Why creating a maturity roadmap is important for vendor management.
Maintaining an effective vendor management program doesn’t happen overnight. It’s a journey that involves continual learning, refinement and evolution. And as a program matures over time, it results in the management of vendors and other third parties with fewer risks, lower costs, better performance and stronger compliance.
Since every company is at a different place in their journey towards better vendor management, it’s important to create a roadmap that you can follow as you continually grow and mature your program. A roadmap helps you visualize where you are, where you ultimately want to be, and the milestones you need to reach along the way. Following a roadmap allows your team to gradually improve processes and drive more value from your vendor management program at a pace that works best for you.
How to set about creating your maturity roadmap?
As with any roadmap, you need a starting point and an end point – and a plan for how you’re going to get there. You’ll also need to set aside some time, get a team of stakeholders together, and collectively visualize what the finished project should look like.
To create your maturity road map you need to have a:
- Vision for your program
- Baseline of your current operations
- Gap analysis to identify improvement opportunities
- Milestones for improvements
- Resource plan for getting things done
Here’s how these components all fit together.
Define Your Vision
Start with the end in mind and answer this question: what are the ultimate goals and objectives we want to achieve through your vendor management program?
- Complying with federal and state regulations?
- Mitigating risk with vendors who provide critical services or have access to confidential and sensitive information?
- Improving pricing and controlling costs?
- Eliminating poor performing vendors?
- All of the above?
Ultimately, the goals you set will drive the size and scope of your vendor management program. The bigger your goals, the longer your roadmap may be.
Establish Your Baseline
Every roadmap needs a starting point, and that’s your baseline. It consists of your current policies and procedures across the complete lifecycle of the vendor relationship. From initial procurement all the way to off-boarding and everything in between.
Your baseline also needs to include the operational components of your program such as your governance and communication structure, workflow, systems and reporting.
Perform a Gap Analysis
The gap analysis is the process of comparing where you want to go (your vision) with where you are (your baseline), and figuring out all of the things you need to do to get there. Examples of practical findings that come up in your gap analysis include:
- Developing missing policies
- Updating antiquated forms and templates
- Updating contractual documents with newer or missing provisions
- Performing due diligence on risky vendors
- Reclassifying vendors due to changes in the relationship
- Auditing contracts and performance for SLAs and invoicing
- Adding additional resources
Whether you have a new or existing vendor management program, there are always a ton of improvement opportunities that come up when you do a thorough gap analysis. But not every opportunity is created equal. So it’s important that the issues get prioritized so you know where to focus first.
Milestones are a critical part of your roadmap as they allow you to do two things. First, milestones allow you to group improvement opportunities into stages so that you can address them over a period of time rather than trying to do everything at once. And second, when done right, milestones actually allow you to build new value in your vendor management program each time a milestone is reached.
As an example, if you launching a new vendor management program from scratch, one of your first milestones may be to simply build profiles of all your vendors and contracts and get them into a central system so you have visibility. Reaching this milestone creates value by simply having a central view of vendors, their risks and all of the contractual obligations you have as an organization. While this sounds simple, many companies don’t have even these basics in place.
Alternatively, if you have an existing vendor management program, you may set a milestone to re-assess, rationalize and consolidate your vendor population. In addition to saving money through improved leverage and negotiations, you’ll also significantly reduce your risk (and potentially improve compliance with regulations, if applicable) by focusing your oversight and contract management with fewer vendors.
Create resource Plan
Finally, your roadmap needs to identify the resources you’ll need to get the job done, and assign responsibilities accordingly. Most companies – whether or not they have a formal vendor management office – are simply under resourced to get their program to the maturity level they desire. More and more, companies are bringing in experts to get things done faster and oftentimes cheaper than if done internally. Experts provide both speed and scalability to move projects along and get to the next milestone in an efficient, cost effective way.
Whether you’re improving the program you already have, or getting one going from scratch, a maturity roadmap is an important tool for creating a vision and a path for a more successful vendor management program.