Maintaining up-to-date, efficient and compliant vendor management processes isn’t easy – especially in organizations experiencing rapid growth or significant change.
That’s why continuous process improvement is so important and a MUST HAVE for effective governance of any vendor management program.
The good news is that process improvement doesn’t have to be a multi-month effort. There are practical things you can do – starting tomorrow – to begin getting traction.
In this blog I break down:
- the definition of continuous process improvement,
- why it’s critical for effective vendor management programs, and
- 15 practical ways to improve your vendor management practices
Let’s get started.
What is continuous process improvement?
Continuous process improvement is an ongoing, systematic effort to analyze and improve processes within your organization. It involves regularly reviewing and evaluating processes to identify areas for improvement, and then implementing changes and monitoring the results to ensure the improvements have been effective.
It can take many forms, including the implementation of new technology, the adoption of new policies and procedures, and the reengineering of existing processes.
Organizations that are committed to process improvement are better positioned to respond to changing market conditions, remain competitive, and drive growth and profitability.
Why is process improvement critical for effective vendor management?
Process improvement is essential to the long-term success of your vendor management function for several reasons:
- Increased Efficiency: Most vendor management departments are strapped for resources, requiring employees to do more with less. Process improvement streamlines activities and reduces the level of effort required to complete tasks.
- Improved Quality: By optimizing vendor management processes, you can reduce errors, eliminate waste, and enhance the quality of output. This leads to improvements in the types of vendors you work with and the quality of the goods and services you buy.
- Competitive Advantage: When you can quickly find, contract and begin working with vendors, your organization is better positioned to scale, operate cost-effectively, respond to changing market conditions, and innovate on new products or services.
- Regulatory Compliance: Continuous improvement ensures that your processes stay current with an ever-changing regulatory landscape. This is especially important for complying with third-party management requirements in highly regulated industries like banking, insurance and healthcare.
15 Practical Ways to Improve Your Vendor Management Processes
There are dozens of ways to improve your vendor management processes. Some can be done with little effort, while others may take longer due to the need for new technology, more complex process reengineering and cultural change management.
Here are 15 practical ways you can begin improving vendor management processes in your organization – some as soon as tomorrow!
- Document your end-to-end vendor management processes to standardize activities and provide consistency across your organization.
- Create a RACI Chart to clarify ‘who does what?’ when executing vendor management activities.
- Standardize common forms and templates like requests for quotations (RFQs), requests for proposals (RFPs) and purchase requests.
- Analyze and rationalize your supplier base to reduce time spent on supplier management.
- Evaluate competitive bidding policies to determine if you can increase procurement thresholds and reduce the need to competitively bid low cost, low value items.
- Leverage procurement software to automate common activities like sourcing, competitive bidding and purchase-to pay.
- Create a contract clause library and contract templates for staff to use to provide speed and consistency in contracting.
- Use a Contract Lifecycle Management (CLM) system to centralize all third party contracts and make it easier to manage the contracting process.
- Develop a contracting policy to define which contracts require formal, legal review and which can be managed solely by the business owner.
- Create a contract review and approval authority matrix to clarify the number of reviews required for certain types of contracts, and eliminate unnecessary reviews for low risk agreements.
- Review your third-party risk assessment questionnaires to improve how questions are asked (which improves vendor response accuracy) and remove non-value add questions.
- Use Vendor Risk Management software to automate tasks related to risk assessments, due diligence and risk monitoring.
- Simplify approval processes to remove unnecessary approvals and sign-offs.
- Integrate your vendor management systems to establish a ‘source of truth’ for vendor management data and to eliminate manual workarounds between systems.
- Operationalize a process-driven, continuous improvement process to continually review and improve your processes – year after year!
Vendor Centric specializes in helping companies establish and implement efficient, scalable vendor management processes. If you need help setting up new processes, or reengineering the ones you’ve got, contact us to learn how we can help.