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What Is Vendor Management, Exactly?
Your IT vendors can become either a roadblock or a springboard for growth. What is vendor management, and how can it benefit your organization?
Which relationships most improve your business? You probably think first of customers, clients, or industry partners. But while these relationships are vital, there’s another crucial area that often gets overlooked: vendor management.
Working with the right vendors has a notable impact on your longevity and ultimate success as an organization. However, it’s all too common for businesses to select a vendor and then let that relationship go stale, running on autopilot with little oversight, engagement, or chance for review.
Vendor management works on a number of levels, from improving your current vendor partnerships to analyzing cost-effectiveness and identifying new prospects. In turn, this gives your organization the power to reduce operational expenses and vendor-related risks while improving the service you receive.
Especially for businesses that are pursuing rapid growth, managing your roster of vendors can become either a roadblock or a springboard. But what exactly does vendor management entail, and how can it benefit your organization?
Defining Vendor Management
At its core, vendor management is about maintaining your most valuable partnerships and optimizing your less rewarding ones — whether that means renegotiating terms or seeking a new option. To accomplish this balance of maintenance and optimization, effective vendor management must address the following areas:
- Contracts. Vendor contract management allows companies to explicitly establish the terms of the customer-vendor relationship, each party's responsibilities, and any severance terms. This is important not only when a new partnership is established but also when it comes time to renew. With dedicated vendor management, each contract renewal becomes an opportunity to evaluate vendors’ performance and ROI, making improvements or pivots where necessary.
- Performance. How do you know if your vendors are delivering the level of service you need? Vendor management involves analyzing the reliability and quality of your vendors, so you know how to move forward and grow together. Typically, this involves metrics like the cost, delivery, and service quality of each specific vendor.
- Communication. There is also a relationship aspect to vendor management, which helps streamline communication between you and each partner. By cultivating a close, symbiotic relationship, vendor management can help alleviate common pain points in customer service when working with vendors.
- Risk. Vendor risk management is a particularly vital factor that many companies tend to overlook. At the beginning or renewal of a vendor partnership, risk management should assess the vendor’s reputation and any associated legal issues. They should also be examined for cybersecurity and financial risk to ensure each potential partner is a safe investment for your business.
The Benefits of Vendor Management
If your business has been operating without much attention to vendor management, you may wonder what it has to offer that your current processes lack. Executed well, vendor management can support your business goals in a number of ways.
Objectivity and Strategic Vendor Selection
It’s not uncommon for businesses to maintain vendor contracts because they’ve “worked together for years” or have no specific complaints. This subjective “If it ain’t broke, don’t fix it” approach may demand less management, but it also misses opportunities to improve services, lower costs, or discover more effective solutions that streamline your workflow.
Because vendor management uses data and market research to evaluate each vendor objectively, it’s easier to see which partnerships are underperforming and take action. By proactively identifying weaknesses in your vendor network, your company can find more competitively priced services, address potential lapses in regulatory compliance, or finally transition to much-needed upgrades in quality.
The economy is not static, and neither are vendors’ pricing structures. Even if you begin with a competitive service rate, your existing partnerships may fluctuate in cost from year to year, or new vendors may enter the marketplace. So, how can you be sure you’re still receiving the best value?
Vendor management helps your business keep one finger on the pulse of your vendors’ industries, so you can tell if you’re being overcharged or underserved in any partnerships. Even if you aren’t interested in switching vendors, having objective data during your contract renewal provides an opening to negotiate your current rates — an easy win for your organization's profit margins.
Builds Rewarding Partnerships
It can be all too easy to set a vendor partnership in motion and then ignore it until trouble arises. That’s why professional relationships are the foundation of vendor management. When your business is able to foster better communication with vendors, you benefit significantly from improved response times, reliability, and service. Remember, this relationship goes two ways. If vendors feel a stronger attachment to your brand, they’re more likely to go above and beyond on your behalf.
Implementing Vendor Management
Vendor management allows your organization to turn your vendor relationships into thoughtful, data-driven partnerships. But managing vendors doesn’t only require attention — it also takes a profound understanding of how vendors function, competitive pricing, and what constitutes high-quality work. That’s why many companies may need to hire a dedicated vendor manager or work with a team of vendor management specialists who already understand the ins and outs of certain industries.
Of course, not every business has the flexibility to hire a vendor manager in-house. If this is your situation, there are options to support your team with professional insights from third-party vendor management.
For instance, if you’re struggling to keep track of your IT service vendors, Populus Technology is here to help. We can evaluate and update your selection of IT vendors to ensure you’re enjoying competitive rates, top-tier service, and only paying for tech solutions you actually need.
Populus has the expertise to help you tackle IT vendor management knowledgeably and effectively. And if you’re navigating other areas of organizational change, we can help there, too. Whether you’re updating and automating routine processes or undergoing significant restructuring, Populus provides consulting and bespoke solutions to ease the way. If your problems are especially unique, we can even design, develop, and deploy customized software to support your goals.
Business evolves at a quick pace, and you need relationships that will empower you, not hold you back. If you’re ready to start getting the most out of your partnerships, contact Populus today to learn more about our IT vendor management and other services.