No organization is immune to challenges in supplier management. The Hackett Group’s Third-party Risk Management (TPRM) Performance study details the critical risk factors in both manufacturing and service industries and mitigating vendor-related risks to avoid everything from regulatory issues to catastrophic events.
While issues organizations face with vendor management vary widely, the Hackett Group’s report revealed the top vendor management problems firms dealt with across sectors was a reactive approach to risk management.
Waiting to address risks until mandated through industry regulation – or worse, until an actual problem arises – means firms are left vulnerable to security threats, quality complaints, and conflicts of interest.
Organizations also fall short by failing to account for explicit risk measures in their supplier scorecards and ineffectively managing myriad risks across numerous stakeholders.
When vendor risk is automatically tracked and evaluated on an ongoing basis, and it’s logged with other supplier information, organizations are able to flag potential issues before they arise and collaborate with suppliers to minimize risk exposure for all parties in a relationship.
Effective supplier information management through supplier scorecards, vendor management software and other specialized tools helps to organize stakeholder responsibility and stay on top of vendor management as a whole.
In a broader sense, firms may also have trouble handling relationship-based tasks, such as dealing with vendor performance issues, contracts and renewals, disputes, and coordination challenges. Strategies to address such challenges may include actions such as setting out clear and quantifiable goals, tracking supplier KPIs and fostering healthy relationships with vendors.
Overall, vendor management requires skilled coordination of many suppliers, tackling ever-changing risks and adjusting strategies and responsibilities based on industry trends and organizational needs. While such enormous tasks often overwhelm leaders and teams, there are many tools and technologies that can ease the burden.
Software Vendor Management Tools and Technologies
Vendor management software (VMS) streamlines the process of selecting, onboarding, monitoring and collaborating with their vendors or suppliers. It centralizes vendor-related data, automates workflows, and facilitates communication to optimize vendor relationships and enhance supply chain efficiency.
Meanwhile, contract management platforms simplify the creation, negotiation, execution and monitoring of contracts throughout their lifecycle. They often include features such as document storage, version control, reminders and reporting.
Performance monitoring and evaluation tools track vendor performance against predefined metrics and KPIs. They provide insights into vendor performance trends, identify areas for improvement and support data-driven decision-making to optimize vendor relationships and drive operational efficiency.
To help manage risk, vendor risk assessment and mitigation solutions evaluate potential risks associated with vendors and suppliers, such as financial instability, compliance issues or supply chain disruptions. As a result, organizations proactively safeguard their operations and uphold their reputation.
Finally, supplier collaboration and vendor information management platforms facilitate seamless collaboration between organizations and their suppliers. Through consolidating vendor information and simplifying data exchange, they support real-time access to critical supplier data.
A few software options, like Ivalua’s supplier management solutions don’t fall neatly into one of the categories above. Instead, they combine all the above capabilities to support successful vendor management across functions.
Auto Parts Manufacturer Streamlines Supplier Information Management with Ivalua
Chassis Brakes Int’l, a producer of brakes and rotors, struggled with multiple costly issues: corrupt supplier master data, over 12,000 suppliers across multiple ERP instances, and poor visibility into indirect spend, among others.
Through adopting Ivalua’s Sourcing, Procurement, Contract Management and Supplier Management software, they were able to compile a complete master database and centralized contract repository.
As a result, Chassis Brakes enjoyed better knowledge of their spend to leverage in negotiations and strengthened their communication with vendors, resulting in an over 50% reduction in their supplier base and 10% savings on indirect spend.
“Ivalua has enabled our transformation journey effectively, making Procurement more agile and digital. It really began with a focus on suppliers and clean supplier master data to make better decisions. Resolving this empowered efficiency, visibility and much more value creation for the business.” ~Cyrille Naux, Vice President of Strategy, Operations and Procurement at Chassis Brakes
Read how Chassis Brakes leveraged Ivalua’s platform in the full vendor management case study.
Future Trends in Vendor Management
Digital transformation continues to disrupt all workstreams, and vendor management is no exception. The rise of remote and hybrid work and global collaboration require organizations to shift to cloud-based vendor management solutions.
Moreover, the adoption of automation and artificial intelligence across workflows has transformed supplier management as we know it. Generative AI can create procurement models to support demand forecasting, procurement strategy, quality control, and risk assessment.
For contract management and vendor relationships, generative AI can help create contract language and streamline knowledge sharing for vendor collaboration. Advanced models specially trained to provide supplier management solutions can even act as a virtual assistant – conducting supplier research, assisting in drafting legal documents, and keeping teams up to date on the latest market trends.
Conclusion
Vendor management covers a wide range of activities: sourcing and supplier selection, contract negotiation, performance monitoring, risk and relationship management, and many more. In the dynamic world of today’s supply chains and the digital marketplace, a commitment to continual enhancement and adoption of cutting-edge strategic sourcing software is crucial.
Such tools equip organizations to solidify long-lasting vendor alliances, capitalize on the actionable intelligence that data offers, and greater cost savings. This strategic approach positions organizations to excel in efficiency and maintain a more cohesive organizational structure.
Watch a demo of Ivalua’s Supplier Management Software to see how incorporating technologies tailor-made for vendor management can deliver powerful results.
