The DNA of any successful procurement vendor management lies in following industry best practices.
Because business process outsourcing and procurement, in particular, can be a challenge to navigate and manage, these best practices can help shine a light on how you can improve your processes and procedures for greater efficiency.
With this in mind, this article explores some of the key vendor management best practices for procurement professionals like you, helping you navigate the route to third-party procurement successfully. Let’s take a closer look.
Best Practices for Procurement Vendor Management
Professionals involved in procurement deal with multiple risks and challenges at the same time. A problem with a vendor may mean delays to your customers. Inflation could mean price hikes that you did not budget for. Then there are supply chain issues with transport worker strikes and more to contend with. The list of potential challenges is practically endless. However, there are certain procurement best practices when it comes to vendor management that you can follow. We set them out in more detail for you below.
- Perform thorough due diligence
They say the devil is in the details and with vendor management, this really is the case. You need to perform extensive due diligence whenever you’re choosing a new partner to assist you with the supply of products for your business. Here are some tips worth considering:
- Vendor selection: Avoid picking a vendor based on the cost factor only. Choose one with an established reputation, positive reviews from current and existing customers, and one with a track record of success.
- Vendor availability: Be sure that the time frames that you want to work with your chosen vendor align with them. There may be some irreconcilable differences regarding their availability so always check that they will meet your expectations according to your requirements.
- Compliance: Apart from ensuring regulatory compliance of the vendor, such as looking at confidentiality policies and privacy agreements, other factors to consider include carefully evaluating and drafting your service level agreements (SLAs) and contracts. It’s also essential to set out very clear expectations of deliverables.
- Onboarding: Many procurement professionals skip this step. However, it is essential for success. If you put your employees through an onboarding program to understand your business, processes, and brand better, you should do the same for your third-party supplier, too.
- Develop a vendor management policy
Vendor management is as much about managing relationships with your suppliers as it is enabling your team to navigate these with success. For this reason, it’s highly advisable that you train and educate your team on accurate vendor management procedures and steps so that everyone is on the same page. This means creating a policy that’s transparent and clear so that even if a member of your team if off sick or has taken some time off work, someone else will be able to pick up where they started.
- Collaborate and communicate regularly
Establishing clear channels of communication with your third-party vendor is also essential. Choose a single platform where all communication will take place so that it is not scattered and important messages get lost along the way. Select a language for your communication and stick to it. In the event of any disagreements or disputes, make sure that the vendor has access to a point of contact in your company that they can escalate the problem to.
- Stay organized and plan well
Staying on top of vendor management is easier said than done. However, there are several things you can do to help you manage these relationships with success. Here are a few tips we recommend:
- Centralize your vendor agreements: Instead of using multiple files or folders for every single vendor, consider centralizing your vendor agreements in one spot.
- Monitor and manage costs: Constantly keep an eye out on rising costs that can creep in, by evaluating the initial quote you received from the vendor with the final monthly invoices they send you.
- Use AI and automation: Don’t be afraid to implement artificial intelligence (AI) and automation tools into your workflows. These tools can help in a myriad of ways that can save you and your procurement team a lot of time and effort.
- Have a back-up plan in place
As mentioned earlier, vendor performance can fluctuate. Sometimes, the reasons behind this are due to internal challenges the vendor is facing and sometimes they can be because of external factors such as strike action, rising inflation, new regulations, and many more. You need to have a back-up plan and mitigate vendor-related risks by ensuring that you know what to do in the event that anything goes wrong.
If your vendor is going to be 10 days late with their shipment, how will this affect you? Do you have a second vendor you can reach out to that can deliver in a shorter space of time and at short notice? Attempt to consider every eventuality that could go wrong and by having a plan B in place, you will be better able to manage risks.
- Track performance and KPIs
It’s so easy to get lost in daily operational demands and that’s where tracking performance against key performance indicators (KPIs) takes second place among all your tasks and activities. However, you need to take time out and track your vendors’ performance against pre-established metrics so that you know whether they are fulfilling their side of the deal and contract with you.
If vendors outperform in terms of expectations, these are definitely worth keeping on file. However, if they consistently underperform or deliver poor quality results, it may be time to rethink your partnership with them and consider taking your business elsewhere.
Conclusion
Supply chain resilience and effective strategic sourcing can only really be achieved through the right partners. It’s about looking at the whole package rather than the sum of the parts.
From sustainable sourcing and procurement automation to data-driven procurement, cost savings, and risk mitigation, you need a partner who can work with your business for your business’ ultimate success.
That’s where the team at StorsenDigital steps in with professionalism, efficiency, and punctuality while also affording you a cost-effective service that will guide your business to the next level. Ready to talk to us? Our team is at your service, ready to assist.
