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Efficient procurement requires seamless collaboration between vendors and the company’s procurement department. Selecting the right vendors helps businesses achieve their procurement goals and minimize delays. In this post, we’ll talk about vendor management, what it is, prime activities, and its benefits.
Vendor management is a business process that helps organizations find, evaluate, and manage vendors. It starts when the need arises to outsource a project to a vendor, or to purchase goods or services, and continues until you work with the vendor.
It ensures that the vendor is competent enough to meet your business needs. Vendor management aims to maintain quality and consistency while making sure that the agreed-upon terms are fulfilled.
Vendor management is essential for larger businesses that deal with hundreds or thousands of vendors. Working with vendors across borders is also difficult, which is why it’s important to develop a process for managing key trading partners.
Vendor management can be broken down into several different activities, as discussed below.
Vendor management starts with the selection of vendors. However, as mentioned earlier, prices aren’t the only determinant to ensure a healthy relationship. They are screened based on their capabilities, pricing, quality, experience, and other factors.
Sometimes, if information isn’t available, the company may seek additional information through an RFI (request for information). Essentially, it is a questionnaire in the form of a document whose purpose is to gather information about the suppliers and their capabilities.
Once you have enough information about your vendors, the next step is to negotiate with them. Companies often use RFQs (request for quotations) at this stage. If negotiations are deemed successful, the company can sign a contract with the vendor.
Vendor management also includes monitoring their performance, so they don’t get out of track. Consider evaluating your vendors based on the KPIs (key performance indicators). These indicators include quality and the quantity of the goods or services rendered, and average lead times.
Vendor management benefits your organization in many ways.
Effective vendor management improves the vendor selection process, letting you work with quality vendors and build stronger relationships.
Vendor management allows businesses to compare quotations from different vendors before making a decision. This means increased cost savings and allows businesses to negotiate the best terms.
With a vendor management solution, you can gain better insights into vendor performance, communicate, and improve the flow information. It allows companies to maintain a centralized database of active vendors, and review performance to make strategic procurement decisions.
SoftCo Vendor Management is an integrated platform that simplifies and streamlines vendor management for organizations, allowing them to onboard, communicate with, and evaluate vendors through a dedicated platform. Vendors can submit supported documentation, including contracts and documents needed for AML compliance.