bought from the supplier each year.
Step 6. Keep the discipline with indicators
Four indicators to review every six months
- Number of active suppliers (with purchases in the last 12 months)
- Share of suppliers with a single purchase order in the year
- New onboardings in the period, and how many were for one-time purchases
- Average time to onboard a new supplier
Step 4 without touching your supplier master
AROLICO solves step 4 for your tail spend. You onboard us once and, from then on, low-value purchases in the categories you define go through us: we source quotes, issue the purchase order and follow up on delivery. We onboard the end suppliers ourselves: you add none to your vendor master. Your ERP shows a single supplier and one consolidated invoice a month.
To get started, we run an assessment on your extract of purchase orders under CLP 5 million (about USD 5,000) from the last 12 months: we classify it by category, supplier and lead time, and show you which part of the tail makes sense to hand over.
Frequently asked questions
What is a supplier master?
It is the register of every supplier authorized to receive a company’s purchase orders and payments, usually kept in the ERP. It includes tax, banking and contact details, plus each supplier’s onboarding documentation.
Should inactive suppliers be deleted from the ERP?
No. The recommended approach is to block them for new purchases and payments. Deleting them breaks the traceability of historical orders and invoices, which may be needed in an audit.
How often should the supplier master be reviewed?
A review every six months is enough for most companies, with ongoing control of new onboarding requests.