Why is supplier or vendor management so important today?
Well, the reputation and quotes from vendors relate directly to your product costs. That said, if you want your product to be of high quality and at a reasonable price, vendor management is a spot that you can’t afford to miss.
Vendor management definition
There are many types of definitions for vendor management, and there is no need for us to create yet another one to burden you.
In a nutshell, vendor management is a collective term for suppliers and vendors screening, selection, development, collaboration and control.
What vendor or supplier management want to achieve here is to build a steady, reliable vendor team to supply reliable resources to fulfill their daily operation requirements and achieve their business visions.
Vendor or supplier?
Some companies don’t really mind using either of these two words, while others favor one over another.
Generally speaking, vendor is more usually seen on B2B and B2C companies, whilst supplier in B2B scenarios.
In this post, we will use vendor and vendor management mostly, since it covers a wider range.
However you may call it in your organization, it’s well-acknowledged that businesses around the world develop relationships with suppliers and vendors across the world with the help of global supply chain.
This has brought more opportunities than ever for companies and vendors across the world, but it also makes it harder to manage and monitor your own suppliers, not to mention managing sub-suppliers to your suppliers.
This has made an effective vendor management all the more important.
Targets for vendor management
With what being said, vendor management is expected to help you alleviate problems in your business. To conclude, an effective vendor management should hit the following targets:
For manufacturers or buyers
- Select and/or evaluate vendors or suppliers;
- Evaluate and mitigate risks;
- Get quality services or products at the optimum prices;
- Develop good supplier relationship;
- Develop potential suppliers or vendors;
- Reduce delivery lead time.
- Better understand the needs and requirements of the buyers;
- Improve product and operation quality;
- Shorten the response time and flexibility in dealing with changes;
- Increase profit margin.
Both parties share their mutual goals and expectation in the project, as a way to reduce risks, costs to the lowest point possible and eventually a win-win cooperation.
Benefits of vendor management
Vendor management is more than just to find the supplier with the cheapest price for a product or service. It’s about streamlining the process to improve efficiencies and manage vendor relationships to ensure that the agreements made are mutually beneficial for both parties. It requires a lot of skills, resources, and time to get it done properly.
In other words, there could be more benefits of an effective vendor management that you know. Let’s break them down here.
This is by far the biggest advantage of vendor management.
There are many activities between you and your vendors that don’t add any value to your product. Inventory is such an example. Effective vendor management can reduce the uncertainty between the both parties, and reduce value-less activities to the lowest level, as one of the ways to reduce the overall supply chain costs.
Best utilize resources
Innovation is the key for a company to moving forward, but it requires a lot of experiences and supports from the professional. The upper stream vendors can provide you with resources for joint development, knowledge sharing, and their technical skills and experience. With you winning the innovation bonus, your vendor can grow into your exclusive vendor and stand out from the crowd.
To some extend, this is a way to create loyal relationships.
Improve product and service quality
With collaboration on quality management and continuous project improvement, high product quality is a guarantee before the product get shipped out from the upper stream vendor. This saves tons of time that should have been invested in testing and examination.
That concludes what we want to say about vendor management. But it’s just still a rough introduction, because there are far too many areas in vendor management that requires your attention.
But if you’re interested in knowing more about vendor management, feel free to let us know. See you in the comment section.