Definition of Vendor Management System
The individual or an entity that supplies goods or services to an organization is called a Vendor. An organization could have many numbers of vendors according to its needs. It is necessary for an organization to handle multiple vendors with different quotes, contract policies, conditions, and rates. Vendor management involves the handling of vendors starting from the selection of vendors to maintaining good relationships with them for the long run with consistent support.
We can’t say vendor management is a simple work of just finding and fixing a vendor who offers the lowest quotes from the vendors’ list. But there are many considerable factors involved in vendor management for the organization’s success.
Vendor management is a process that finds out the right vendors from the vendors’ list, evaluates them for better performance and makes decision whether they are qualified or not to accomplish the organization’s requirements
Effective vendor Management process involves several steps.
- Fixing the performance parameters for vendors to know their strengths, weakness and the ability to fulfill the organization’s requirements.
- The capability, pricing, quality, financial stability, certifications, past- history and goodwill they earned from their previous customers – are the major factors that are considered while fixing the performance parameters.
- Performing researches on finding out the vendors from the selected vendors’ list to know who can perform as per the requirements.
- Evaluating the selected vendors with some checkpoints which the organization has fixed earlier as the parameters.
- Preparing a list of selected vendors and making contracts and other documentation works.
- Assigning the task to the specific vendors for specific tasks with consideration of their previous performance and the second preferred vendor for the same task is also selected in a case when the first selected vendor is not able to supply.
- Maintaining the big volume of the database of all selected vendors with their full details, prices and individual contract terms and conditions and the renewals of the same are well maintained by the Vendor Management.
- The accounts and payment details of the vendors are properly handled.
- Monitoring of the performance of each vendor on a routine basis, the consistency in performance is also maintained.
- The most important task that vendor management does is maintaining a good relationship with the vendors and make agreements mutually beneficial to the vendor as well as the buying organization.
Benefits of Vendor Management
There will be many choices at better cost are available to the organization when it implements the Vendor Management system. The bid competitions among vendors will result in more value to the money spent by the organization.
Better Management of contracts with the Vendors:
When it needs to handle multiple vendors, there will be a lack of processes in managing the contract and other important details of the vendors. The vendor Management system will take care of managing the contracts and helps the organization to have a centralized view on contracts and provides capabilities to the organization in better decision making on important matters such as renewal of contracts.
Better Performance Evaluations
With the help of the Vendor Management system, the organization monitors the performance of each vendor from the multiple vendors’ list and assigns tasks to the capable vendors along with the alternate vendor also. Better performance of vendors, in turn, leads to better performance of the organization.
Maintains Good Relationships with Vendors
There will be many difficulties and challenges that an organization must face for maintaining relationships with vendors. With the help of the Vendor Management system that provides a centralized view of vendor data, current status, and performance of the vendors, an organization can maintain good relationships with vendors.
Now, we hope you better understand how vendor management is crucial for business success!