What is Vendor Management?
Vendor management is defined as the steps an organization takes to source, manage and monitor their vendors, also known as third parties and suppliers. Vendor management activities include sourcing and evaluating vendors; making selections; negotiating contract terms and conditions; reviewing costs and ROI; reducing the risks and consequences associated with vendors; as well as monitoring risk, performance, and relationships over time.
The types of vendors an organization uses varies based on company size, industry, and location. Examples of differing vendors include technology vendors, marketing consultants, contractors, licensees, and office suppliers. The criticality of a vendor is directly correlated to the risk they pose. The term vendor management is commonly intertwined with third-party risk management (TPRM), vendor risk management (VRM) and supplier risk management(SRM). However, it does differ in that it often focuses more on the sourcing and procurement of vendors as well as the management of those relationships over time. TPRM, VRM, and SRM are more focused on risks.
Download the infographic: The Importance of Vendor Risk Assessments
What are common vendor management challenges?
Organizations face a host of vendor management challenges, especially if the business has a large network of suppliers – or an intricate and global landscape of compliance obligations. Gaining a clear and evergreen understanding of your vendor engagements can be the difference between operational efficiencies and negative impacts that effect the bottom line. That said, the challenges an organization faces when managing vendors includes:
- Difficult sourcing the right vendor
- Slow evaluation processes (both RFPs and security, privacy, and due diligence questionnaires)
- Lack of tools and technologies to manage contracts and documentation
- Inability to track a vendor’s key performance indicators (KPI)
- No clear understanding of the risk a vendor poses to the business
- Difficulty monitoring vendor risk and performance over time
What are vendor management best practices?
Vendor management is key to a successful and sustainable supply chain. There are a variety of techniques and best practices an organization can leverage include:
- Establish and communicate clear expectations and KPIs
- Dictate firm and realistic timelines for operations
- Identify areas for automation (onboarding, assessments, monitoring, offboarding)
- Sync with vendors regularly to maintain a successful relationship
- Monitoring regulations and industry updates
- Conduct in-depth vendor risk assessments
- Understand the controls a vendor has in place and the risks associated with that vendor
While there’s no “one-size-fits-all” vendor management process, organizations can leverage a few basic, but helpful steps that are needed to manage the lifecycle of a vendor engagement. These include:
- Pinpoint and create organizational goals
- Build out a dedicated vendor management team
- Create a centralized database for all vendor-related information, including contracts and communication
- Outline the processes for requesting and selecting a vendor
- Establish a contractual review method that incorporates all vendor-related stakeholders
- Host bi-annual syncs to review key KPIs
Read the blog: What is Supplier Risk Management?
What are the benefits of implementing vendor management software?
By implementing a vendor management software like OneTrust Vendorpedia, your organization can establish and scale a successful program that adds to your bottom line and reduces risk. To learn more about how Vendorpedia can help, request a demo today!
- Vendorpedia News: OneTrust Recognized for the Second Consecutive Year as a Gartner Peer Insights Customers’ Choice for IT Vendor Risk Management Tools
- Read the case study: How Self Esteem Brands Got in Vendor Risk “Shape” with OneTrust Vendorpedia
- Sign up for the webinar: Are You a Trusted Vendor? 10 Things Every Customer Wants to Know
- Watch the webinar: Trends in Third-Party Risk: What’s New for 2021?
- Download the report: OneTrust Named a Leader in the 2020 Gartner Magic Quadrant for IT Vendor Risk Management Tools