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Category: Supplier management

Best Practices for Creating a Vendor Management Policy

Good vendor relationships are absolutely essential to running a successful business. However, managing these relationships can be complicated and overwhelming. Your business needs to keep track of a lot of information when it comes to vendors, from the very basics like who your vendors actually are, to far more intricate details like what kinds of access your vendors have, the SKUs they produce, and what internal policies apply to which vendor contracts. 

Without a solid foundation for your vendor management program, keeping track of all of these working parts can quickly become a nightmare. An inadequate vendor management program can expose your business to undue risk, and lead to large problems that could ultimately damage your enterprise. 

This series of five articles breaks down vendor management best practices, and should leave you with a much clearer understanding of what an effective vendor management program looks like. 

In this article, you’ll learn how to establish a clear vendor management policy.

But before we get into the meat and potatoes of vendor management policy creation, let’s first establish what vendor management actually is.

What is Vendor Management?

The definition of vendor management has shifted significantly over the years. In the past, vendor management’s primary concern was keeping costs low. Today, vendor management is a far more complex process that involves creating strategic relationships with vendors that can truly drive your company’s success. 

Vendor management is a process that includes how an organization identifies and selects vendors, evaluates and optimizes vendor performance, and encourages vendor collaboration and innovation. 

Your organization needs a vendor management program for two main reasons. Firstly, you need to be able to evaluate vendor performance based on your company’s requirements. Secondly, you need to be able to identify where your vendors can improve while maintaining a good relationship throughout the vendor’s lifecycle. 

To get the most out of any vendor, it is important to measure and track data that is relevant to your company’s goals while supplying consistent feedback to your vendors. This open communication fosters strategic partnerships between your vendors and your company. 

Vendor Management Policy Best Practices

Clear and concise vendor management strategies enable strong vendor relationships. They allow your company to effectively choose and engage with vendors, lower vendor risk, and improve vendor performance and quality of service over the lifecycle of the contract. 

A vendor management policy is a document that informs the company board and senior management about vendor management activities. Effective vendor management policies address areas that drive performance and quality improvement, risk reduction, innovation, collaboration, and vendor diversity. 

Here are best practices for creating a vendor management policy:

Once you’ve established your company’s vendor management policy, you’ll want to create a vendor contract management policy and also include that document as part of your overall vendor management policy. 

You’ll learn best practices for creating a vendor contract management policy in the next article of this series on creating a vendor management program.

Looking to more easily and effectively manage your vendors? Take a look at our Supplier Management Software. From onboarding new suppliers to managing risk and supplier contracts, our Supplier Management Software saves your organization time and money at a flat-rate price.

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How to Find the Right Supplier

Identifying the right supplier may be difficult, and a sizable proportion of procurement teams consider this the most challenging component of their job. Knowing how to find and choose a supplier ensures that the products and services are supplied on time, at a suitable price, and according to your standards if you work with a reliable and trustworthy provider. Your client’s happiness and your company’s image might be damaged if you make a mistake in selecting a supplier.

The capability of your business to supply high-quality products and services at competitive prices may be hampered if your supplier cannot be relied upon or does not produce high-quality items.

A well-designed procurement process will guarantee that the business firm connects with the appropriate supplier. According to a recent study, the procurement outsourcing industry is predicted to reach USD $5.03 billion by 2025. This is a clear indication that the procuring process of identifying suitable suppliers has led to economic growth. Get a piece of that growth by understanding how to choose suppliers.

No. Really…How Do You Choose a Supplier?

This article will walk you through the eight most important actions to take to identify the best potential suppliers for your goods, components, or raw materials.

1. Price

Price is one of the critical factors to consider from a supplier. However, you shouldn’t merely pick a supplier based on their price alone, especially if the purchase is non-commodity items. When it comes to general costs, low-quality products and services may not be the best choice in all cases. Be satisfied that your supplier needs to earn a sufficient profit at the specified price for the company to remain in business.

2. Conduct Market Research

In the digital world, it’s becoming easier to conduct due diligence online and discover information via searches and by reviewing the websites or blogs of the potential suppliers of your products or services.

While not all suppliers have company websites, most have developed a digital presence via networks, virtual stores, and establishing a presence in supplier platforms. You may have to do some exploration in the markets to get the important information you need to help decide about organizations you are thinking about engaging, but this discovery process is vital when choosing a supplier.

3. Ask for Samples/Trials

These are free. However, you may be liable for delivery costs. This will assist you in deciding on the appropriate service provider or manufacturer for your good quality. Your intuition plays a significant role in finding quality items and in choosing a supplier.

However, hands-on analysis of a supplier’s service or product is necessary to ensure that the service or product will fulfill your needs. You may test your goods in the market after finding a dependable supplier to determine whether your clients/buyers are interested. It’s also good to ask for tangible evidence like images, video clips, or detailed information of the facility, products, or services offered.

4. Ascertain Supplier Authorization

When you hire a firm or company for your products or services, be sure the provider has a solid reputation, has been in business for a while, and has no documented problems. They may also include a manufacturing certification stamp from the location, which is an additional plus. For suppliers with unique products but newly in the market, it’s advisable to test their samples/products by observing their products for a while and getting reviews from their first clients; this will increase the chances of getting quality products. Also, for the manufacturers of products, one can agree with the supplier to provide a warranty of their products that are new in the market.

