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• Vendor management is the process and best practices of managing suppliers or simply vendors.
• Vendor management is a complicated and sequential process that involves selecting vendors (based on price, quality, and delivery), negotiating contracts, onboarding vendors, evaluating performance, and controlling costs.
• Measuring performance and determining vendor-related risks are critical parts of any procurement and vendor management process.
The vendors leveraged by companies could vary considerably depending on the nature of services rendered. Most vendors are outsourced service providers, including IT specialists, marketing personnel, and technicians. Cleaners and utility service providers can also be outsourced routinely to help with repair and maintenance.
Vendor Management Process
The steps and activities that go into the vendor management process include:
1. Vendor selection
This step of the vendor management process involves selecting vendors by comparing different rates and quotes. Selecting vendors involves sending requests for requisitions and requests for proposals, which eventually determine the cost of products. And while the price is the most underpinning factor in selecting suppliers, other factors like quality, capacity, and vendor reputation will factor in their selection.
2. Contract negotiation
It’s critical to get contracts correct at the onset. This can be done by ensuring that they benefit both parties. Contract negotiation can be time-consuming and the process involves identifying the products and services that will be needed. You must also determine the start and end of all procurement arrangements. Attention must also be paid to issues like accountability.
3. Vendor onboarding
The process of vendor onboarding is collecting information, data, and documentation needed to set up a vendor as a formal-established supplier of a particular organization or business. Vendor onboarding involves collecting the necessary documentation like tax records, licenses, insurance details, payment information, and other licenses.
4. Monitoring vendor performance
Vendors must be monitored to ensure they meet the best supply practices. Vendor monitoring is a critical step in ensuring that your business meets its quality expectations and meets customer satisfaction. Monitoring vendor performance involves comparing their performance against key performance indicators, including quality and volume deliveries.
5. Monitoring and risk management
Vendors must be evaluated and monitored for violations that could potentially affect the business’s reputation. Violations such as data losses, breaches, intellectual property laws, and loss of consumer protection data are critical failures on the part of the supplier that could affect individual organizations and businesses.
Companies must evaluate how a vendor’s actions may affect or disrupt the company’s operations. Organizations must evaluate how a vendor’s failure to act in specific circumstances may affect their business continuity and reputation.
Payment is an essential component of the vendor management process. A critical part of the vendor management process is ensuring that vendors are paid on time alongside the products and services they provide.
Procurement Vendor Management in 2022 – and Beyond
It’s critical to note that the procurement vendor management process is changing with new tools and technologies. For instance, the emergence of online tools like automation, artificial intelligence, and cloud computing has helped businesses redefine how they contact and select suppliers.
Today, vendor management entails a wide range of technologies and online tools that help enterprises to centralize their suppliers’ data and streamline procurement operations. To do this, procurement vendor management uses software that centralizes data and automates routine procurement processes.
Vendor management or supplier management software fulfills business functions – from streamlining supplier communications to managing the request for purchase processes.
Vendor Management Challenges
The need for a centralized and automated procurement vendor management process stems from the complicated or sophisticated nature of today’s procurement processes.
It’s hard to obtain a centralized view of vendors, especially for organizations with complex geographical footprints and large supplier bases. Challenges are likely to emerge throughout the different stages of vendor management, from securing the right documentation to conducting the right assessments.
So, it’s advisable to adopt the right tools, technologies, and best practices to create an efficient procurement system.
The Need for Emerging, Modern Procurement
Traditional vendor management solutions are a huge waste of time and money. With traditional models, you can’t integrate siloed vendor management practices like selection, onboarding, and qualification with other vendor management processes.
Also, collecting and integrating vendor data with existing procurement processes adds to an already complicated supply chain problem. Manual efforts tend to derail important vendor management decisions. So, driving spending to specific vendors and compliance demands an alignment of different vendor management functions.
Vendor Management Goals
Today, cutting costs and achieving quality deliveries is no longer a priority for organizations that want to streamline their vendor management processes. Rather, a critical benchmark for succeeding in the procurement vendor management process is building strong and meaningful vendor relationships.
Effective development and implementation of strong vendor management relationships are critical for succeeding and maintaining long-term profitability. The vendor management process helps you achieve strong vendor relationships in the following ways:
- Evaluating supplier capabilities including turnaround times, quality, and pricing
- Contract negotiation and payments
- Internal job assignments
- Ongoing performance evaluations and check-ins
- Vendor relationship management
The next section of this post discusses how organizations can build an agile and successful vendor management framework:
There’s no denying that with value taking precedence over cost these days, vendor management is gradually turning from supply and demand to building mutually beneficial business relationships.
Steps for a Successful Vendor Management Process
Transforming the supply chain to conform to these trends requires careful planning, intelligent strategizing, and ultimately hard work.
Realizing a successful vendor management process demands the following steps:
1. Review business goals and metrics
Every enterprise has different goals and expectations. To gain the best from your vendor relationships, you need to understand what you expect from vendors to maximize your success.
2. Evaluate your third-party spending
Knowing your current spending is essential to optimizing your procurement total spend. Conduct a thorough spend analysis to gain complete visibility of the resources flowing in and outside the organization.
3. Assemble your team
Like any other complex organizational undertaking, vendor management is best tackled by a team of professionals with expert knowledge. Build a competent team of professionals experienced in diverse functional areas like sourcing, requisitions, invoices, team-building, and contract negotiations.
Transforming Your Procurement Vendor Management Process
We help organizations and businesses of all sizes and sophistication navigate complex procurement processes.
With innovative and cutting-edge procurement solutions, ProcurePort helps organizations bridge their vendor management processes.
Contact ProcurePort for time-to-value procurement solutions.