What is vendor management? (A guide to its benefits and challenges)

When you have a contingent workforce strategy in place, you will likely be engaging with vendors. Vendor management is the process of selecting, onboarding, managing, and monitoring suppliers of your contingent workforce. The goal of vendor management is to ensure that these vendors meet or exceed your expectations regarding the quality and cost of the independent contractors that are presented to you by the vendors.

Key benefits of vendor management

Most organizations have and vendor management strategy in place, but many do not realize the full benefits that can be gained from it. The lack of vendor management processes can mean that you aren’t able to keep track of vendor performance, meet deadlines or stick to budgets.

An effective vendor management process can offer a number of benefits to an organization, including improved vendor relationships, cost savings, quality control, and more.

In this blog post, we will explore the seven main benefits of vendor management.

1. Increased visibility into vendor performance

One of the benefits of vendor management is that you can monitor how your vendor is doing against the key performance indicators (KPIs) that you put in place, usually within a vendor management system like the Onsiter VMS. You will be able to track whether the vendor is meeting or exceeding expectations in terms of quality, cost, delivery, and service. This can help to avoid potential problems such as going over budget and engagement with poor quality consultants and independent contractors.

2. Improved vendor selection process

Good vendor management systems will gather and present vendor data that can help you improve the vendor selection process. You’ll be able to identify suitable vendors and avoid vendor-related risks by being able to easily compare vendor proposals and make informed decisions about which vendor to select.

3. Reduced vendor-related costs

Effective vendor management can help to reduce vendor-related costs. By having a system in place, you can more easily track and manage vendor expenses, ensuring that they stay within budget. This can help to reduce the overall cost of doing business with vendors.

4. Improved vendor communication

Another benefit of vendor management is that it helps to improve vendor communication. You or your vendor management team can more easily track and manage vendor communications, ensuring that all stakeholders are kept up to date on project progress, changes, and updates. This can help to reduce the risk of misunderstandings and ensure that projects meet business objectives and are completed on time and on budget.

5. Easier vendor onboarding

Another benefit of vendor management is that it makes it easier to onboard new vendors. The VMS that you use will make it easy for you to collect vendor information such as including contact information, company details and product or service information. This can help to reduce the amount of time it takes to onboard new vendors and get them up and running quickly.

6. Reduced risk

Finally, one of the biggest vendor management benefits is that it helps to reduce risk. Reducing vendor-related risks pertaining to labor misclassifications and taxes can protect your organization from breaking any laws.

Some challenges of vendor management

1. Defining vendor roles and responsibilities

One of the challenges of vendor management is defining vendor roles and responsibilities. This can be difficult, as different vendors may have different areas of expertise and be responsible for different aspects of the project. It is important to clarify these roles and responsibilities from the beginning, so that everyone is aware of their individual responsibilities and knows who to contact if there are any problems or issues.

2. Managing vendor expectations

Another challenge of vendor management is managing vendor expectations. By definition, vendors are not always under the organization’s control and they may not always meet deadlines or meet all of the organization’s requirements. It is important to manage vendor expectations effectively, so that both parties remain happy with the relationship and no one is disappointed.

3. Coordinating between vendors

Another challenge of vendor management is coordinating between vendors. This can be difficult, as different vendors may have different agendas, timelines and priorities. It is important to ensure that all stakeholders are kept in communication with each other and are working towards the same goal. This can help to avoid problems and ensure that projects are completed on time and on budget.

4. Measuring vendor performance

Another challenge of vendor management is measuring vendor performance. This can be difficult, as different vendors may have different standards of performance and it can be hard to compare them. It is important to set clear performance indicators from the beginning so that you can monitor and evaluate vendor performance effectively.

5. Ensuring vendor compliance

Finally, one of the challenges of vendor management is ensuring vendor compliance. By definition, vendors are not always under the organization’s control and they may not always meet deadlines or meet all of the regulatory requirements. It is important to ensure that all stakeholders are aware of the compliance requirements and that vendor compliance is monitored on an ongoing basis. This can help to reduce the risk of noncompliance penalties and sanctions.

Some tools for vendor management

There are a number of vendor management tools available to help organizations with managing vendors more effectively. These tools can help to improve communication between vendors, track the quality of vendors, and ensure compliance with regulatory requirements.

1. Vendor management software

One tool for vendor management is vendor management software or vendor management systems. This type of software can help to automate and streamline the vendor management process, making it easier to track and manage vendor-related information. There are a number of different vendor management solutions available on the market, so it is important to choose one that best meets the needs of the organization.

We recommend trying the Onsiter VMS, which is a free-to-use vendor management system for sourcing suitable vendors, tracking vendor performance, and generating reports.

2. Contract management software

Another tool for vendor management is contract management software. This type of software can help to automate and streamline the contract management process, making it easier to track and manage vendor contracts. There are a number of different software solutions available on the market, so it is important to choose one that best meets the needs of the organization. Some examples of such software include PandaDoc, Docusign, and Concord.

3. Quality management software

Another tool for vendor management is quality management software. This type of software can help to automate and streamline the quality management process, making it easier to track and manage vendor efficiency. There are a number of different quality management software solutions available on the market, so it is important to choose one that best meets the needs of the organization.

Final thoughts

Vendor management is a critical function in any organization that relies on external vendors. It is important to carefully select vendors, define clear expectations, and monitor the quality of your vendors.