Strategies to Implement Successful Vendor Management

In the past, successful vendor management was primarily based on your ability to negotiate and re-negotiate important contracts. Nowadays, this is no longer the case.

To establish a well-optimized supply chain, you need to collaborate with vendors, organize your workflow, and monitor the whole process from start to finish. This warrants some strategic planning and thinking. After all, using sound tactics is what separates good vendor management from the great.

So, what kind of strategies can you implement into your vendor management process to fulfill both your long- and short-term goals and make it more efficient?

Read the full article down below and find out!

Build Long-Term Partnerships

Frequent vendor changes for short-term monetary gains will prove more costly in the long run. Instead, what you should be doing is cementing your relationships with ongoing partners and getting more value out of your partnerships. According to Deloitte’s Global CPO survey, 23% of CPOs stated that increasing their supplier collaboration activities was an integral part of their procurement strategy for the following year.  

These include better real-time communication, data sharing, transparency, etc.

In the end, you will not only get preferential treatment (quality goods at lower prices) but their trust and expertise as well. This, in turn, will help you gain a better understanding of the whole vendor management process and will assist you in spotting the key areas that require improvement; it will also help you avoid costly mistakes and potential oversights.

Sharing and Caring

When it comes to vendor management, sharing truly is caring. No matter how good your relationship with your supplier may be, they still can’t read your mind. Therefore, you need to work on improving your overall communication channels and creating a shared data repository, with relevant supplier data, for your vendors to access.

This includes new product designs, launch dates, expansion plans, relocation changes, and so on.

That way, your vendors will get valuable insight on how to serve you better.

In addition, you also need to try and understand how your vendor’s business works inside out. After all, you’re both in it for the money. Caring for their part of the process will establish trust and understanding, boosting cooperation that will, ultimately, encourage growth for both parties.

Automate What You Can

Successful vendor management doesn’t imply that you have to do things entirely from scratch — automate what you can instead. Work smarter and use the tools and resources at your disposal to fully streamline and optimize your workflow. For example, when drafting legal documents, having access to some useful vendor contracts templates will significantly lower the time you need to get these done.

As a result, you will waste less time on administrative duties so you can focus on other — more important — aspects of your vendor management.

In a nutshell, simplify as much work as you can and facilitate a process that will not only save you precious time but money as well. 

Use Smart Vendor Segmentation

Mapping suppliers according to certain parameters — such as risk exposure and profitability — is a good way to organize your vendor-management efforts. As such, there are three basic categories you can group them into:

• Strategic — these vendors offer the highest value and the lowest volume; usually from a single source.
• Important — these, on the other hand, have multiple sources but provide only moderate value.
• Transactional — vendors provide a multitude of options but, unlike strategic vendors, they come with the lowest value (but in high volumes).

In essence, you want to streamline the performance management process as much as possible. In the long-run, this will make it easier for you to determine the most optimal supplier for your business and where they fit in the grand scheme of things; aka, your vendor management.

Do Frequent Performance Check-ups

Conduct regular performance reviews. If your vendor is providing you with less value each quarter, it’s time to find a new supplier. To get to the bottom of this, you first need to utilize adequate key performance indicators (KPIs). These include the following:

• Vendor satisfaction rates — how well you cooperate.
• The success rate of projected targets — delays, volumes delivered, etc.
• Contract compliance — adhering to deadlines, market performance, and so on.

Overall, by monitoring your vendors’ performance levels you will effectively separate the wheat from the chaff, allowing you to focus on your more beneficial relationships while getting rid of the rest. Furthermore, this will also help you become more aware of any issues that may exist in your supply chain, leaving you with plenty of time to sort things out before they become problematic.

The end product — a supply chain that delivers. So, don’t be lazy and use these awesome tips to optimize your vendor management process even further and get some concrete results right now.