Vendor Management Definitions, Process, and Roles

As per the project management and PMP certification course, to fulfil their goals, most projects rely on outside resources. It's becoming increasingly rare for a single business to possess all of the commodities and services required to execute the task at hand.

This is when vendor management enters the picture. Vendor management is the activity of enlisting vendors—or firms and individuals that offer critical goods and services—to assist in the execution of a project. Most businesses operate with suppliers, typically a large number of them, which necessitates distinct contracts, terms, payment rates, and points of contact for each. Managing vendors can be extremely difficult depending on how many you have.

Vendor management is a discipline that searches for and sources vendors, as well as obtains estimates for pricing, capabilities, quality, and turnaround times. Contract negotiations, relationship management, task assignments, performance evaluation, and payment distribution are all covered as well.

Vendor Management Definitions

A vendor is someone or something that sells something, whether it's a service, a product, or labour. They can be independent consultants, consulting firms, or staffing firms, all of which are referred to as suppliers.

A Vendor on Premises (VOP) is a vendor who sets up shop at a customer's location. They may source labour internally or from outside vendors, but they are ultimately responsible for managing and coordinating the work for the client.

A Managed Service Provider (MSP) oversees vendors and evaluates their performance in meeting the client's standards and criteria. They don't normally recruit; instead, they investigate and recommend the finest vendors based on the client's needs.

Vendor Management Process

As per the project management and PMP certification course, the vendor management process is divided into four steps:

• Establish Business Goals:Define your business objectives clearly and as precisely as possible (consider making SMART goals). To successfully enlist the help of a vendor, you must first understand exactly what you want to accomplish. It's also easier to manage vendors when you've established performance benchmarks to compare.
• Choose the Best Vendor:Who is the best match for your requirements and performance characteristics? You'll have to assess all of the vendors' advantages and disadvantages, and they'll all have them, so this step should only be chosen after rigorous vetting. A purchase order should be used to document the price, quantity, delivery window, and payment terms for the goods/services you want. It's a legally enforceable contract that ensures you and your vendor are on the same page.
• Manage Vendors:Monitoring performance and output on a daily basis is what this task entails. It's the most effective technique to ensure that the contract's provisions are followed. This step entails a great deal of communication in order to provide approvals, disapprovals, adjustments, comments, and whatever else is required to strengthen the relationship.
• Consistently Meet Goals:You want to achieve your objectives not just once or twice, but on a regular basis during your engagement with the vendor. This entails regularly managing the vendor in order to better influence them to meet performance goals on a consistent basis.

The Role of Vendor Managers

So, what exactly does the vendor management manager do? To begin, they collaborate with management and budgeting departments to manage and regulate suppliers while ensuring that costs are kept at or below market value.

They also engage with suppliers to find ways to keep costs within the company's budget while maintaining quality. This entails soliciting quotes from a variety of vendors to ensure that they're working with the proper company. More than just the product or service they supply, the right vendor is characterised by their track record and financial history.

After the contract is signed, the manager must maintain contact with the vendor, as well as their own financial and management teams who will be dealing with the suppliers. They also maintain track of stock levels and keep extensive records to track and validate the delivery of supplies.

Need more insights on Vendor Management?Take on a professional certification such as PMP, PgMP, PfMP Certification etc.

Richard Pierce An expert in Pmi and Iiba Certifications.