To gain a competitive edge in this hi-tech world, organizations need to ensure they have healthy, benefitting relationships with their vendors. Companies need to employ effective strategies to reap monetary benefits for the company and vendors, a win-win situation. That is when the role of vendor management comes in!
Best Vendor management practices will help companies build healthy relationships, boost business value and achieve critical goals in the long run. Not just that, organizations will also be able to deliver good quality products and services in the market on time
Why Vendor Management?
Vendor Management is the set of processes that organizations leverage to manage their vendors or suppliers. These processes include finding reliable vendors, mitigating vendor-related risks, cost monitoring, cost control, negotiating contracts, and ensuring satisfactory service.
Vendors maybe of different kinds, depending upon your business niche. They could be suppliers in the form of social media influencers, marketing consultants, cleaning staff, IT service vendors, vegetable suppliers, and so on. Vendors may be individual traders or large-scale enterprises.
Now the real question is, what is the need for “vendor management”?
First of all, vendor management plays a vital role in getting a vendor onboard to align well with the business strategies and streamline workflows. Right vendors will considerably save your time, enhance customer satisfaction rate, boost ROI and bring myriads of other benefits.
Moreover, vendor management helps businesses achieve their short-term as well as long-term goals, such as cost savings, enhancing onboarding processes for suppliers, etc.
Best Vendor management processes will ensure on-time delivery of goods and services in the market. Furthermore, it will also help build a strong relationship with vendors, so they seek negotiable rates.
Vendor Management Strategies to Strengthen Our Business
Before you get a vendor onboard. Think about the effect they will be having on your company. Ponder whether- the vendor will have a key role in your business-critical initiatives or processes? Often organizations focus on costs, thereby overlooking whether the vendor aligns well with the business goals and architecture. Does their solution or service align with your business requirements? Does the supplier have reliable traits ideal for a good partnership?
Relationships with vendors are known to boost business performance, but often companies struggle to get their vendors to be innovative, collaborative, and proactive in business activities. With bad vendor management, vendors can really become incompliant and sluggish.
1.Data and insight:
Create a holistic overview of the vendor, their value, and their impact on your organization. Include details related to the vendor performance, profile, and market data through identification, aggregation, and visualization. The data collected here needs to be accurate.
- Vendor profiles: Create vendor profiles with their performance, interaction, and market data individually. Keep updating their profiles timely.
- Dashboards: Build visually dashboards that provide real-time updates related to vendor performance through insightful data.
- Scorecards: Prepare quarterly scorecards for objective analysis and timely updates of most strategic measures of vendor relationship. Execute overall review to take inputs from the vendor for customer behavior assessment and future improvements.
- Identify vendor risks: Frame vendor risk plans as per the regulatory requirements. These plans must comprise an overview of vendor-related risks, measures taken to mitigate risks and respond to unexpected events.
2.Frequent Interactions :
Regular interactions with the vendor play a key role in vendor management, as it helps both parties exchange their expectations, priorities, and other critical information. Establish a consistent rhythm for frequent vendor meetings, even if it is executed virtually. These meetings will drive liability and help monitor performance.
3.Strike a balance between competition and commitment :
Needless to say, organizations would want consistent commitment and support from vendors for their business priorities in the long run. In return, vendors will also expect a reliable commitment from the organizations. However, companies often end up blindly accepting high prices provided by the vendors. To avoid this, you need to strike a perfect balance between getting competitive bids yet a reliable commitment.
4.Conduct strategy sessions :
If the vendor provides a critical component, product, or service in your operations. Make sure you invite them to join strategic meetings related to that specific product. The vendor has taken onboard naturally, which implies that they have a key role in the product or service operations. These strategic vendors may provide expertise to make the product/service better or cost-effective in such meetings, helping you achieve a competitive edge.
But before arranging strategic meetings, make sure you have a proper NDA (Non-Disclosure Agreement) with the vendor in place.
5.Long-term relationships :
Vendor management promotes healthy, long-term relationships with vendors. This, in turn, enhances business value and saves costs in the long run. Switching to different vendors frequently will impact product/service quality and cost more money. Long-term relationships will build trust and promote shared liability and favorable treatment for the business's eventual successes.
6.Understand vendor’s business :
Organizations don't want to constantly nag vendors to cut down costs, as it might eventually lead to their business loss or impact on quality. One of the core components of vendor management is to contribute resources and expertise to help suppliers serve you better.
Get to know their business model to understand their perspective of profitability.
What are the Vendor Management Challenges?
1.Compliance risk :
Not all vendors will keep up with your business requirements and comply with regulatory standards. Make sure you precisely present your criteria and business needs before taking vendors onboard.
2.Reputation Risk :
Finding and managing multiple vendors can be overwhelming for businesses. The process often involves risks as often businesses don’t know the quality of work new vendors will provide until the contract begins. Not all vendors will perform and deliver as per your expectations and set deadlines.
Make sure to analyze vendor profiles and their performance in the market to get insights into their value as potential suppliers.
3.Lack of visibility and improper data storage :
As businesses scale up with time; they might want to leverage a vendor data storage solution. Dealing with multiple vendors can get complicated if organizations do not retrieve and store critical vendor data across their relative projects. These data storage solutions will provide a centralized view of multiple vendors and their performance data.
Every vendor is likely to have different payment schedules and terms, which can get tricky sometimes. Optimal vendor management will help you automate vendor payments, thus reducing manual errors.