How ML and NLP Improve Supplier Relationship Management


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The success of any business depends on relationships, and one of the keys is relationships with suppliers. The line between employees, contractors and suppliers is changing, characterized by the acronym Google TVC (for Temporary, Vendor and Contractor), and large companies have playbooks for training in supplier relations. . A typical business has an average of 5,800 third-party suppliers, a number that is expected to increase by 15% by the end of the year.

And yet, vendor management is subject to old-fashioned ways that put growth at risk. This vast network of multi-third party suppliers is increasingly essential for day-to-day business operations, and the challenges of its management are increasing.

Key suppliers, poorly managed

Third-party vendors have long been the backbone of businesses of all sizes. From outsourced production to outsourced tasks – from the purchasing department to the CIO’s office – finding and securing suppliers is a critical activity. However, business is changing.

For example, Software as a Service (SaaS) has predictably matured and customer demand for SaaS experiences has increased, both internally and externally. Software is a key driver or enabler of most business operations including product management, finance, marketing, customer success, systems, sales, and more. Along with this development has been the daily use of technologies that incorporate machine learning (ML), artificial intelligence (AI) and more.

At the end of the line ? As technology advances, specialized services are required to bring sophisticated offerings to market. Almost no company will develop an internal service to manage every component of the technology stack. Instead, they hire salespeople. As the specialties increase, so does the vendor. This unique illustration is reproduced over and over again in all industries and businesses around the world.

Although they are crucial, suppliers are generally unmanaged or poorly managed. This reality has three major consequences.

1. Disorganized or inaccessible data

The pace of innovation over the past decade has been rapid, but many of the vendors and contractors that support it have paper contracts in workbooks and exist as input on a spreadsheet. A 2020 Deloitte survey showed that 90% of organizations rate the visibility of extended supply networks as moderate or very low. Most companies do not have a centralized database of supplier contracts or an efficient way to analyze the data.

2. Limited growth

Strategic suppliers are essential to drive transformation, but innovation projects can be difficult to plan, manage, and scale. Disparate data and unknown actors slow down the decision-making process, making it impossible to move forward at a competitive pace.

3. Limited supplier collaboration

Vendors provide valuable goods and services. In fact, most businesses’ operations would be disrupted if even a handful of vendors gave up. Outdated or inefficient systems undermine this important relationship, often making it impossible to even find a supplier’s contact details, let alone communicate directly with a reference person.

A new way: supplier relationship management

A new category of technologies is emerging to meet the dominant challenges: supplier relationship management (VRM). A company called Terzo takes credit for VRM. Mimicking the qualities of a customer relationship management (CRM) system long used by marketers, VRM addresses the three historic challenges of supplier relationship management:

1. Make data visible and understandable

Terzo’s VRM platform combines machine learning (ML) and natural language processing (NLP) to first analyze linguistic and inventory data found in contracts. It goes beyond digitization, allowing better storage / access, interpretation, analysis and sharing of data.

2. Unlock growth opportunities

Suppliers should not be treated only in transactional interactions. These are relationships that contribute to long term strategy and growth opportunities. For example, the Terzo platform has a framework to extract data using a multi-OCR approach with NLP, and then correlate inventory data such as software licenses and usage. The aim is to highlight areas for rationalizing spending or finding opportunities for digital transformation. It’s not just about what a vendor does today, it’s about the future and the potential, and it is only with the right tools that this information can be unlocked.

3. Collaborate to innovate

It is a mistake to view suppliers as anonymous and faceless entities. Rather, they should be seen as valuable partners in growth. Brandon Card, CEO of Terzo, explains: “You need to build trust with the strategic suppliers you rely on in order to get the most out of the products and services they offer. Most importantly, organizations recognize that working with vendors is the most effective way to accelerate innovation.

A 2020 McKinsey survey of 100 large organizations found that companies that regularly collaborate with vendors had higher growth, lower operating costs, and higher profitability than their industry peers.


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