Vendor management continues to evolve at an unprecedented pace. Customers, boards, auditors, and regulators are demanding more robust policies, procedures, and oversight of vendors and other third-party relationships.
From an operational perspective, senior management is under pressure to maintain an effective infrastructure while identifying ways to extract value through vendor risk reduction, performance improvement, and cost control.
From a market perspective, new regulations are being introduced, and new technologies are emerging on what feels like a monthly basis.
While the challenges are many, these 10 trends have the greatest potential to unlock the power of vendor management in 2024.
1. Creating Value
As an uncertain economic climate continues to cast its shadow into the new year, organizations will look to vendor management to identify new, creative ways to drive value throughout the supply base.
Expect to see a focus on targeted initiatives to control costs, minimize risk, and amplify vendor performance. Vendor management will be under increased pressure to run the day-to-day while bringing tangible value to the business.
2. Strengthening Operational Resilience
Persisting supply chain disruptions continue to shine a spotlight on the need to mitigate third-party risk to strengthen operational resilience. This is especially true with vendors providing critical services to the business.
There will be an increased focus on identifying and managing critical vendors and to enhance due diligence and continuous monitoring. Organizations will also look to ways to improve resilience through stronger contingency planning and supplier diversification.
3. Testing Artificial Intelligence
As the hype (and the potential) for Artificial Intelligence (AI) continues to grow, vendor management software providers are rapidly integrating AI into their platforms – making it ubiquitous in day-to-day operations.
In 2024, vendor management will test various ways to leverage AI to find what works best within their organizations. Process automation, data analysis, and data governance will be critical focus areas.
4. Digitizing & Automating Processes
With over 400 vendor management systems in the marketplace, the opportunity has never been greater to leverage technology to provide speed, efficiency, and real-time information. 2024 will see an increased adoption of vendor management systems designed specifically to support procurement, contracts, third-party risk and compliance.
An emerging technology to keep an eye on is data intelligence solutions, which are integrating more frequently into vendor management systems. These data solutions provide real-time screening and risk monitoring, fostering faster, more informed decision-making.
As organizations embrace a more holistic, lifecycle approach to vendor management, professionals need to expand their skill sets beyond their traditionally siloed roles.
Organizations seek individuals with broader capabilities across procurement, contracts, risk, compliance, and finance. Skills in communication, process automation, data analysis, and change management will all be in demand.
Infographic: Top 10 Vendor Management Trends to Watch in 2024
6. Integrating ESG and Diversity
The global call for ethical and inclusive practices has extended its reach into vendor management. Companies are striving to build an ecosystem of vendors with shared values, while also complying with a growing list of regulations requiring transparent, sustainable business practices.
Vendor management will build on the work started in 2023, with a focus on aligning policies and procedures with broader corporate values and regulatory requirements related to Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI).
7. Fortifying Governance
To enable more effective vendor management across departments, organizations need to bring siloed stakeholders together to foster cohesion and collaboration. Stronger governance will be needed to align stakeholders from various business units, including procurement, legal, risk, finance, compliance, and information security.
Expect to see initiatives to improve the alignment of policies and procedures, systems, and reporting across departments to enable more efficient vendor management operations and more effective oversight.
8. Adapting to New Regulations
Recent years have introduced a number of new laws impacting third-party management, including cybersecurity, data privacy, human rights, and environmental stewardship. This trend will continue into 2024.
While monitoring the changing regulatory landscape, organizations will refresh vendor management policies and procedures to ensure they stay compliant.
9. Doubling Down on Data Protection
Recent years have also introduced us to hundreds of data breaches, many of which can be traced to failures by third parties. With more than 300 million terabytes of data created each day, third-party breaches will continue into 2024.
Organizations will look to strengthen third-party diligence around data security and privacy, with an enhanced focus on augmenting point-in-time diligence with continuous threat monitoring. As importantly, limiting data exchange with third parties will be an area of focus to mitigate risk when breaches occur.
10. Transferring Risk Downstream
The modern supply chain has gotten incredibly complex. It includes myriad downstream (i.e., ‘Nth Party’) suppliers, service providers, and independent contractors that all play a role in service delivery and all present risks to the organization.
Driven by new regulatory guidance on managing fourth-party risk, organizations will emphasize that their vendors maintain effective, compliant vendor management programs. They will also look for better ways to transfer risk directly to their third-party vendors when downstream problems occur..
What’s Your Plan to Unlock the Power of Vendor Management in 2024?
2024 promises to be a dynamic year for vendor management, marked by a confluence of challenges and unprecedented opportunities.
The emphasis on creating value, strengthening operational resilience, testing artificial intelligence, and digitizing processes underscores the imperative for adaptability and innovation.
The integration of ESG and diversity considerations, upskilling of professionals, fortifying governance, and adapting to new regulations showcase the comprehensive nature of modern vendor management.
Moreover, the focus on data protection and the strategic shift of transferring risk downstream reflect a commitment to robust risk management practices.
By embracing these trends, organizations have a unique opportunity to harness the power of vendor management, aligning it with broader corporate values, fostering collaboration across departments, and ensuring compliance in an ever-changing regulatory landscape.
While the challenges remain, the potential for unlocking value and enhancing resilience has never been greater.
Vendor Centric can assist your organization in staying ahead of the curve and streamlining your vendor management program at all stages.
Contact us to schedule a free, no-hassle consultation to assess all your organization’s needs and how we can help.