What are Vendor Management Role and Responsibilities?
A lot of hard work goes into vendor management, which makes it a crucial part of an enterprise’s success. Before we jump into vendor management’s role and responsibilities, let’s take a minute to check out what vendor management is and why it is an essential element of an enterprise first.
What is vendor management?
Vendor management is a term that is often used to describe the process enterprises utilize to manage their vendors/suppliers. Typically, vendor management activities are choosing vendors, negotiating the best price with vendors, discussing contracts, reducing vendor-related risks, ensuring service delivery, etc. The type of vendors employed by an enterprise will vary depending on the nature of the enterprise and what kind of products or service-related business they are into.
For instance, the vendors could be as diverse as seafood businesses, IT vendors, cleaning services, or marketing consultants. Having that said, vendors’ size could also range from independent, sole traders to huge enterprises.
Why is vendor management important?
Not just one or two, vendor management is significant for an enterprise’s success for several reasons. Primarily, vendor management plays a vital part in choosing the right vendor based on the enterprise’s requirements. In addition, enterprises can utilize vendor management to achieve certain goals such as taking steps to speed up the onboarding process, enhance cost-saving opportunities, etc.
On the other hand, vendors are also required to be managed by the enterprise to minimize the risk of supply chain disruption and ensure the quality and delivery of goods and services. Apart from this, the vendor management process could assist enterprises in building better and stronger relationships with the vendors which may later help in negotiating better deals and prices.
Vendor management benefits
- Enhance vendor selection
- Increase cost-savings
- Speed up vendor onboarding process
- Minimize risk of supply chain disruption
- Improve vendor relationships
- Negotiate better deals
Role and Responsibilities
The role of vendor management within an enterprise could include a variety of tasks. Some of them are:
→ Working closely with vendors on a daily basis.
→ Helping with planning and creating the vendor management procedures, policies, and programs.
→ Aiding with vendor selection and negotiation processes.
→ Monitoring vendor risk management even after the contract is completed. For example, observing performance levels and analyzing current due diligence.
→ Communicating with all departments within the enterprise such as internal audit, senior management, etc. to monitor tasks.
→ Maintaining an effective database of all relevant information related to 3rd-parties, and communicating the same information to senior management, stakeholders, and the board.
Managing your vendor lifecycle
Vendor management plays a vital role in managing each vendor’s lifecycle. Those who are not directly involved in vendor management on a daily basis might not be familiar with the fact that there’s an entire vendor lifecycle. So let’s take a look at one now.
The very first step in the vendor lifecycle is vendor qualification that decides if the vendor can meet the requirements or not. Vendors from across the globe can participate in bidding and depending on the parameters of the delivery timeline, quality of the products/services, the right vendor will be chosen.
Vendors submit application documents for the evaluation process. Just like any recruitment search, enterprises evaluate vendors based on cost and quality of the goods and services, delivery schedules, and other financial and economic aspects, the vendor evaluation decides who is eligible to onboard. There are also other types of evaluation that enterprises use such as scorecards, questionnaires, etc.
Being one of the crucial phases, an efficient vendor selection process can get excellent results. The objective of the vendor selection process is to maximize the overall value and create a better long-term relationship. Usually, its success depends on several qualitative and quantitive assessment parameters.
It is essential to gather vendor data to make the working relationship transparent. Once the vendor onboarding process is done, the enterprise can easily track progress on vendor information and performance.
Vendor Performance Management
Vendor performance management assists the enterprise in spotting vendor issues at an early stage and makes sure to resolve them on time. Albeit tracking vendor performance across the globe is a tad complicated, for better visibility, enterprises should track vendor performance and find the problem areas.
Vendor Risk Management
Another crucial part of vendor lifecycle management is to identify vendor risk at an early stage in the vendor base to avoid disruptions later. Risk management is among one of the essential duties in the procurement process and yet often the most overlooked. Vendor risk management is critical for the success of any business.
Vendor development is the process of fraternizing with vendors to enhance their process and production capabilities. A vendor development scenario arises when a vendor’s performance is not up to the mark or meets the enterprise’s expectations. Providing effective feedback about their performance enhances the vendor base.
If the vendors are worth holding on to, the enterprise has to continue to maintain a relationship to invest in its future. It is essential as the primary responsibility of the vendor management role is to create lasting, lucrative partnerships with vendors.
Vendor Management Challenges
For enterprises that have a huge vendor base or a complicated geographical footprint, it could be a little difficult to get a centralized view of the vendors utilized by a company. Often, a variety of challenges arise throughout the stages of the vendor management process. Right from obtaining basic documents from vendors to carrying out any essential risk assessments. It is extremely important to adopt effective and efficient processes to prevent problems in the future.
Enterprises might utilize an effective vendor management strategy to make sure vendors deliver what they promised. An effective strategy might include areas such as setting attainable and quantifiable goals, building relationships with vendors, etc. Also, enterprises can segregate their vendors base to identify their strategic vendors and invest time and resources strengthening those relationships. It is also better to avoid relying heavily on one specific vendor to prevent unfortunate situations for the enterprise.