In our latest webinar, Vendor Centric Founder and CEO Tom Rogers, VendorRisk Founder and Partner Gavin Mac Carthy, and Cohnreznick Partner and CPA Anne Schrantz came together to shed some light onto the most promising current trends in vendor management. The presenters, all of whom frequently work with clients on building their vendor management programs, discussed the best practices organizations are adopting to establish and mature their vendor management programs. To provide even more clarity into these best practices, we will be taking a deeper dive into each one throughout a series of blog posts, starting with this one.
While organizations around the world now realize how important vendor management practices are to their structural integrity and are implementing vendor management programs (VMPs) into their operations, many are struggling to conceive exactly what a VMP should look like. There are so many moving parts that go into managing vendors that many organizations are left asking themselves the same question: where does vendor management start and where does it leave off? To answer this question, let’s take a closer look at the first best practice from the webinar.
Best Practice #1: Take a Lifecycle Approach to Managing Vendor
In order to build or advance a VMP effectively, a crucial first step is to take a step back and look at your relationships with vendors from a new perspective. Too many organizations make the costly mistake of viewing these relationships as compartmentalized and unintensive – find a vendor, sign a contract, and leave it alone until something goes wrong or it’s time to cut a check. Managing vendors in this way is reckless and leaves entities exposed to financial, operational, cybersecurity, and reputational risk.
The responsible way to view these relationships requires some organization – taking all the bits and pieces of the relationships and pulling them into a structured framework that’s easy to visualize and track. It should have a clear starting point, ending point, as well as certain touch points in between. Building such a framework allows you to take a disciplined, lifecycle approach to managing vendors.
In a lifecycle approach, the various stages in the vendor relationship become clear and aligning certain policies and procedures with each stage becomes second-nature. Not only will this approach make managing vendors easier and more routine, it will also substantially reduce the risks facing your organization and make compliance with regulations more achievable.
Adopting this lifecycle approach is easier when using Vendor Centric’s Vendor Management Framework, which provides a visual for the starting/ending points of vendor relationships, as well as the most important touch points in between. There are two main components in the framework that are important to notice:
The core component: includes the 6 main stages of a vendor relationship:
- Sourcing
- Procurement
- Contracting
- Onboarding
- Purchase-to-pay
- Oversight and optimization
The secondary component: includes the foundational pieces – the people, processes, and systems – in a vendor relationship that really make it run:
- Governance
- Stakeholders
- Policies and Procedures
- Workflow
- Reporting
Once this framework is adopted and the lifecycle approach is standardized, organizations can finally extract the value they deserve from vendor relationships. The framework will provide clarity to the department or team tasked with overseeing vendor management, and policies and procedures can be put in place to standardize the processes and delegate responsibilities. For organizations that previously hadn’t quite been able to visualize what a VMP should look like, this level of structure offers something unique: unprecedented transparency into vendor relationships. With this transparency, organizations will understand what level of standards should be set for their vendors, and thus can finally begin to drive real value out of them.
To learn more about the vendor management framework and how you can adopt it, check out our website page dedicated to it here. To listen to Tom Rogers and Gavin Mac Carthy discuss this best practice and more, be sure to watch the free webinar here.
