How to Write a Clear, Successful Vendor Management Program

Avendor management program (VMP)refers to the strategic and tactical measures that a company employs to work efficiently with its suppliers. Vendor management programs include policies and procedures that are explained in shared documents, and they serve to drive cost control, risk management, service, and quality excellence.

有限公司mpanies of all sizes need vendor management programs to maximize the benefits of outsourcing. With the right plan in place, organizations increase the value of vendor relationships, mitigate potential risks, and create long-lasting, positive organizational change.

Jon M. Quigley, author andValue Transformation, LLCPrincipal, has found in his many vendor management consulting engagements that synergistic vendor relationships simply make sense for all parties. “To win in a global, intensely competitive economy, use data to drive decision making and collaborate with vendors,” Quigley advises. “Negotiating to get to the lowest price isn’t a best practice in most cases, particularly for critical vendors. The goal is to work with vendors to reach company goals through mutually satisfying agreements and performance that drive profitability, innovation, and transformation.”

A formal vendor management program makes it easier to drive improvements that generate organization-wide benefits throughout the vendor lifecycle.

Benefits of vendor management programs include improvement in the following areas:

• Administrative Efficiencies:Data is fundamental to administering vendor programs effectively. Vendor management software cuts down on data duplication and loss of information and contracts, and it reduces administration labor errors and the resulting costs. By having a central place to store all your vendor data, you can better manage relationships and improve planning.
• Risk Management:Vendor management tools and vendor management programs provide the data you need to identify risks. Armed with data, it’s easier to mitigate risks or choose another vendor that aligns more closely to your desired risk profile. Mitigate risk throughout the contract lifecycle with vendor risk management (VRM) strategies and tactics such as those found in “Risk Management Strategies and Tips.”
• Vendor Performance and Quality:Vendor quality should include robust support after the sale, flexible credit management, good customer service, and strong market knowledge. Quality vendors take a “we, not me” approach and work with your team to innovate products and processes. Learn about methods that foster collaboration and generate quality results with “Vendor Performance Management.”
• 有限公司st Controls:增加可见性有助于控制成本。除了ally, collaborative relationships support rational rate negotiation and access to incentives and discounts that increase profit margins.
• Vendor Acquisition:One of the pillars of vendor management is learning the value of each vendor. Rank vendors by importance to help reorganize your roster and, if necessary, to end the relationship with some suppliers. Once you consolidate vendors, you’ll have an even more refined set of criteria from which to select new vendors and define the types of agreements and working relationships that make sense.
• Relationships:Improved processes also support improved relationships. These upgrades build loyalty and help you retain your most valued suppliers in the long run.
• Onboarding:Give vendors information about policies, procedures, and expectations from the beginning of the relationship to save time and resources, and to support better workflows throughout the vendor lifecycle. Learn the keys to effective onboarding with “Vendor Onboarding: Best Practices, Process Flows, and Checklists.”
• Brand Reputation:Better performance, efficiency, quality, and other improvements will raise your profile, create good buzz, and boost your brand.

learn more about vendor management benefits and how to make smarter vendor management moves by reading our “Guide to Vendor Management.”

The elements of a vendor management program define your goals and standards for suppliers, as well as set quality, legal, and financial guidelines. The features you emphasize in your program will vary depending on your business and vendors.

Gerard Blokdyk is the CEO of The Art of Service and an author of more than 50 business management guides, includingEffective Vendor Management: A Complete Guide (2020 Edition). He says that successful vendor management begins with determining specific organizational needs. “Begin with due diligence within your organization. Understand your own needs and make a thorough self-assessment before you begin any program. Doing so will prevent problems in the long run.”

learn more about organizing the way you work with suppliers with“The Guide to Vendor Management Process".

AnIT vendor management programensures that technologies, processes, policies, and procedures meet your business needs, industry standards, and security and government regulations. The need for IT vendor management has grown in direct proportion to data use in business and outsourcing.

Having full IT capabilities in-house is rare. Many companies function more effectively and profitably by outsourcing application development, bill processing, cloud computing, data backups, managed security, network monitoring, receivables collections, payroll services, telecommunications platforms, and other services. That said, there is risk involved when you outsource essential functions that often affect sensitive data.

As Blokdyk says, “Even with risk management protocols in place, organizations often get the sinking feeling that they don’t have a clear picture of the security position of their most critical vendors.

“For example,” he continues, “Ask: Do the vendor’s mobile server software, client software, application management capabilities, device security, and management abilities meet your requirements for performance? Is your vendor securing that data in a manner consistent with your data classification requirements and regulations? Make sure that your vendor’s subcontractors are also risk-checked and held to necessary standards, laws, and applicable regulations.”

You will usually include IT management protocols in contracts and specify them in the larger vendor management program. Risk management audits are essential, and in many cases, auditors should certify that you and your vendors comply with applicable laws and regulations.

Below you’ll find a downloadable chart that includes an overview of some of the many national and international data standards and regulations related to IT, data security, and privacy:

Download IT Vendor Management Data Security and Regulations Overview

Vendor management teams manage vendor relationships to ensure that they align with company goals, and help to foster a smooth, fiscally responsible partnership. Vendor management teams also serve as liaisons between vendors and company departments.

Quigley provides an example of vendor management team composition based on his experience with large consulting firms. “The team size and personnel vary depending upon the complexity of the material acquisition,” explains Quigley.

Often, the team resides in avendor management office (VMO), which is the internal unit that evaluates third-party services and goods providers, supervises daily interactions, and manages longer-term relationships based on the vendor management program dictates. Because of the increasing importance and emphasis on technology, a separate IT vendor management office operates within the VMO. IT vendor management offices establish and monitor IT vendor relationships, set up insourcing and outsourcing standards, and determine risk management policies.

Vendor management program (VMP) best practices should support your organization’s stated goals and overall performance. Best practices support overall company goals, use data and technology to continuously improve, provide clarity, and improve relationships.

Below are some VMP best practices:

• Secure Top-Down Planning:Get leadership buy-in from the start and look to right-size the vendor management program for your company.
• Keep KPIs in Mind:Simplify vendor evaluations with KPI scorecards. When you define and monitor goals, you communicate what you need and how you will evaluate deliverables from the first day of the engagement.
• Clarity:The policies, procedures, strategies, and tactics of your VMP should be clear to both internal and external stakeholders. Reach out to the people who regularly interact with vendors so that they can review all aspects of the program to ensure it functions in the real world.
• Foster Relationships:Take the time to engage stakeholders at your company and with your vendors to keep communication lines open. Grow the relationship and see what opportunities you can work on with the vendor to improve and innovate.
• Take Advantage of Technology:It’s easier to track every aspect of vendor management effectively with the right tools to centralize data, track risks, and monitor performance.

For more best practices, refer to the “Vendor Management Best Practices Guide.”

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