Where Should Vendor Management Fit in the Supply Chain?

Published : July 10, 2015


How you manage your vendors can resonate down the full length of your supply chain—raising or lowering costs, influencing risk and determining product quality. Effective vendor management best practices can prevent your business from enduring a catastrophe, like the Takata airbag recall—which seems to be forever expanding, encompassing ever more manufacturers and car models. After all, not many companies can survive vendor oversight errors on such a large scale. This example makes it clear how much vendors contribute to business growth and shows that, in reality, vendor management keeps businesses in business.

Critical Success Factors for Effective Vendor Management

The most critical step in vendor management is choosing the right outsourced vendor. When you do this part right, everything else falls into place:

  • Quality assurance prevents delivery failure. As part of your best practices, collect ratings and feedback from your customers to help assess satisfaction with all of your outsourced support functions.
  • Risk management minimizes business disruption. Your vendor should provide dashboards and reports you can access for real-time information needs and reports to company stakeholders. Be strategic when sharing proprietary information with vendors, though. Vendors should have enough insight to provide you with the best service and coordinate with other parts of your supply chain. But sharing too much information can provoke questions about information security from customers or other vendors.
  • Contingency planning allows for quick course-corrections. "Predict rather than react" is a vital mantra in vendor management best practices. You and your vendors should have solutions and workarounds in place for those inevitable moments when something goes wrong. Have a back-up vendor or supplier in place, for each of the vital elements of your product or service—so that it can be delivered as promised. Back-up suppliers can also provide future options for your company and act as negotiating leverage when contract renewal time arrives with your main supplier.
  • Controlling costs and gaining efficiencies help you meet your company goals. You should be able to access and collect performance data from your vendor, and they should work with you to continually streamline processes and improve service, saving you time and money. The goal should always be to scale up or down with ease, meeting the demands of your business without wasted effort or budget. If you haven’t already taken steps to streamline communications, consider using a widely available, free communication tool (like social media) to enhance your vendor relationships. Popular note-taking, archival software (like Evernote) can help you create a searchable knowledge base for vendors to consult when information is needed.
  • Adopting sophisticated yet user-friendly IT systems. Purpose built, customizable vendor technology that is well integrated with your systems makes vendor management easier. The IT infrastructure that connects you with your vendor must offer transparency so that you can capture, measure and analyze vendor progress on any specific project and point in time—as well as overall performance. Real-time data enables you to employ the kind of agile business model that most companies, no matter the industry they operate in, need to prosper in today's competitive digital marketplaces.

Managing Vendor Partners for Business Success: The Bottom Line

Staying properly informed about the quality of each element that makes up your product, and the progress of each step in getting it to your customer, can be challenging. The right vendor partner, however, can make essential vendor management best practices very easy.

Choose vendor partners who offer a well-organized technology infrastructure providing transparency and ease of communication with strategic planning experience. A poor vendor cannot be successfully managed, no matter how much time you devote to the task. In contrast, the best vendor partner becomes a seamless part of your business, fueling continual growth for your brand.

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Topics: Vendor Management

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