Guide to Vendor management Process

Vendor management is the procedure that authorizes an organization to take suitable actions for controlling cost, decreasing potential risks associated with vendors, ensuring excellent service deliver ability and originating value from vendors in the long-run. This comprises of researching about the best appropriate vendors, sourcing and obtaining pricing information, managing relationships in case of multiple vendors, and ensuring that the payments are always made on time.

                                   

Vendor Management Process:

An organization needs to plan and execute a process to guide how they will work with their vendors at each stage:

(1) Identification and Establishment of Business Goals

Before initiating the vendor management process, it is vital to identify and establish company goals that require vendor involvement. This benefits in understanding the needs of each business unit and stops duplication of efforts and depletion of resources in terms of choosing and contracting with vendors.

(2) Setting up the Vendor Management Team

After the company goals are acknowledged, the next step should be the foundation of an enthusiastic vendor management team. This centralized team should be proficient in recognizing company objectives for vendor management, choosing relevant vendors, negotiating the contracting process, occasionally assessing the performance of the vendors and tracing all transaction activities.

(3) Formation of a Database for all Vendor-related Information

After the company goals are clear and the vendor management team is up and running, the next step should be to build an efficient and characterized database of all appropriate vendors and vendor-related information.

 (4) Recognizing the Selection Criteria for Vendors

Once all vendor-related information is organized, efficient and categorized, you have to choose the standards based on which all significant vendors will be selected. While cost has been the chief selection criterion for selecting vendors, companies are progressively looking at other criteria to choose which vendor would best serve their needs.

 

(5) Valuation and Choice of Vendors

The vendors need to be assessed based on the selection criteria and, if applicable, the bidding procedure. The submitted bids require to be thoroughly evaluated to recognize the pricing structure, scope of work and how the necessities will be met, the terms and conditions, expiry and renewal dates, etc. 

(6) Emerging Contracts and Confirming Vendors

The contracting stage is allocated to the legal and finance team and the senior management dealing with the vendors. The rest of the business units receive the contract and involve the vendors after the complete procedure. All the significant stakeholders require to be engaged, at least in the decision-making procedure.

In today’s global economy, where geographical and economic barriers are constantly decreasing, businesses have to work with diverse kinds of vendors from all around the world. It is essential to understand the advantages and challenges of vendor management so that ASC can design an operational process that will guide your involvement with your vendors.