We can’t stress enough the importance of working on customer and employee management. Both of these groups have the power to make or break your business. However, most organizations keep ignoring one another important group while striving to improve their relationships with customers and employees. Vendors are that overlooked group. Numbers also show that the practice of having an established vendor management system is not widespread among organizations. A report by Forbes indicates that nearly half of the supplier collaboration initiatives fail to materialize into any meaningful thing.
Vendor management can help organizations in a competitive environment to not just survive but thrive. Good vendor management can become a tiebreaker among two enterprises boasting the same value proposition. In short, vendor management is an integral element of winning organizational practices.
In this article, we will keep our focus on discussing vendor management, how to put it into practice, and what are its ultimate benefits.
Let’s start our discussion on vendor management – an ignored area of most organizational work landscapes.
What Is Vendor Management and Vendor Management System?
Before discussing vendor management approaches and benefits, it is imperative to discuss what this term essentially means. For many people, vendor management means curating vendors’ list and their contact information. However, this is not what the wide discipline of vendor management represents. Simply put, vendor management is a set of practices that control purchase costs, mitigate risks, and harness service excellence for the overall value increment from suppliers throughout the contract lifecycle.
Moreover, a vendor management system is an application or software that streamlines all the vendor-related tasks for an organization. These systems help an organization improve its communication and coordination with vendors. Moreover, organizations can also efficiently approve and track a vendor’s portfolio and performance on a vendor management system.
Vendor Management Approaches
Let’s look at some vendor management approaches that your organization can adopt to improve things at the backend.
Focus on Long-Term Partnerships
This is one of the most important things that many organizations miss while dealing with vendors. Just like customer and employee retention profits, an organization retaining vendors also has its benefits. To begin with, it saves you from initiating new bidding and vetting process every other day. Moreover, a long-term affiliate is less likely to break your trust. When getting a vendor on board, make sure it is for the long haul rather than a one-time partnership.
Communication is important in every personal and professional relationship, and vendor relationship is no different. It has been observed that most organizations have a very unenthusiastic and indifferent association with their vendors. Their communications are only limited to exchanging invoices and purchase orders.
Such boxed communication doesn’t leave any room to expect service excellence from the vendor. You need to improve your vendor communication and extend it beyond exchanging paperwork. Treat them as your B2B partners to whom you show warmth and courtesy.
Ensure Vendor Values Working with You
This point is linked to the two approaches we have discussed above. When you don’t go for long-term partnerships and keep your correspondence reserved, you somewhat let vendors know that they are expendable. Vendors often reciprocate this cold and disinterested behavior from organizations in their own way. Just take a page out of your consumer/employee satisfaction guidebook and use it for your vendors. You will succeed in making them realize that you truly value their partnership.
Before wrapping up this section, you need to mention here that a vendor management system is central to all the approaches we have discussed here. It will be virtually impossible for you to successfully implement these approaches without vendor management software at your disposal.
Vendor Management Benefits
Let’s see how using a vendor management system offer benefits to organizations.
Mitigate Risks and Reduce Costs
Good vendor management practices help you cut down supplier risks by improving the visibility of their activities for you. A robust vendor management system assists you in tracking a supplier’s performance and verifying their certifications and other information. This homework enables you to see unforeseen cost implications and take care of potential regulatory compliance lapses in advance.
On the other hand, good vendor management also helps you reduce your expenses. First, the healthy relationship that you manage to develop with your vendors comes in useful. You get in a better position to negotiate existing rates and leverage discounts to reduce costs and improve margins. On the other hand, the better visibility offered by vendor management software helps you identify unseen and avoidable expenses.
Establishing good supplier management through a vendor management system also helps you optimize their performance. Good vendor management software lets you track a supplier’s performance against its contract. This tracking can give you enough insight to identify areas that need improvement.
Improves Vendor Onboarding Process
Having a manual assessment of a vendor’s banking details, regulatory data, portfolio, and available capacity is a time-consuming process. It can considerably extend the time from receiving bids to placing the first procurement order. Most of this work is streamlined and automated through a software application in good vendor management. As a result, you get to speed up your supplier onboarding and the overall procurement process.
Protects Your Brand Image
Good vendor management practices that involve a 360-degree vetting process guarantee that you only work with the best in the business. This is important because even partnering with ill-reputed vendors can stain your brand image.
As mentioned multiple times throughout this article, a vendor management system is important for executing the relevant approaches and reaping the subsequent benefits. If you helm a small-to-medium enterprise in Canada and looking to streamlining its vendor management, consider SimplyPurchasing by Microsys.
It is the procurement management software that also boasts good vendor management features. It can help you consolidate all the vendor data on a single platform to help in tracking and assessing the performance of every individual supplier more efficiently.