Vendor management is very complex, and with the increasingly important role of stable supply chains, this complexity will only increase. Technology-based systems and process re-engineering can improve efficiency and reduce some of the pain of complexity. However, with companies managing thousands of vendors, it is imperative to have an efficient vendor management program in place. The good news is that there are many areas of opportunity in vendor management. You just need to find what works best for your organization, whether it be new software, functionality, or something else.
Compliance
The first opportunity in vendor management is compliance. The complexity of vendor relationships increases as the vendor/supplier base grows. Vendors may provide business expertise, but often do not assume responsibility for the risks and compliance violations involving their products or services. Companies without a compliance solution are at high risk of costly fines, penalties, and lawsuits. Vendor portals can go a long way towards assuring compliance by utilizing vendor onboarding functionality to ensure your vendors comply with regulations and corporate standards before they begin transacting with your company.
Compliance is also helpful for ongoing relationships with vendors. As time goes on, it is important that your vendors remain compliant. There are different notification systems that exist that help to remind your organization, as well as your vendors, of upcoming expiring compliance documents
Time
A recent study found that almost 60% of companies dedicate more time to vendor management than they did 3 years ago. This may be for many different reasons, such as having more vendors or more complicated processes, and more to track. A manual or ineffective solution to processing the wide array of vendor documents and data can strain your company’s time and human resources. Implementing vendor portals can help reduce many manual tasks associated with vendor management and encourage vendor self-service. Vendor onboarding, online payment inquiry, dispute submission and tracking, and electronic invoice submission are some tools that will help you reduce the time your team spends on vendor management. Many of these options support vendor self-service, which also assists the vendor and builds relationships.
Visibility
A lack of visibility into your vendor network can also lead to a multitude of problems within your organization. Without visibility into vendor performance and financial health, your team may see a vendor’s service as satisfactory while it is perceived negatively at the executive level. Vendor and supplier visibility has become a strategic priority, and being as highly informed as possible is a key component of any data-driven decision and vendor management program.
A study by LNS Research found that manufacturers with poor visibility into vendor performance had a vendor defect rate more than double that of their competitors with more visibility. Utilizing solutions like AP automation, workflow, vendor portals, vendor onboarding and maintenance, score-carding, dashboards, and data mining are all ways to effectively evaluate your vendors’ performance.
Communication
A recent 3M study found that nearly 70% of companies reported problems communicating with vendors, negatively impacting relationships with downstream customers. Vendor portals offer a vehicle to maintain constant communication with your vendors. Because vendor portals are accessible 24/7, your vendors can always get information, send data, and communicate with you.
ICG can help you reduce the pain associated with managing your vendors. Check out ICG’s comprehensive suite of Vendor Management Tools that can help you achieve your vendor management goals. Contact ICG today to learn more or to see a demo of our vendor management solutions.