Strategic Vendor Management is an integral part of any organisation. It is extremely important to ensure that maximum value from outsourced arrangements is achieved. Utilising outsourced arrangements allows organisations the opportunity to leverage external expertise. It also allows internal resources to be more focused on organisation-specific activities, appropriate to their knowledge and skill. However, without effective Strategic Vendor Management, organisations are at risk of outsourced services not delivering the agreed requirements, with potential high-cost overruns.
There are several areas that can be improved through diligent Strategic Vendor Management which include:
- the ability to model costs more accurately
- utilisation of cross-organisation team
- reduction in the impact of price fluctuations on cost structure
- early supplier involvement in product and service development
- transfer of knowledge through the supply chain
- planning and design synergy
- use of metrics to drive change for both organisations
- improved risk management and continuity of supply
- access to, and speed of, innovation.
Benefits associated with Strategic Vendor Management include:
- Reduced costs – cooperating in mutually beneficial relationships with key suppliers, can strive for cost savings over the long term. Good working relationships with suppliers will not only deliver cost savings, they will reduce availability problems, delays and quality issues – and that means a better service for the consumer.
- Increased efficiency – communication improves as the relationship develops between the organisation and suppliers. Strong communication allows both the organisation and suppliers to gain a more complete understanding of the other operating model and providing an avenue for supply chain and operational issues to be identified and resolved early.
- Continual improvement – strong relationships with suppliers encourage free-flowing ideas on methods to improve operations for both parties
your supplier relationships.
services and business outcomes.
Short term, transactional activity using a routine approach and is often reactive and focused on lowest cost
- Low-level procurement decisions that may relate to low-risk, non-critical items and services
- Short-term adaptive decisions as to how and from where specific requirements are to be met
- Routine, planned and sometimes reactive approach to purchasing materials & supplies using quick quote & order processes
- Doesn’t particularly focus on requirements of the entire organisation, but immediate needs of the sub-organisation at a point in time
- Doesn’t’ strive to deeply understand vendors’ core capabilities to support company’s broader needs
- Procurement of goods and services that are generally required to sustain daily production or business activities
Systematic, long term and holistic approach to acquiring current and future needs of an organisation that will deliver long term value
- Collect and analyse spend and category data for organisation
- Develop sourcing strategies
- Ensure procurement meets client and capability intent
- Market research and assessment of the supply market
- Look at whole of life costs rather than just purchase price
- Investment in developing connections with suppliers
- Measure performance – supplier and organisation
- Understand organisational risk tolerances
Supplier Relationship Management
Determines and assesses an organisation's supply categories and supplier capabilities, to maintain alignment with the business strategy and developing mutually beneficial relationships with supply partners
- Focused on joint value creation based on trust, open communication and collaboration with a limited number of key suppliers
- Leveraging supplier capabilities to drive innovation and new ideas
- Develop relationships to be more collaborative, innovative and mutually beneficial through proactive engagement at all organisational levels (senior executives to operational team)
- Define a governance model that supports the arrangement
- Invest in supplier development through frequent communication and having them assist in solutioning issues
- Jointly develop performance measures and have 360° feedback to share accountability
How can we help?
Akela Digital provides a range of services to support customers with their vendor management programs.
- Strategic Vendor Capability Assessment and Planning
- Risk Assessments
- Supplier Contract Reviews
- Augmented and Outsourced Vendor Management