Vendor management is the process of continually assessing the risks a third-party vendor and its subcontractors pose to your institution. It relies on policies, procedures, and tools to monitor and mitigate those risks.
The Vendor Management Process Defined
Reducing costs with lower price points and lower spend is no longer enough to give your vendor management team, and your entire organization, a serious competitive advantage. Effective development and maintenance of vendor relationships with your supply base is essential.
The vendor management process helps you achieve your organizational goals by:
- Evaluating supplier capabilities, including terms, pricing, and overall quality of your procured services
- Negotiation of contract terms and conditions
- Managing vendor relationships, and ongoing monitoring of invoices and performing regularly scheduled bill audits.
Why Vendor Management Matters
Vendor management is the system your company uses to interface with external suppliers. The capabilities, reliability, and affordability of each vendor can have a substantial impact on your company’s bottom line.
Vendor relationship management (VRM) is essentially risk management, and an essential business process for every organization.
Vendor Performance Reviews
Whether they’ve been with you for years or are brand new to your company, vendors require regular performance reviews. The metrics established by your VRM team and your vendor contracts will provide you with the guidelines you need to determine how much value a particular supplier is providing.
A few metrics you might use as benchmarks when evaluating vendors include:
- Mutually-agreed-upon performance targets, e.g. volume of goods, server uptime, shipping delays, etc.
- Contract compliance
- In-house satisfaction, including vendor relationships with key team members
- Vendor risk based on company goals, market performance, and social and financial presence
Using these metrics, you can quickly and reliably identify your “problem children” among your vendors and address any unusual changes or ongoing problems. You’ll also have a jumping-off point for relationship improvement (as needed), and head off disasters before they can damage or even destroy a mutually beneficial relationship.
Continuous Improvement of Vendor Management Process
One important thing to remember about Vendor Management is that it is not static. It is an ongoing process that can always be improved. It is imperative that your company identify these opportunities for improvement and develop a strategic and tactical plan to implement them. Some of the areas to focus on are:
- Cost Analysis & Metrics
- RFP Management
- Contract Review Procedures
- Bill Audit and Invoice Reviews
Who says relationships have to be hard? With the right team, a strong strategy, and a solid vendor management policy, you can reduce risk, streamline your supply chain, and provide powerful support to your company’s goals—today, and in the future.
Take control of your vendor management process, and build value along with strong relationships.
About Limitless Technology
Limitless Technology, LLC has been managing complex indirect spend and vendor documentation since 2006 for some of the largest companies in the USA saving them millions in costs.
Through our Billing Optimization and Vendor Management Solutions proprietary platforms we utilize technology, processes, expertise, time, and resources to improve our client’s bottom-line.
Limitless Technology manages your vendors, so you can manage and grow your business.
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