Vendors are very crucial for the development of any company. They play very importnt role in driving new growth within the industry and ensure the company to achieve revenue and profit goals. They are at the heart of many organization’s processes and activities.
However, vendors are often not considered so important and get mismanged that only leads to revenue and profit loss in long run. Previously, procurement of was just a department that purchased goods or services. Nothing much, nothing less!
But now purchase shold be considered as a part of your overall business strategy. To get the best value of your money, companies should take strategic approach to recruit and manage your suppiers efficiently. Doing so will have a plethora of business benefits.
Unfortunately vendor management is not not widely understood. Only a handful of top notch organizations who spend a lot of money on business reengineering processes have understood the importance and benefits of vendor management and use some structured system to manange their vendor relationship efficiently to garner best out of them.
What actually is Vendor Management?
Vendor sare the individuals or businesses that supply various goods and service to an organization. It is likely that an organization works with hundreds of different such individuals and businesses. Every one of them may have unique agreement, pay rates, point of contact and contract terms for the good or services they offer.
This, of course, can become a complex affair for an organization to deal with in case it doesnt have a proper system in place. Without a proper system or management tool the organization suddenly finds that it has missed on many deadlines, paying extra cost and losing time that ultimately leads to increase toatl project cost.
This is where vendor management come in picture.
Vendor management is a process that involves researching and sourcing vendors, obtaining quotes, negotiating contracts, managing vendor relationships, evaluating vendor performance and making payments. Streamlining this process will save business time, money and reputation.
Why Vendor Management is import for a business?
To help understand why, we have marked off seven reasons for vendor management should be on top priority in an organization.
1 Mitigate Risks
To effectively manage risks, whether in terms of operations, unforeseen cost implications, or regulatory compliance, organizations need to increase visibility. Vendor management can track a company’s suppliers and provide the necessary data to identify supplier’s risks and company can take necessary steps to mitigate them or find out alternatives well within time. Vendor management give you flexibility to easily verify suppliers information such as qualifications, certifications, track performance and even look into their financials to get a broader picture of the risks involved to protect the organization.
2. Optimize performance
Only finalizing suppliers/ vendors is not important rather tracking their performance as per the contract agreement and on different parameters including timeline and quality is. Vendor management system lets an organization track developments at suppliers end seamlessly and signal challenges before they become a problem. This is very important for optimal performance of an organization
3. Reduce Costs
Increased visibility marks organizations of forthcoming invisible costs. This lets organization to prepare better to avoid those costs. Additionally better relationships with vendors allow organization to negotiate better price with them and reduce costs.
4. Form Strong relationship
Good vendors are far and between. Getting them on boarded is a good win for the company. Organizations should go an extra mile to stay associated with them. Smooth and fair business processes makes them confident of organizations capability and effectiveness. This increases their loyalty towards the organization and organizations become able to keep them in their supply chain for long time.
5. Increase Decision Making Speed
Your vendor management program can significantly drive administrative efficiencies. As a central hub for vendor master data and record keeping, this program can cut down on duplication of data, loss of contracts and other information, administrative labor costs, and errors. Having one central place for all the vendor data can help organization take decisions fastly.
6. Increase Onboarding Speed
The time and resources it takes to onboard new vendors can slow down organization’s productivity and cost money. But with supplier management, it’s a breeze to obtain all relevant vendor information, such as bank details, capability information, regulatory data, and capacity details and input it into the system in a fast and error-free way for approval. The quicker you can onboard your vendors, the quicker you can move through the procurement process and receive your goods or services so you can put them to use.
7. Protect Company’s Brand For a company, brand holds a lot of value. It does not want to tarnish it due to the actions of an unprofessional or unethical vendor. A supplier management program can provide the company with the information it needs, such as a supplier’s social and environmental standards, to reduce risk of a serious incident stemming from a vendor’s actions.
