Effective and efficient vendor management should be your priority if you want to remain competitive in the marketplace. Vendor management enables you to drive service excellence, mitigate risks, gain value from your vendors and manage costs throughout the partnership cycle.
Wrong partnerships will lead your company to its deathbed while right ones will help you achieve your long-term goals, so take all necessary steps to ensure that you stay on top of things from the beginning to the end of the relationship.
Below are five best practices that can help you improve your vendor management strategy.
Start by creating an internal vendor management team that will be dedicated to handling vendors from the onset. A committed team will focus on procuring the most appropriate vendors and maintaining mutually beneficial relationships. Vendor management is different from other organizational aspects like employee management where typically the Human Resources department would source and hire, but the department heads will manage them.
The size of your vendor management team will depend on the number of outsourced vendors and their contribution to the company. Your goal here is to position your office as a strategic function that facilitates the long-term health of key vendors.
Proper classification helps in resource allocation because not all vendors are equal. For example, a vendor providing hardware is different from the one providing a service. To determine further the distribution portions, consider whether the partnership will be short-term or long-term.
Your aim is to invest more on the strategic vendors whose role has the highest impact on the organization goals and objectives. However, do not neglect the tactical vendors.
This structure will ensure your team works seamlessly and increase your resource management effectiveness, including cost containment.
You need to safeguard yourself and the vendor by defining the partnership parameters. Determine what to share at what point of the partnership, agree on individual responsibilities for the overall success of the relationship and contract termination circumstances.
Your aim should be to protect yourself from any misunderstanding and risks that may emerge if the partnership collapses. You would also be well advised to also execute standard Non Disclosure Agreements.
Consistent monitoring and measuring of vendor performance will enable you to quickly notice when something goes right or wrong. Given the impact of a vendor to the organization, their performance has to remain top notch. Hold performance review meetings to discuss the progress of the partnership.
Effective and efficient vendor management is crucial for the success of your business and should be a top priority. Having a good team in place will establish a mutually beneficial relationship that can be your competitive edge.