Estimated reading time: 5 minutes

• A vendor management system provides efficiency, reduces operational costs, and extends a collaborative approach to improving products and services.

• Managing vendors is a central part of any procurement process. Despite the criticality of vendor management in modern supply chains, organizations are yet to deploy vendor management systems.

Tips to Help You Understand Vendor Management

1. Identifying Corporate Objectives

The corporate key performance indicators must form the basis for any vendor relationship. When selecting vendors, you must work with a combination of key performance indicators. It’s by first identifying your organization’s inner priorities and overriding needs that you can select the best vendors.

2. Identifying the Project Objectives

In most cases, procurement functions involve satisfying project needs. For instance, a new project installation may require material resources. Material resources have to be acquired from outside vendors. Identifying your project objectives and underlying priorities will help you determine which factors best meet your needs. In addition, it will help you know the most cost-effective supplier based on your project’s lifecycle.

3. Vendor Selection

Vendor selection is the strategic and systematic process of selecting vendors. Once you’ve identified your key success factors, match them with your supplier selection criteria. It’s critical to build a centralized database of all vendor-related information. You can also use a vendor management system to centralize and remotely access your vendor-related data. The vendor management system provides the flexibility needed to navigate your vendor relationships. It’s critical to note that not all vendors offer equal value to organizations. Therefore, vendors must be selected based on corporate goals.

Some of The Ways to Select Vendors Include

  • Potential value. That involves classifying all vendors based on their ability to drive business value. High-value vendors are quite a few, but they provide top value. Secondary vendors have multiple supply points and drive business value. But the value of secondary vendors is less than that of primary vendors. Tertiary vendors are easy to replace; they are high in number but offer low weight.
  • Due diligence and profiling. Perform due diligence with a focus on high-end vendors. Review the business approach, and conduct due diligence, location, and cost factors. It’s critical to interview both the past and current customers.
  • Risk assessment. The due diligence or background check on vendors must address different risk areas. A risk assessment must touch on specific factors: delay risk, brand reputation risk, competitive advantage risk, cost risk, and quality risk.

Selecting Vendors Helps You Avoid Costly Mistakes and Improves the Procurement Process

1. Contracting and Onboarding

Vendor onboarding is the process that enables clients to collect data and documentation, review contracts, purchase products, and make payments. Vendor onboarding allows the contracting agent (or client) and the supplier to interact and agree on the supply and payment terms.

2. Monitoring and Oversight

Monitoring vendor performance is a critical aspect of ensuring that you access only the trusted and quality vendors. Vendor monitoring involves establishing a checklist and evaluating suppliers based on the laid benchmarks. But with a vendor management system, it’s possible to obtain self-service vendor performance metrics. Vendor performance metrics help businesses prioritize which suppliers are most relevant in meeting pressing business challenges.

3. Advantages of Vendor Management

An organization can enjoy the following benefits by deploying a vendor management system:

  • Better selection. Organizations with vendor management systems can better select vendors based on time, cost, and payment terms. Better selection yields cost-saving opportunities and business value.
  • Better contract management. Contract management is the heartbeat of any efficient supply chain process. A contract management system enables organizations to stay at the top of their vendor management processes. Indeed, improving your contract management process is critical for better procurement planning and management.
  • Better performance management. You can obtain an integrated view of vendors by implementing an efficient vendor management system. A vendor management system aggregates vendor metrics such as delivery data, deadlines, quality, and performance. That, on the other hand, facilitates a better selection of vendors.
  • Better relationships. A vendor management system leads to better vendor relationships. That’s because a management system provides timely notifications and seamlessly handles all procurement-related tasks, saving time and money; and improving vendor-buyer relationships.
  • Improved value. Deploying a robust and efficient vendor management system is key to business value. Businesses that rely on automated systems, including centralized databases and vendor management systems, often leap scalability, efficiency, and performance.
  • Minimizing risks. Working with trusted vendors minimizes your business’s multiple risks. Supply chain risks, product and material delays, and damaged products may interfere with business continuity. However, working with trusted vendors provides you with leeway to avoid risks anytime they occur.
  • Compliance. Vendors must comply with emerging policies in the regulatory landscape. Setting benchmarks before engaging vendors can save you loads of money and time. So, it’s advisable to ensure that all vendors meet statutory supply requirements, including sustainability benchmarks and allied regulations. Working with certified and compliant vendors also helps your business, products, and supplies to be compliant with existing laws.

ProcurePort – Your Leading Vendor Management Solution

ProcurePort provides a vendor management system that streamlines buyer-seller relationships. ProcurePort is committed to bringing automation, efficiency, and scalability to modern-day procurement and supply chain functions. With robust tools and innovative products, ProcurePort helps your business transcend the modern-age enterprise problems.

ProcurePort’s vendor management system is a robust architecture that facilitates information exchange and communication between buyers and vendors. ProcurePort’s vendor management system provides additional functions like contract negotiations, vendor visibility, and due diligence on existing vendors. Organizations using a vendor management system can yield scalability, transparency, and visibility of all vendor activities.

Contact ProcurePort to take advantage of our futuristic vendor management system.

Become an expert in procurement with the help of our new website!

Learn More