Vendor Management 101: Best Practices and Expectations
Vendor management is a part of most companies’ daily operations. Put simply, it is the process of managing your vendor relationships. It has to be, considering more than 18% of companies today work with 1,000 or more third parties.
There are benefits to using vendors, which is why so many organizations do. They help you speed up growth, allow you to delegate tasks you can’t complete internally, and let you leverage the expertise, products, or network of another organization. However, as your pool of vendors grows, so can the complexity of keeping track of all the important information related to activities and performance. Especially when vendors can take many shapes and forms; offer many products or services; and come with differing prices and engagement timelines.
Vendor management helps you keep track of it all. With the proper time invested up front, you’ll save hours of work over the course of the vendor relationship. You’ll also keep costs down by monitoring important metrics. And finally, a proper vendor management process protects your company from unforeseen risks.
So, what’s most critical for successful vendor management?
The first set of tasks that fall under the vendor management discipline is choosing your vendors (sometimes called suppliers, third parties, partners, and other terms). First, your team must establish internal processes, goals, and expectations. At the very least, these should include:
- Functionalities of the vendor
- Turnaround times
- Risk, security, and compliance
Establish expectations for each of these areas. When vendors submit proposals, look for the ones that can provide all or as many of your “wish list” items as possible. RFP templates are often available for specific products and services (ex. Third-Party Risk Management RFP template). Another qualifying factor when choosing vendors is if they have the ability to scale. Your organization will grow, and you want vendors that can be long-term partners.
This part of vendor management not only includes comparing and choosing vendors, but also writing and negotiating contracts. Onboarding and training are also crucial steps once suppliers sign contracts with you. Reinforce expectations, processes, and KPIs to ensure a successful relationship moving forward.
The day-to-day tasks of vendor management make up the bulk of what the discipline comprises. You’ll be closely communicating with vendors, collaborating with them to make sure they’re completing assigned tasks on time. Common daily duties include:
- Approving changes or updating goals
- Providing timely and clear direction
- Making sure vendors stay true to their contract terms
- Ensuring your company pays vendors on time and in full
- Identifying potential performance issues or unexpected risks
This stage of vendor management is when you’ll most likely see compliance, security, or risk issues pop up with vendors. Although vendor risk management (VRM), third-party risk management, and supplier risk management (SRM) are separate disciplines, vendor management is the first line of defense for spotting problems. When you see a possible vendor risk issue, alert the appropriate team members so they can address it immediately.
The day-to-day interactions you have with vendors is important. It takes the vendor relationship from a passive business transaction to an active partnership. That bodes well for creating long-term relationships that save your organization time and money.
Tracking Vendor Performance
Many vendors have a direct impact on the products or services your customers receive. Vendor management includes keeping tabs on the quality and accuracy of how vendors deliver those products and services. In general, on time and of the best quality is the goal.
However, as a part of the vendor selection process, your organization will have a set of specific expectations and KPIs. Vendors will all have signed on the dotted line to uphold and meet these. Vendor management makes sure they’re holding up their end of the bargain.
Cost-tracking is another task that falls under vendor management. Consistently evaluating the spend on each vendor and whether there are comparable ones in the market is valuable to your company’s bottom line. There’s no need to stick with a vendor that doesn’t meet your budget needs if another high-performing one can.
Key Takeaway: Simplify Your Vendor Management
Vendor management gives you control and visibility over your third-party suppliers. Instead of paralyzing decision-making for lack of information, at a glance you’ll understand the value each vendor brings to your organization.
This helps you foster long-term, cost-effective relationships with vendors. These strong ties can be the catalyst behind a better bottom line. Vendor management can also help you let go of providers that aren’t performing up to standard. You’ll have the time and processes in place to evaluate performance and exit contracts quickly.
OneTrust Vendorpedia is designed to simplify vendor management for everyone involved. From vendor assessments, to managing everyday tasks — and using automation to track KPIs — our vendor management solution is designed to make the process easy. Request a demo today to see how it can help your company.
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