The reason why your business should focus on vendor management is, Your suppliers are critical to your success in the market and your profits; they’re at the heart of many of your organization’s processes and activities. However, you might not consider how important it is to effectively manage your relationships with them. In the past, procurement was simply the department that bought goods and services. Nothing more, nothing less. But now, procurement should be considered as a part of your overall business strategy. To get the best value for your money, you should be taking a strategic approach to efficiently managing your suppliers. Doing so will have myriad beneficial effects.
Unfortunately, vendor management isn’t well understood or widely implemented in the business world. You might not truly understand the advantages you’ll receive from supplier relationship management. To help you understand its importance, we’ve outlined seven reasons why vendor management should be a top priority in business.
1. Mitigate Risks
To effectively reduce supplier risks, whether in terms of operations, unforeseen cost implications, or regulatory compliance, you need increased visibility. Vendor management can track your suppliers and provide the data you need to identify supplier risks so you can take the necessary steps to mitigate them, or choose an alternative vendor. You can easily verify supplier information, such as qualifications and certifications, track performance, and even look into the supplier’s financials to get a broader picture of their risk level in order to protect your organization.
2. Optimize Performance
Once you have a supplier active in your vendor management system, you can track and measure performance against the contract to ensure that the company is meeting your needs and complying with your requirements. This will enable you to ensure optimal performance. The data you receive from tracking performance can signal challenges before they become problems and identify areas that may need improvements.
3. Reduce Costs
When you have increased visibility, you can see invisible costs that you can then better control in order to save on costs. Additionally, having strong relationships with your suppliers, due to effective procedures and processes thanks to vendor management, can help you to negotiate better rates and have access to discounts and incentives that can increase your profit margin.
4. Create Loyal Relationships
Good vendors are hard to come by. If you’re working with excellent suppliers, you should be doing everything you can to strengthen your relationships with them in order to build loyalty. With effective supplier management, you can ensure efficiencies that lead to smooth processes, which can help you build the loyalty you need to keep your great suppliers as part of your supply chain for the long term.
5. Increase Administrative Efficiencies
Your vendor management program can significantly drive administrative efficiencies. As a central hub for vendor master data and record-keeping, this program can cut down on duplication of data, loss of contracts and other information, administrative labor costs, and errors. Having one central place for all of your vendor data can help you manage your relationships with heightened efficiency, which your suppliers will appreciate.
6. Increase Onboarding Speed
The time and resources it takes to onboard new vendors can slow down your productivity and cost you money. But with supplier management, it’s a breeze to obtain all relevant vendor information, such as bank details, capability information, regulatory data, and capacity details and input it into the system in a fast and error-free way for approval. The quicker you can onboard your vendors, the quicker you can move through the procurement process and receive your goods or services so you can put them to use.
7. Protect Your Brand
Your company’s brand holds a lot of value. You do not want to tarnish it due to the actions of an unprofessional or unethical vendor. A supplier management program can provide you with the information you need, such as a supplier’s social and environmental standards, to reduce your risk of a serious incident stemming from a vendor’s actions.