5. Examine the reviews

The best way to make a final judgment on the list of suppliers you’ve engaged with is to get recommendations from previous customers. If you use one of the leading marketplaces, such as Amazon, you can check the reviews directly from their sales page. Still, if you find the supplier elsewhere, such as the internet, you’ll have to communicate with other people who’ve used them or do some due diligence on your own.

6. Understand supplier’s scaling

The supplier’s ability to accommodate small and large orders is an essential factor to keep in mind. If you’re seeking smaller numbers of samples, you’ll likely discover providers that specialize in that amount. If you demand massive shipments of the goods over time, you may soon exceed your initial supplier choices. To ensure that you’re working with a supplier that can easily expand to meet your changing requirements, you need to know the product’s growth trend and have some sense of the supplier’s ability to fulfill your expected demand.

7. Recognize The Distribution Networks In Your Business

Products may go from the producer to the merchant in a variety of ways. All suppliers aren’t aimed at the same customer base. To identify the best supplier for your business, you need to know your company’s distribution networks and supply chain in detail. Suppliers come in various forms, including service providers, subcontractors, manufacturers/producers, distributors, and importers.

8. Get To Know The People That Provide Your Goods And Services

Until now, while it has been commonplace to visit your suppliers and tour their factory (even if you can’t afford it initially), the circumstances of today’s global commerce footprint coupled with the impact of the pandemic have made that difficult.

The good news is, technology has made it possible to reduce some of the logistical challenges and costs while preserving the significant due diligence needed. The motivation, however, is still the same – gaining better knowledge may provide you with a wealth of new insights. It also cements your connection with the supplier, and you are no longer a nameless client in another nation.

Best Stakeholder Management Practices For Procurement That You Should Know

In an enterprise, Procurement’s job is to ensure stakeholders get the right goods or services provided by suppliers, on time and at the right quality level. Procurement success is tied to how well you work with the stakeholders and what you can do to help them to succeed in what they want to achieve. Their success is not only the company’s success but also yours. As such, it’s crucial for Procurement to have a good stakeholder management strategy. 

Who are the stakeholders in the procurement process?

A stakeholder is an individual or organization that benefits from or is affected by the project, product or service. In procurement, stakeholders are broadly divided into two major categories – Internal and External stakeholders. 

Why Does It Matter?

Many surveys show that stakeholders often do not cooperate and only give feedback once a major issue arises. This has caused challenges to procurement to successfully do their job due to the limited comprehension of what value/ expectations the stakeholders want. 

This article lists six practices that successful procurement professionals leverage to build a solid relationship with stakeholders.

First of all, it’s vital to plan out an engagement strategy and communication plans. By doing so, you identify research your key stakeholders, how much support you will need for the project, and what stakeholders’ communication preference is. Skipping this step directly impacts your outcome, such as missing stakeholders, identifying wrong people as stakeholders, budget variances, or worse – your project can fail.

Do your homework before talking to stakeholders. Many stakeholders care about cost and savings, but you may be surprised to find it’s their secondary importance. Start building a relationship first, have an initial exploratory conversation to understand their goals and expectations for that project/activity. What you want is to become an expert that stakeholders will ask relevant questions at a later time.

Don’t forget to speak the stakeholder’s language instead of using unattractive procurement jargon. Modifying the ways in which buyers express opinions or ideas is a more compelling way to build an interpersonal rapport.

Once you build a strong relationship, everything you care about, such as cost or saving, will come later. Otherwise, you may impact their interest right from the beginning.

Not all stakeholders are equally important in any given project. There are two important criteria to help you properly prioritize the needs of stakeholders – the level of interest and influence. As a rule of thumb, those with a high level of interest and influence are considered key stakeholders. Conversely, those with a low level of interest and influence only have a minor impact on decision-making.

It’s critical for procurement professionals to drive a culture of regular communication and mutual collaboration across the organization. These activities include joining the regular meeting with stakeholder’s departments, joining the kick-off meeting to set the project’s foundation, etc. 

The earlier you engage with key stakeholders, the better you’re involved in the negotiation process. Positive working relationships add higher value to the outcome and be more likely to be a part of the project’s decision-making process for any changes.

Being transparent in procurement activities is one of the best ways to build trust and enhance clear communication with your stakeholders. Everything is made more accessible and efficient with the right tools. Take the time to explore what technology options are available out there and what solutions these technologies offer are the best for your organization. To identify that, you need to understand what obstacles and bottlenecks that your organization is facing.

After discussing with stakeholders and defining what needs to be done, it’s time to implement your procurement plan. It includes identifying, shortlisting, selecting and acquiring suitable goods or services from multiple third-party vendors through direct purchase, competitive bidding, receiving and fulfilling payment, etc., while ensuring timely delivery in the right quality and quantity.

It’s a daunting process for procurement professionals. Fortunately, digital technologies allow you to easily manage suppliers, quickly respond to market demand at a much lower cost than doing it manually. With the right pick of software, procurement is likely to have a game-changing impact across the entire organization.

SupplierGATEWAY’s easy-to-use, instant-on and inexpensive software facilitates the entire procurement and supplier management process to increase operational efficiencies, reduce costs and streamline communication with suppliers. A portal administrator can tailor custom business rules, create unique workflows, and modify user roles and permissions. In addition, the software is configured to quickly accommodate any necessary changes in your project to ensure you source and diversify the best-qualified suppliers while delivering your project on time and within budget.

To learn more, please visit our website.