If there’s one thing that businesses learned during the pandemic, it’s that supply chain matters.
Mismanaging vendors can result in operational inefficiencies, higher costs and strained supplier relationships. One lousy customer interaction can have other happy vendors racing for the door.
What’s more, 48 percent of businesses find it difficult to manage supplier costs, according to research from The Hackett Group.
A self-service supplier portal can overcome the challenges of vendor management.
This article provides an overview of vendor management, explores the biggest vendor management challenges and shows how a self-service supplier portal can improve vendor management.
What is vendor management?
Vendor management is the process of administering relationships with suppliers or vendors.
From initial vendor selection to ongoing performance evaluation, vendor management spans all the activities involved in selecting, contracting, and managing suppliers. These activities include:
- Vendor selection. Buyers must identify potential vendors, evaluate their capabilities and select the most suitable ones based on factors such as quality, price and reliability.
- Contracting. Once vendors are selected, buyers must negotiate and establish contracts or service level agreements (SLAs) that define the terms and conditions of the relationship, including pricing, delivery schedules, performance metrics and other buying criteria.
- Performance monitoring. Vendor management includes monitoring the performance of vendors to ensure they meet the agreed-upon standards and deliver products or services, per the contractual obligations. Performance monitoring may involve conducting periodic reviews, tracking key performance indicators (KPIs) and addressing any performance issues.
- Relationship management. Building and maintaining strong relationships with vendors is crucial for successful vendor management. Strong relations require effective communication, collaboration and fast resolution of any conflicts or disputes that may arise.
- Risk management. Identifying and mitigating risks associated with a vendor relationship is an important aspect of vendor management. Risk management may involve assessing vendor financial stability, conducting due diligence and implementing risk mitigation strategies.
- Vendor rationalization. Businesses may want to periodically consolidate their list of active suppliers to streamline operations and increase their negotiating power. Vendor management helps a business evaluate its portfolio to make good decisions about vendor consolidation.
By actively managing vendor relationships, businesses of all sizes can reduce costs and ensure that they are working with reliable and competent suppliers that align with their business objectives.
What are the biggest vendor management challenges?
Managing suppliers is not easy. Fifty-nine percent of businesses face challenges in building and maintaining effective relationships with their suppliers, according to a study by APQC.
And the bigger a company gets, the more complex the vendor management challenges can become. There are several common vendor management challenges that most businesses face.
- Onerous vendor selection. Choosing the right vendor from a multitude of options is hard. Evaluating vendor capabilities, conducting due diligence, ensuring alignment with business requirements and gaining stakeholder consensus can be time-consuming and complex.
- Lack of performance monitoring. Tracking and assessing the performance of multiple suppliers across the globe can be an administrative nightmare. Buyers must define appropriate metrics and KPIs, gather accurate performance data, and ensure timely reporting.
- Complex contracting. Few functions are as burdensome as managing vendor contracts. It all starts with negotiating contracts. Buyers then must manage executed contracts, keep track of contract terms, resolve any disputes in a timely manner and oversee contract renewals.
- Poor communication. It is crucial for buyers to establish effective communication channels with suppliers. Establishing strong communication channels and collaboration mechanisms with vendors is crucial. Miscommunication, slow responses to supplier inquiries and lack of vendor/customer alignment can hinder smooth operations and lead to misunderstandings.
- Risk. In today’s fast-changing business environment, it can be hard for a business to assess vendor financial stability, ensure data security and privacy, and manage compliance regs.
- Lack of vendor diversification. Businesses leave themselves vulnerable to system downtime or a sudden spike in prices when they rely too heavily on limited suppliers.
- Weak integration. Compatibility issues and data mapping challenges can be major obstacles to integrating a buyer’s internal systems with a vendor’s legacy systems and processes.
- No exit strategy. Buyers will want to end a vendor relationship. Without careful planning, it is hard to replace a vendor or terminate a vendor relationship while ensuring a smooth handover of responsibilities, seamless data transfer and continuation of service.
These challenges can make it hard for a business to effectively manage its vendor relationships.
That’s why more businesses are automating vendor management with a self-service supplier portal.
Benefits of a self-service supplier portal
A self-service supplier portal can digitize and simplify the vendor management process.
Portals empower suppliers to access and manage their information and interactions with customers.
Fifty-three percent of businesses face difficulties in collaborating with suppliers and driving innovation, per APQC.
Here are some of the ways that a self-service portal can improve vendor management.
- Streamlined vendor onboarding. A self-service supplier portal streamlines the vendor onboarding process by providing suppliers with a secure and intuitive interface to submit their information, documentation and certifications. Submitting information through a portal eliminates the need for manual paperwork and accelerates the vendor approval process.
- Effortless vendor profile management. Vendors can use a self-service portal to update their profile information, including contact details, banking information and certifications. Providing suppliers with a portal to manage their profile ensures that the buyer has access to up-to-date and accurate vendor data, improves onboarding efficiency and reduces risk.
- Easier document management. A portal is a centralized mechanism for collecting and managing relevant supplier documents, such as contracts, insurance certificates and compliance documentation. Electronically gathering documents through a supplier portal facilitates document sharing and retrieval and ensures that information is easily accessible.
- Enhanced invoice management. Vendors can use a self-service portal to submit electronic invoices, view and track invoices and monitor payment status. Digitally submitting invoices through a portal promotes transparency, reduces manual handling of documents and improves efficiency in the notoriously time-consuming procure-to-pay (P2P) process.
- Better communication. A self-service supplier portal can establish an efficient and transparent communication channel between trading parties, allowing them to exchange messages, submit inquiries, receive updates and digitally collaborate to resolve issues.
By implementing a self-service supplier portal, businesses of all sizes can enhance efficiency, transparency, communication, and collaboration in their vendor management processes.
Take control of your vendor management
Vendor management is critical to the supply chain. By implementing a self-service portal for vendor interaction, information exchange and process automation, businesses can streamline back-office tasks, enhance transparency, improve communication and foster stronger vendor relationships.
Learn how VendorInfo helps all kinds of organizations keep compliant with OFAC and other critical watch lists–contact us.