Steps to Vendor Life Cycle Management
With new technologies, business expansion and cost focus, the importance of vendor has increased dramatically in the past few years.
Vendors play a vital role in increasing operational efficiency, improving financial results and customer satisfaction. However, the benefits of efficient vendors come at a cost. Establishing and nurturing the vendor relationship, monitoring the vendor performance and effective communication channels in both the organization holds the key to effective vendor management.
A strong Request for Proposal (RPF) holds the key for vendor selection. RPF should include the business requirements, value output, and metrics to be measured along with the capabilities and integrations of the vendor required to achieve the business objective.
Plan your selection process with small multiple milestones and timeline. With the plan in place, the selection team would be in a position to communicate the progress well to the top management. Derive the agreed-upon selection criteria of vendors and communicate the same to the top management. Ensure that your vendor presents substantial proof of its capabilities.
Contract and SLA
The business value and terms of agreements need to capture in a contract and service level agreement (SLA). The contract and SLA are used for onboarding, performance evaluation, and relationship management. The contract should provide a clear mention of the products and services in trade. This will help in establishing compliance activities at both organizations. SLA should establish the agreed-upon expectations for delivery of services and goods. Also ensure to provide protections, recourse against vendor risks.
Effective onboarding of vendors provides a good and time-bound start to vendor relationship. A start-up integration plan needs to be developed and implemented for simplifying the complex coordination system, process, and workforce. Also, the focus should be placed on setting the performance monitoring system during this process. Setup KPIs and build tracking mechanism to promote data-based performance evaluation. Also, setup procedures which need to be followed in times of any vendor crisis.
Setup short term and long term goals for performance evaluation. The parameters for evaluation can be classified into Quality, Time, Satisfaction, Availability, and Coverage. Automate data collection processes and regularly generate reports for tracking the vendor performance. Monitor all the SLA metrics compliance and generate data based actionable reports for further issue resolution.
The time, efforts and resources devoted to building vendor relationship bears fruits in terms of the long-term vendor relationship. Conduct regular and productive meetings with the vendor to build a sense of integration and collaborative relationship. The effective communication channel in both organizations with proper escalation process for hassle-free issue resolution.
The multi-vendor approach uses multiple vendors rather than using a single vendor. For complex supplier interdependencies, set up integration points and standards to be followed. The multi-sourcing system can help business derive extra value but may bring supplier coordination complexities.
For long-term vendor relationship, a smooth contract renewal process is important. Ensuring more clear communication is required in renewal process as it involves significant changes in the contracts. Communicate any issues faced in the expiring contract. Conducting internal assessment would help unearth significant areas of improvement which should be incorporated into the renewed contract.
VComply helps organizations in implementing the vendor management lifecycle with its easy to use GRC platform. Monitoring the vendor KPIs and detailed reports enable better decision making in relation to vendors.
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VComply Editorial Team