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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Vendor Management Best Practices — The Ultimate Guide of 2024
Key take-aways
- Vendor management refers to the processes that help manage suppliers, taking appropriate measures to reduce potential supplier risks.
- Vendor management includes vendor sourcing, contract negotiations, vendor performance assessment, risk management, and payments.
- A vendor management system can solve common problems of organizations, which include finding, engaging, and managing external workforce
Vendor management best practices are utilized to boost business growth and productivity. However, many organizations do not know these best practices in their industry.
For this article, we will discuss what the best practices in vendor management are. We will also share the benefits of vendor management that will captivate you to use it.
After reading this article, you will be able to manage the organization well through the best practices tips that we shared with you. You will also know how important vendor management is for the organization to manage its suppliers.
What is Vendor Management?
For starters, vendor management is used to describe the processes used to manage their suppliers or vendors.
It takes appropriate measures to control costs, reduce potential supplier risks, and ensure excellent service deliverability from vendors.
The vendor management process involves several different stages which are:
1. Vendor sourcing
This process is where the organizations search for the right vendors who will provide their products or services. You can research by using the internet or social media applications like LinkedIn.
2. Contract negotiations
Once you have identified your potential vendors, usually, you usually ask them to send quotes in the form of RFPs and RFQs.
Through their quotes, you can compare their prices. Additionally, you should compare and evaluate some factors like reputation, capacity, security practices, and effective communication.
3. Monitor vendor performance
The organization needs to build metrics for assessing vendor performance. This is important so that you will know if the vendors meet your standards.
Depending on their scorecard, the organization can retain them or replace them with a different vendor.
4. Risk management
This process involves evaluating potential risks that could negatively impact the organization. It includes data security, intellectual violations, compliance issues, and lawsuits.
5. Payments
Once the organization receives the goods and the invoice, it is now time to make timely a payment. Paying in time can foster good vendor relationships.
4 Vendor Management Best Practices
Here are some best practices of vendor management that you need to know!
1. Convey your defined goals and objectives to the organization
When engaging with vendors, the organization must clearly define its goals and expectations from the vendors.
The organization must let the vendors know the current and future requirements so that they will know how to align with the objectives of the organization.
Furthermore, the organization can collaborate better if the vendors are on the same page. It helps to reduce risks related to vendor compliance and performance and evaluate the vendors.
2. Set realistic deadlines
It is important to set your goals and deadlines as realistic as possible to the vendors. Setting deadlines that are not achievable can slow down vendor performance and value creation. Additionally, it increases risks and prevents a meaningful collaboration with your vendors.
3. Collaboration
Simply negotiating the pricing and performance leads to the completion of the contract. However, when you collaborate with your vendor, that is where the magic begins.
It leads to valuable, long-term relationship building that will allow both parties to brainstorm ideas about how value creation can be maximized.
4. Establish key performance indicators (KPI)
The organization can realize that the vendors are meeting the standard or expectations set for them by using key performance indicators.
This is utilized to measure the capability of the vendors and to know if the vendor management process is effective.
What is a Vendor Management System
A vendor management system (VMS) is a cloud-based software platform that solves the common problems of organizations such as finding, engaging, and managing their external workforce.
Nowadays, the vendor management system is key to the success of any procurement team. Using it will help the procurement team to make the most of the supplier relationship.
Examples of Vendor Management System
Here are some examples of vendor management that we’ve curated for you below!
1. SAP Fieldglass
SAP Fieldglass is a cloud-based, open vendor management system that helps businesses in finding, engaging, managing, paying, and unlocking value from the external workforce.
SAP helps transform how external workforces run. It guides hiring managers to know the best supplier.
It includes features such as built-in mobility, workforce visibility, automation process, increased security, and advanced reporting.
2. Oracle HCM Cloud
It is a complete solution that connects every human resource process from hire to retirement. Oracle HCM Cloud provides a consistent experience across devices.
It delivers an end-to-end solution that allows hiring manager admins to meet the changing needs of the business on a global scale through its advanced HCM controls, robust dashboards, and insightful analytics.
Oracle’s system helps create human experiences and strengthens the agility of an organization.
3. Beeline VMS
Beeline VMS has everything that an organization needs to automate all categories of its non-employee workforce.
It is a powerful software as a service platform that automates the current process in your organization that can save you time and money.
Conclusion
Effective vendor selection is essential for achieving organizational goals, ensuring quality, and maintaining strong relationships. By considering various factors, implementing recommended tips, and following a structured selection process, organizations can make informed decisions that contribute to their success. The vendor selection process is not just about cost but involves a comprehensive evaluation to secure reliable, ethical, and capable suppliers.
Frequentlyasked questions
What are vendor management best practices?
These are the activities or processes that can make the vendor management of an organization effective and efficient.
What is vendor management?
Vendor management is used to describe the processes used to manage their suppliers or vendors.
What is a vendor management system?
A VMS is a web-based software that allows the organization to manage its entire contingent workforce hiring process in one easy-to-use solution.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
