Amid ERP transitions, rising regulatory pressures, and an increasing reliance on automation, one foundational element determines the accuracy of supplier evaluation: legal entity data.
This core dataset鈥攄efining the official, registered identity of a business鈥攊s often overlooked but is essential. Without it, companies are operating on fragmented, duplicated, or outdated supplier records, making evaluation unreliable and risky.
Supplier Evaluation: A Broken Process Without Legal Entity Data
Supplier evaluation is all about assessing whether a supplier can meet your organization’s needs鈥攐perational, financial, compliance, and strategic. It usually means looking at things like their qualifications, past performance, risk factors, financial stability, legal status, certifications, and whether they align with your company鈥檚 values, like diversity, sustainability, or ethical sourcing.
Organizations often attempt to evaluate suppliers using internal ERP records, procurement platforms, or third-party databases. But many of these sources lack a universal identifier to tie records together, resulting in:
- Multiple records for the same supplier under slightly different names
- Conflicting tax IDs and incomplete ownership structures
- Outdated or missing compliance certifications
Consider this fictional鈥攂ut familiar鈥攅xample:
Northbridge Automotive, a global manufacturer, is getting ready for an ERP migration. During the initial data audit, they discover over 15,000 duplicate supplier records鈥攁 large chunk of which turn out to be different versions of the same supplier: 鈥淒elta Mechatronics.鈥�
Some records read:
- Delta Mechatronics Inc.
- D. Mechatronics USA
- Delta Mecha GmbH
- Delta M. International
Each version includes inconsistencies in address, tax ID, and payment terms. Worse, only one record includes current banking details and compliance credentials.
Without understanding legal entity data, it’s unclear which records are valid, which are duplicates, and which should be preserved or retired. Finance can鈥檛 reconcile payments, procurement can鈥檛 aggregate spend, and compliance teams can鈥檛 assess risk. Supplier evaluation becomes a guessing game.
What Is Legal Entity Data?
It includes attributes such as:
- Legal business name and aliases
- Company registration number
- Tax identification number (TIN, EIN, VAT, etc.)
- Country/state of incorporation
- Legal status (active, dissolved, merged)
- Relationships with parent or subsidiary companies
Unlike marketing or operational data, legal entity attributes are stable, globally recognized, and compliance-ready. They form the foundation for cross-system matching and enable a 鈥渟ingle source of supplier truth.鈥�
Why Legal Entity Data Matters Across the Supplier Lifecycle
Legal entity data plays a pivotal role across multiple procurement and finance processes:
- ERP Migrations & System Consolidati