You probably don’t manage all of your company’s production and operations yourself. You may already have outsourced a few matters to some third-party contractors. For example, some companies hire another company to provide IT support. Similarly, some companies work with vendors providing products and services to help you run your business. This process of working with third-party stakeholders is called vendor management.

Vendors may provide individual solutions or work as long-term business partners. If your organization deals with many suppliers and large projects, keeping track of contracts, terms, payments, and communication becomes complex. This is essentially what managing vendors is all about. 

This post is all about how you can effectively manage your vendors, how to draft a strategy, pick a suitable platform, and implement the best practices.

What is Vendor Management?

It is the activity of working with external parties to run your business smoothly. Choosing a service provider and entering into a contract is just the beginning of the entire process. To establish a successful collaboration, you need a proper process to track, evaluate, review, and align your goals with all the vendors involved.

The process of managing vendors includes the following:

• Looking for the best options
• Getting price quotes
• Estimating turnaround times
• Managing vendor relationships 
• Maintaining work quality 
• Assigning jobs to relevant vendors
• Reviewing performance 
• Making payments 
• Reporting and KPI tracking
• Compliance monitoring
• Resolving issues
• Minimizing risks

Add all the clauses in the contract and ask vendors to comply with the terms. That will ensure that every stakeholder is aligned with your bigger goal and works efficiently. Have a ‘Plan B’ if things don’t go as initially planned.

Why is it Important to Manage Vendors?

It ensures successful outcomes and a positive, collaborative experience when working with vendors. 

For the best results, identify suppliers with expertise in your desired area and link them with your organization’s goals and values. Remember that the most robust vendor relationships are like partnerships. Their mistakes could reflect on your company’s reputation and become your burden.

What is the Process to Manage Your Vendors?

The process has four main steps:

Establish business goals

First, define your business objectives using the SMART goals technique. Then, list what you need from vendors to achieve these objectives. You can more easily manage vendor relationships by being clear about your goals and what you need from vendors.

Choose the best vendor

Once you have your performance metrics in place, the next step is finding vendors to meet your needs best. Consider the pros and cons of each option before making a decision. When evaluating vendors, ask yourself the following questions:

1. Does the vendor have related experience? 
2. Do they have experience working with similar clients?
3. Do they have a good reputation in the market? 
4. Do they follow the best practices to keep things up and to run?
5. Do they provide economies of scale? 
6. Do they have positive social proof?

Manage vendors

After you have a list of vendors, you can start working with them. Ensure they meet the standards set in your contract. Stay in touch with vendors to get updates, approvals, changes, feedback, and other information needed to complete the project successfully.

Consistently meet goals

Ultimately, it would help if you strived to achieve your company goals by maintaining positive relationships with your vendors. That means supplying them with the necessary information and resources so they can provide reliable products and services to your business.

How to Write a Vendor Management Plan?

It is the plan that defines your objectives and the process you want to achieve those objectives. It also often adds vendor relations plans to normalize and simplify how your company communicates with vendors.

As part of your planning, you will need to identify and group your vendors accordingly. This step will include outlining their deliverables and due dates, reviews, proofing, and quality checks. Having multiple people manage different aspects of the vendor contributions can help ensure a successful outcome.

Vendor Relationship Management Best Practices

Efficient management of vendor relationships leads to increased revenue, client contentment, and superior output. However, it may not be possible to determine how much time and effort must be invested in creating positive supplier relationships to see improvements in the company’s overall performance. 

For supplier relationships to be effective, certain key elements are necessary, such as trust, communication, and a clear plan. Here are some of the best practices for managing supplier relationships:

• Set clear project expectations and performance metrics
• Keep your request for proposals (RFP) short and set realistic timelines 
• Regular schedules, milestones, and check-ins to identify potential pain points and new opportunities
• Define expectations and rules regarding competition, non-disclosure, and other requirements
• Communicate regularly and proactively address issues
• Share information and priorities to serve your needs better
• Build strong partnerships for long-term to avoid hurdles
• Negotiate a win-win agreement

What is a Vendor Management System or VMS?

It’s a tool for effectively managing vendors. Organizations forward their task specifications via this system. These systems usually have features such as contract administration, hiring, interviewing, and payment processes. A vendor managing system can also make tracking project progress easier and streamline the billing and timekeeping process.

The Bottom Line

Vendor management is all about running businesses smoothly. Having good terms ensures you achieve your goals and avoid hurdles.

Efficient VMS makes it easier to manage vendors. It also helps in making the most of all your agreements. These systems let you manage vendor onboarding, assessment, approvals, and compliance.

Want to know more about vendor management? Connect with 403 IT Solutions, and we’ll give you a brief overview.