Vendor Management –
How Do You Score Your Vendors?

Vendor management has a number of definitions. Some companies believe that it is the management of vendors in order to achieve better prices and terms. Others believe that vendor management is building a relationship with your vendors in order to obtain mutually beneficial interactions.

There is also an increasing prevalence for purchasers to allow vendors to manage the procurement process as in Vendor Managed Inventory (VMI) systems, also known as Vendor Management Inventory.

In this procurement process, used by many large retailers, the vendor interfaces with the purchaser’s sales and inventory accounts and delivers new products on a just in need (JIT) basis.

Vendor management includes care in selecting a vendor and then undertaking regular and frequent reviews using detailed evaluation methods. During this vendor selection process, a period of vendor analysis is undertaken to find the vendors who will provide quality products at keen pricing and advantageous terms.

Each vendor is matched to a set of vendor selection criteria to find the most appropriate vendor for the purchasing company. Large vendors often have vendor ratings assigned to them from reputable consultancies that greatly aid the process.

The entire purchasing process and management of several vendors is assisted by a set of tools, technologies and services, collectively known as Vendor Relationship Management (VRM).

Vendors align themselves with their customer’s Vendor Management System that builds an efficient and profitable procurement relationship for both companies.

Vendor performance management is usually measured by service level agreements (SLA) and alignment to their contractual obligations. Some companies use a balanced score board methodology. Measurements of the relationship, account management, quality, delivery and costs are the most common.

Those companies who hire a multiple staff, particularly temporary staff are able to use a Vendor Management System (VMS) to minimize costs and prices and maximize efficiency. A VMS is an internet-based application that connects to one or more service providers. Features include a procurement process, consolidated billing and time sheets.

It appears that however, you want to undertake your vendor management or your vendor supply, there is a software package or consultancy out there to assist you in your performance reviews.

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