Vendor management has been getting increased exposure among large businesses lately. Some of that can be attributed to the times we are in and the increased focus on those critical suppliers and vendors in your supply chain. Now more than ever it is critical to manage key vendors by insuring compliance and supporting vendor health. Maintaining healthy supply chains is critical where demand for products is exceeding supply in many industries. Towards this end, we have seen an increase in companies now setting up Offices of Vendor Management and new roles in the executive suite such as Chief Vendor Management Officer. The curious thing is almost everyone has a different view on what constitutes vendor management and what tools are available for businesses to employ in managing vendors and supply chains?
Some of that depends on who you talk to and what responsibilities they may have in an organization. For instance, a person who works in sourcing may have a vastly different view of vendor management than someone who is in accounts payable or in supply chain operations. All three of those positions will likely have a view towards vendor management that impacts their area of responsibility the most. And it is not only the position you may hold in an organization that will that influence your opinion on “what is vendor management” but the company and industry you are in will impact the definition as well, even to the point of the name, i.e., Vendor Management vs. Supplier Management. It is this fractured view of vendor or supplier management that has come to the attention of executives and the need to have an organizational view from top. In other words, vendor management is no longer a tactical operation, but more a strategic element in the overall success of the enterprise.
Regardless of what you call it or how your company views it, there are some common themes and characteristics that we can establish: Vendor Management is a set of people, processes, activities, systems, and information management tools that allows an organization to have maximum visibility into all of the characteristics and activities associated with a vendor or supplier and having the ability to make real-time decisions based on the availability of this actionable information. To accomplish this you need to define vendor profiles (who, what, where, why, how and how much); supplier recruitment based on the target profile; onboarding the supplier via data and document collection to insure compliance and supplier health;, tracking and scoring vendor performance; and tracking all of the transactional activities of the vendor throughout the procure-to-pay process. Key to all of this is building an organizational/management structure to manage and take ownership of all vendor related activities to insure healthy suppliers and supply chains that fuel your business.
While not all of the characteristics defined above may apply equally, there is generally some form of activity or process surrounding these areas in every organization, even if discrete and largely undefined. In fact, identifying and formalizing these “discrete and undefined” processes is often a crucial element in establishing a successful vendor management program. Supplier or vendor management should not be the exclusive province of large companies. Any company who expends time and resources on managing vendor activities, who depends on their vendors as mission critical components of their core business, or companies that have complex supply chains can benefit from a defined and structured vendor management program.
So here are some of the components that you should take a look at in evaluating a vendor management program: define all of the activities, processes, systems, people, and information assets that are part of the vendor life cycle; identify all vendor touch points including who is responsible for the touch points, the interplay between departments/vendors for each touch point; establish reporting and visibility into vendor activities and vendor performance; identify relative success or failure of each touch point and identifiable vendor activity; define who owns each process or piece of the vendor life cycle and how issues are escalated and resolved. Based on what you find you can begin to identify where the holes are, where the challenges will be, and most importantly where the opportunities for improvement exist and put together the outlines of a successful vendor management program for your company.
There are technologies that can assist you in streamlining vendor management activities not only for your organization, but for your vendors and suppliers as well. Technology based solutions and other powerful business tools that will help streamline these complex and often resource intensive processes such as:
- Vendor Portals or Supplier Portals
- Vendor Onboarding (supplier onboarding)
- Vendor Information Management Systems
- Business Process Management/Workflow
- PO Dispatch & Update
- RFx Dispatch & Update
- Dynamic Discounting or Supply Chain Finance
Implementing a formal vendor management program can be a very beneficial undertaking that can deliver substantial economic benefits as well as strengthen vendor relationships and facilitate more secure supply chains. Contact ICG Consulting to see how your organization can establish or strengthen your vendor management initiative. Or you can request a demonstration from ICG for you and your team of the many vendor management related solutions such as those referenced above.