Hopefully you wouldn’t classify your relationships with your vendors as “Complicated.” Your relationship with your vendors should be much deeper than a questionable Facebook relationship, right? This is why you need to develop a strong vendor relationship management program.
Successful Procurement Departments know how to work closely with vendors long after the signing of the initial contract. They understand that frequent communication is crucial to the longevity of their vendor relationships. As a matter of fact, less communication can lead to more frequent software license audits. You don’t want that, do you?
Establishing ongoing two-way communication is essential for an effective vendor relationship management program. The objective is to partner with your vendors to create value for each party involved.
What key questions are you asking of your IT vendors?
Every relationship requires good communication. Identifying the right questions is the key to getting the most out of each relationship.
Here are 3 key questions that promote effective vendor management:
- If a problem develops, what will be done to resolve it in a timely fashion?
- What does each party need to do to meet their respective goals to maintain a positive relationship?
- How can the relationship be used to create value for both parties?
How are you managing your vendor contracts?
Most purchasing and procurement teams follow best practices to negotiate significant potential savings during the sourcing process but in the end, those savings are never fully realized.
Two of the main reasons for this are:
- the contract terms are not fully communicated to the affected parties within the organization or across divisions
- contract compliance is not effectively monitored
Where are the contracts?
Who is keeping the contracts? Are they interspersed among different departments? Are they held in purchasing, legal, finance, or operations? Or somewhere else?
There are many benefits to consolidating ownership to one entity —- it ensures the contracts are collected and maintained in a central repository and greatly improves risk mitigation.
What is Strategic Sourcing?
Strategic Sourcing is an interactive, collaborative and structured process of critically reviewing (through analysis, evaluation and feedback) an organization’s spend to optimize its procurement practices, supply chain results and improve the overall value proposition.
Some of the key principles of focus of Strategic Sourcing are:
- the active and collaborative participation of all parties
- the analysis of all process points to find savings
- ongoing feedback driving continuous improvements
- the greater use of market intelligence over habit or preference
Effective and value-added vendor management requires establishing good, two-way collaborative communication by asking the right key questions and following procurement best practices as in Strategic Sourcing.
Streamlining processes typically removes some impediments in communication between different parties, internally and externally. And as it relates to contract management, can save money through greater risk mitigation.
Communication. Collaboration. Analysis. Feedback. Streamlining. Value-add.
Access the Best Practices Roadmap of IT Integrated Procurement™ for a comprehensive look at Spend Optimization, Vendor Management, IT Asset Management, and Supplier Diversity.