Let’s understand this concept with a simple example.
Did you ever wonder why a flock of birds usually flies in the V-formation? This is because V-formation increases their efficiency while traveling long distances. Every bird needs to fly in an orderly manner to ensure that the flock reaches its destination despite all the hurdles.
Similarly, your vendors must play their roles perfectly to achieve your organization’s goal. Because when you reach your goal, everyone benefits—the end-users, your vendors, and you.
To establish this level of coordination in your company, vendor management is essential.
What is Vendor Management?
Vendor management is the process of coordinating with vendors to ensure excellent service to your customers. It involves onboarding vendors, training them to use your platform, and engaging with them for improved profitability for both—your vendors and you. Vendor management also involves measures to control costs, mitigate risks, and improve vendor performance.
However, managing vendors comes with its own set of challenges. Let’s explore them.
Challenges in Vendor Management
Your vendor management process generally depends on:
- Location (developed vs. developing nations)
- Market maturity (Are vendors aware of your platform or similar platforms?)
- The complexity of your process and the tools you use to manage your vendors
To bring a broader perspective, we spoke to experts about vendor management processes in the American and Indian markets.
Jim Goodrich, Co-founder of Continuous Process Improvement Systems, South Carolina Area, shares the challenges he faced in managing vendors. He says:
“In my experience, a big challenge was performance management. It may be considered a part of overall contract management, satisfying terms, and conditions over time. Reasons for issues include that terms and conditions should change over time if managed actively.”
According to Jim:
“Not all suppliers should be managed the same. Strategic, leveraged, and critical suppliers will have more extensive face time with higher execs and two-way communications, possibly changing terms and conditions as market factors change.”
That’s a perspective from the developed world.
Managers in developing nations like India face different challenges. Kumar Harshdeep, Former Vendor Manager at Flipkart, explains:
“The major challenge with vendors in tier-two cities is educating them about the company’s selling platform. If the process is not explained properly, it increases the probability of mishandling orders, eventually affecting their performance.”
During our conversation, Harshdeep shared an incident that further highlights the need for proper vendor management:
“Once I ordered a product from a website that came with a note inside the packaging. The seller requested me to write a review on the platform and offered to credit Rs. 100 in my digital wallet.”
Unethical activities like this can severely damage a company’s reputation, underscoring the importance of setting guidelines on customer interaction during the vendor management process.
What are the Steps Involved in Vendor Management?
The vendor management process involves seven key steps:
-
Assess the Vendor
Before onboarding, assess the vendor for product quality, supply time, pricing, and reliability. Many organizations use scorecards for this. -
Establish Goals
Set clear objectives for your vendors to align with your business processes and performance metrics. -
Negotiate a Contract
Draft a mutually beneficial contract that maintains quality without compromising the vendor’s profitability. -
Onboard the Vendor
Guide vendors into your company’s network. Fast-growing companies like Amazon Pay, Meesho, and Dunzo use T3 CRM’s mobile app to onboard vendors efficiently. -
Monitor Vendor Performance
Track your vendors to ensure they meet the required standards, adjusting policies as necessary for strategic vendors. -
Communicate Regularly
Regular communication with vendors helps avoid delays and improves supply chain accuracy. -
Reward Your Vendors
Recognizing vendors for their performance fosters motivation and healthy competition.
The Importance of Vendor Management
Effective vendor management helps your organization in several ways:
- Stay Updated with Market Trends: Keep vendors informed about market demand and advise them to manage their inventory accordingly.
- Improve Vendor Relationships: Strategic meetings allow both parties to learn and improve.
- Enhance Product Quality: Ensure vendors consistently deliver high-quality products, improving customer satisfaction.
How Technology Enhances Vendor Management
Vendor management tools like T3 CRM streamline processes and offer several features:
- Activity Log: Track vendor interactions.
- Centralized Data Repository: Store all vendor-related information in one place.
- Communication: Support multiple channels for communication.
- Onboarding: Simplify the vendor onboarding process with automated tools.
- Performance Tracking: Monitor vendor performance to reduce risks.
- Self-Service Portal: Allow vendors to upload documents and track transactions.
How T3 CRM Can Help
T3 CRM can significantly improve your vendor management process through automation, vendor screening, and performance tracking.