What is Vendor Management? Definition and Best Practices

The process of an organization’s effort to control cost, decrease vendor-related risks, assure the best service deliverability that is possible and ensure value from vendors secularly can be described as Vendor Management. Questioning the difference between the term vendor and supplier is very common. In fact, both terms mean the same and can be used interchangeably. Whichever the term is being used, its effective management is crucial for organizations. An organization might work with a few or even hundreds of vendors, all of them with different contracts, pay rates and points of contact. This is why most companies have a vendor manager and care about vendor management a lot.

Vendor management is of great importance, the absence of information and negligence about issues such as vendor information and vendor performance rise supply risks for companies. In addition, employees have trouble deciding which vendors they are expected to buy from.

What are the Components of Vendor Management?

Components of vendor management can be explained as; the research for best suitable vendors, sourcing and getting information about price, measurement of the quality of the work that is done, management of relationships when multiple vendors are present, performance evaluation with pre-set organizational standards and making sure that the payments are made in due time.

What is Vendor Management System?

Most of the time, organizations use spreadsheets for vendor data. That is an ineffective method, as companies expand their operations globally and work with vendors from all around the globe, it is harder to manage with manual systems and to keep the information up-to-date. This is why most companies need a vendor management system. A vendor management system is a tool that helps organizations manage all vendor-related activities from a single platform. With a VMS tool, it is possible to maximize efficiency and long-lasting growth without wasting a lot of money for providing them.

What is the Difference Between Vendor Management and Vendor Relationship Management?

Vendor Management and Vendor Relationship Management do not refer to the same meaning. Vendor Management is the term used for describing the whole process related to vendors, on the other hand, Vendor Relationship Management refers to the human component of the process. The vendors are represented by people and establishing good relationships with those people is highly important. Meaningful and long-lasting relationships with vendors have a positive impact on the performance and help to minimize vendor-related risks. There are VRM tools that simplify the process.

Vendor Management Processes

• Selecting the vendor
• Assessing risks
• Negotiating the contract
• Onboarding
• Evaluating performance

The first step to select the right vendor is identifying the business goals. With this step, it is possible to understand the requirements and expectations of each business unit. After identifying goals, it is best to assign a team that will act as an intermediary between vendors and business units. The next step is taking all vendor-related information and creating a database. Identifying the selection criteria is crucial, after that there is only one step left: evaluating vendors and selecting one of them.

After the vendor is selected, it is crucial to assess risks. When it is time for the contract, it is important to include all stakeholders in the contracting stage. After terms are established and KPIs are set, the next step is onboarding. The last step is evaluating performance, monitoring performance is essential for getting insights.

What are the Benefits of Vendor Management?

• Better selection of vendors: With efficient vendor management, having more choices and minimized costs can is possible.
• Better management of contracts: When multiple vendors are present, it is probable to have problems with managing contracts and documents without efficient vendor management. With the suitable VMS tool, it is possible to save time and achieve better decision-making processes with the centralized assessment of the current status of all contracts and all other valuable information in that matter provided by the tool.
• Better management of performance: It is possible to get insights into the performance of all vendors. With this information, a better understanding of what is working for the company is achievable.
• Better relationships with vendors: Managing vendor relationships efficiently is highly important for the success of the project. With proper VMS tools, organizations can get all necessary information on a single page thus simplify the decision-making process.

Supplier Management Portal: JetSRM

JetSRM Supplier Portal is a vendor management solution that enables businesses to perform supplier relationship management. JetSRM works 100% integrated with SAP, so companies can record all these data in the SAP system.