Vendor management is one of those functions that often gets overlooked in the agile world. Many people see it as a non-technical function that is not as important as managing your talent.
However, vendor management is just as important in the small and medium size org with minimal support from dedicated procurement teams and should be given the attention it deserves. After all, your vendors are what keep your business running. Here are a few tips on how to manage them effectively:
Governance
Vendor governance is the process by which an organisation oversees its relationships with external suppliers. Effective vendor governance helps ensure that organisations get maximum value from their supplier relationships, while minimising risk. Some of the important things related to setting-up proper governance
- Clear vendor management structure should be in place.
- Clarity on vendor responsibilities in your organisation.
- Expectation should be aligned on both sides for any governance to wrok.
- Also includes setting up processes for approvals (e.g., purchasing, contracting), communication (including escalation procedures), weekly or fortnightly catch-ups and reports, and monitoring/evaluation.
Having good governance in place will help ensure that your vendors are treated fairly and that they understand what is expected of them. It will also help avoid any conflicts or misunderstandings down the road.
Performance Evaluation/ KPI's
One of the key aspects of managing any relationship is regularly evaluating performance to make sure it meets expectations on both sides. This applies equally to vendors as it does to employees or other contractors you work with. You should set specific KPIs for each vendor based on their role within your organisation and track these regularly against actual performance achieved.
Doing this allows you to identify issues early on before they become bigger problems, as well as recognise when a vendor is doing a great job so you can reward them appropriately! It also allows you to assess the value that the vendor is providing relative to the cost associated with them.
Example KPI's: number of new resumes provided (for T&M engagement), quality of candidates,attrition rate, bugs found, P1, and SLA commitement met. e.t.c.
Commercials
Negotiating favourable commercial terms (pricing models, payment terms, and warranties/guarantees) with suppliers is critical to keeping costs down without compromising on quality or service levels. It's also important to have a clear understanding of each supplier's pricing model so that you can accurately compare quotes from different sources.
You should aim for terms which are fair for both parties - not too favourable for the supplier or too restrictive for your organisation - as this will help create a win-win situation which benefits everyone involved. When negotiating commercials, it's important to keep in mind what other options are available should things go sour with the current supplier.
This helps maintain some leverage during negotiations whilst also ensuring continuity of supply in case things do go wrong. Also these agreements should be reviewed regularly and updated where necessary so that everyone remains aligned & knows where they stand financially speaking.
Esclation & Conflict Management
Any good relationship between two organisations will inevitably have its share of disagreements or conflicts at some point or another. Disputes with suppliers can be costly and time-consuming if not managed effectively. The key is how these disputes are handled - escalation & conflict management procedures must be put into place so that matters don't spiral out of control unnecessarily.
Resolution pathways must also be defined so that everyone knows who they need to talk when there is an issue (and who they shouldn't talk to). Having effective escalation & conflict management protocols in place helps reduce tension between organisations, minimises disruption caused by disputes, and ultimately leads to better outcomes for all involved