4 Vendor Relationship Management Activities

What Does Vendor Relationship Management Involve?

PurchTips Edition #328 Click here for the printer-friendly version

Picture of Charles Dominick, SPSM, SPSM2, SPSM3, author of this procurement article on vendor relationship management.By Charles Dominick, SPSM, SPSM2, SPSM3

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Strategic sourcing is a process for selecting the right vendor for your organization’s needs. When strategic sourcing ends, vendor relationship management begins.

Vendor relationship management is a combination of separate, but related, activities that are strategically coordinated. These activities help to maximize the value of your vendor selection. Here are four of the activities that comprise vendor relationship management.

1. Measuring The Vendor’s Performance. You selected a vendor because you were convinced it would fulfill its promises. You put a contract in place to legally obligate the vendor to fulfill its promises. Shouldn’t you confirm that the vendor is fulfilling its promises? Of course! And you do this by measuring the vendor’s performance. The traditional vendor performance metrics are cost, delivery, service and quality. But leading organizations measure additional performance facets like innovation, social responsibility, and more.

2. Collaborating With The Vendor. Simply accruing all of the cost savings you estimated when selecting the vendor doesn’t maximize the value your organization can get out of the relationship. With strategic vendors, you should collaborate towards goals like: driving cost out of the shared supply chain, working towards joint process improvements and innovations, and exploring ways that both organizations can be more profitable by working as partners, rather than adversaries.

3. Benchmarking The Vendor’s Cost. Just because strategic sourcing identified your vendor as your best cost option in the marketplace at the time of selection doesn’t mean that will be true in a year, three years, or five years. You should keep your finger on the pulse of the market by using tools like price indices, market intelligence subscriptions, and third party benchmarks to ensure that your vendor continues to remain competitive throughout the relationship.

4. Re-evaluating The Vendor Relationship. Business conditions change. Always ensure that your vendor fits your current and future business needs, not just those needs in the past that may no longer be relevant. You can decide whether to disengage with the vendor, revisit the strategic sourcing process, or even remain with the current vendor for an even longer period of time.


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Copyright 2015. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3

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