Vendor Management Introduction

Vendor Management Introduction

Vendor Management is the process of establishing a robust relationship with your vendors and leveraging these relations to drive service excellence and smooth coordination between your organization, vendors, and end-users. 

• A vendor is a person or business that supplies goods or services to a company. 
• Another term for vendor is supplier. 
• In many situations a company presents the vendor with a purchase order stating the goods or services needed, the price, delivery date, and other terms.
• Management is the coordination and administration of tasks to  achieve a goal. 
• Administration activities include setting the organization’s strategy and coordinating the efforts of staff to accomplish these objectives through the application of  available resources.
• Cost control, risk reduction, and execution assessment lies in the foundation of this procedure.

Analyze Your Vendors

• Before on-boarding any merchant, you should assess them for the quality of their product, time taken to supply, pricing, and other vital elements. A large portion of organizations use scorecards for examining their vendors.
• For example, out of 100, they allot 10 points for quality, 40 points for pricing, 20 points for supply time, etc.
• The goal of analyzing your suppliers is to vet them for a long-term relationship. You should identify if they can consistently deliver the promised output and quality
• Additionally, you should concentrate on long-term relationships as changing vendors can be an expensive and time-consuming task.

Establish Smart Goals

• To meet your business targets, you must set up clear objectives for your vendors, based on your long-term and short-term business goals.
• Most importantly, you must comprehend your business procedure in the utmost detail
• It will help you structure and define clear performance metrics
• It is pivotal in conveying your expectations and building a mutual understanding with your vendors. With strategic inputs, your vendors will be able to forecast your needs and maintain their inventory accordingly.

Onboard The Vendors

• To cultivate a stable relationship with your vendors, you must recognize and acknowledge their business objectives
• You must author a legitimate contract that is beneficial for both parties
• Negotiating too much for prices and restricting the profit margin of your vendor can hamper the quality of the product
• To avoid that, you need to plan the terms of the contract in such a way that they are mutually profitable

Negotiate a Contract

• When your organization and the vendor land at mutually beneficial grounds, the contract document is signed, and the vendor is on-boarded
• The on-boarding process involves guiding the vendor into your company’s network
• A decent vendor on-boarding process guarantees the commencement of a smooth Vendor relationship
• Discover more about creating a hassle-free vendor on-boarding process

Monitor Vendor Performance

• After conveying your expectations, you expect your vendors to work as per the indicated standards of contract. But, most of the time, the situation is far from ideal.    
• You must ensure that your merchants are working at their highest potential
• The vendors who perform exceptionally well are called strategic vendors, and their perspective is esteemed while establishing new vendor policies or changing the current ones

Maintain Communication

• Numerous vendors fall in shadows of disarray in improving their performance
• They continue working in their usual way, but the performance deficiency persists
• Many organizations hold gatherings and forums to talk about vendor issues. Here, vendors are guided and are provided with several tips to improve
• It helps maintain open communication between your company and the vendor
• Additionally, it also helps develop coordination with your vendors and nourishes the buyer-vendor relationship

Rewards

• Vendors see themselves as an essential part of the organization when you reward them for exhibiting outstanding performance. Organizing reward campaigns helps your company motivate your vendors and establishes a healthy competition among them
• Acknowledging the vendors for their performance drives them to build their service potential, and it is beneficial for your company in the long run

Author: Nazia Tabassum