Developing A Vendor Management Plan: Tips And Strategies

Purpose

The venders are classified into three groups. The critical vendors, the important vendors and the incidental vendors. The three categories of vendors must be well determined to ensure a smooth flow of business process required of them. Usually vendor management is enhance a strong relation with the suppliers and service providers leading to a strengthened business relation. There are a number of factors to be considered for a successful vendor management plan.

First is that the information should be shared as well as the priorities. Usually appropriate vendor management provide the necessary information at the time to allow the vendors serve the needs better. This information may include new product launches, forecast information, changes in design or relocation changes. Secondly, the vendors should balance commitment and competition. This will help the vendors in assisting and supporting the business operations. Thirdly, the key vendors should be allowed to help in the strategizing of the business operations. Inviting the vendors in strategic meetings that involve the product hey are working with is necessary.  The forth activity is that it is necessary to build long term partnership with the vendors which is cost saving an impacts the quality of products and services the venders are dealing with. Finally, the company and the vendors should have a win-win agreement. The negotiation between the vendors and the organization should ensure that their goals are achieved in the end of the partnership.

A vendor management plan is necessary in the organization as it will help a company in most of its process. A vendor management plan helps a company identify all vendors that have access to sensitive data or sensitive network. The vendor management plan will also help in ranking vendors according to the level of risk associated with the relationship. This will help different the three classifications of vendors that are involved in the business currently. They include: The critical vendors, the important vendors and the incidental vendors. The vendor management plan will also help to determine the vender resiliency against the threats. Finally, the company will have report findings, so that they are accessed and approved by senior leadership.

The roles of all the venders should be clearly stated. The vendors should also have the skills and some level of expertise in the respective roles provides. The mains roles of a vendor include liaising with suppliers and competitive pricing, product evaluation duties and budget and they should ensure delivery arrangement and stock management is done as required. The vender with much experience will be classified as the critical vendors. These vendors are expected to ensure that all the activities are done accordingly.

The RFP development in an essential activity in the procurement process. The expertise required include software, hardware, firmware engineering and information. The competitive procurement are solicited to respond to the RFP (“RFP Preparation and Source Selection”, 2018). The proposals should be evaluated during source selection and a contract is awarded to the contractor who provides the most favorable terms in a business. The source selection is a selective procurement and the proposals tend to be examined against the requirements, facts, recommendations and the best proposal is selected (“Understanding Government Contract Source Selection”, 2018).

Vendor Management Kpis: Spend Visibility

Developing A Vendor Management Plan

Spend visibility is a key activity in business. Spending analysis is necessary so as to understand how much the company is spending with the vendors. The company is supposed to prioritize subcategories of activities where they spend most. The company should start with the subcategory which will bring more benefit to the company. Evaluating the result produced by the venders is very important. Depending on the information gathered, the business will tell whether it should continue outsourcing a relationship to a vendor (Fournier, 2018).

The vendors are to be classified into three categories: critical vendors, important vendors and the incidental vendors. The critical vendors should ensure that key activities are performed accordingly (“Vendor Classification”, 2018). The important vendors are supposed to handle the some of the strategic activities. The important vendors are necessary in the projects performed but they can control the project nor make decision in the project. They follow what the critical vendors advise them to do. The incidental vendors are experienced vendors are tend to replace vendors in a project in situation where the current active vendors are not in a position to perform their tasks.

The roles of all the players including the operational staff, the management, procurement employees, tender committee members, quality/ product assurance representatives and the vendors are involved in the procurement cycle (Tysseland, 2008). All the vendors should coordinate their activities and work as a team.  

For the currently active vendors, it is necessary to have an effective management for the vendors. The management to carry out a process evaluation. There should be a dedicated vendor management team. The team should manage all the transactions that arise from the vendors and the suppliers. The team should have a clear audit trail- decisions. The team should have the skills of proper auditing and ledger keeping (vendors, 2018).

The company also requires a database of existing suppliers and vendors. This will help in monitoring the vendor performance. The data will enable the business to enhance time and cost efficiency. The score cards is used to measure the KPI that the vendor is bound to (“How a Vendor Management Scorecard Basics Monitors Performance”, 2018). The score cards should have a timeline and set of milestones that tend to sync with the performance indicators. The data that is collected by the score card is used to follow up the vendors’ performance (“The Importance of Vendor Management Policy Programs”, 2018).

The vendor management plan will ensure the vendors operate smoothly in business and the organization will meet its goals. The vendors will achieve their goals.

Vendor risk management is an important aspect in vendor management. The vendors are subject to risk such as financial, reputation, compliance, legal risk and many more. The business should identify all the vendors and associate the business they have access to. Secondly, the vendors should be based on the risk. There are vendor who can result to a critical risk, high risk, medium risk or low risk. The business should ensure that the vendors’ access or rights in the business operations is based on the legitimate business need. The third wat is that the business should vet new vendors with due diligence. Before the contracts are signed the business should ensure that the contracts are reviewed with legal counsel. In case the vendors fails to provide the contracted services the company should have a backup plan. This can be solve by the third classification of vendors who end to replace the vendors who fail to provide the contracted services. Finally the vendor management should constantly be reviewed to ensure activities are performed smoothly.

VENDOR SCORECARD
1. RFP Instructions	VENDOR 001	VENDOR 002	VENDOR 003
Ability to keep time	2	4	3
Completeness	5	3	3
Level of Professionalism	5	5	2
General Responsibility	5	4	5
Average Score	4	4	3
2. Company Information	VENDOR 001	VENDOR 002	VENDOR 003
Financial Viability	5	5	5
Experience with Similar Companies	2	4	3
Service Department	5	4	3
Partnerships	5	4	3
Average Score	4	4	4
3. Project Understanding	VENDOR 001	VENDOR 002	VENDOR 003
Understanding the objectives in projects	5	5	5
Understanding the requirements in the business	5	3	2
Working towards the business objectives	2	4	3
Average Score	4	4	3
4. Requirements	VENDOR 001	VENDOR 002	VENDOR 003
Completeness of Vendor Response	5	5	5
Working to achieve the project requirements	1	5	4
Average Score	3	5	5
5. Product	VENDOR 001	VENDOR 002	VENDOR 003
Technology Is Sustainable	5	5	5
Product Roadmap	5	3	2
Product Development Life-Cycle	2	4	3
New Release Process	5	4	3
Average Score	4	4	3
6. Terms & Conditions	VENDOR 001	VENDOR 002	VENDOR 003
Duties expected to be performed	5	5	5
Rules	1	5	4
Agreement  between venders and suppliers	2	4	3
Average Score	3	5	4
7. Vendor Demonstration	VENDOR 001	VENDOR 002	VENDOR 003
Solution well defined	5	5	5
Company’s objectives met	5	3	2
Adaptability	5	4	3
Average Score	4	4	3
8. Fee	VENDOR 001	VENDOR 002	VENDOR 003
Maintenance Fees	1	5	4
Purchase Timeline	2	4	3
Licensing Period	5	4	3
Other Fees	2	5	3
Average Score	3	5	4
*Total score should = 1.00
CRITERIA SCORES	WEIGHT	VENDOR 001 AVERAGE	VENDOR 002 AVERAGE	VENDOR 003 AVERAGE
1. RFP	0.05	0.21	0.20	0.16
2. Company Information	0.05	0.85	0.85	0.70
3. Project Understanding	0.20	1.20	1.20	1.00
4. Requirements	0.30	0.15	0.25	0.23
5. Product	0.05	0.21	0.20	0.16
6. Terms & Conditions	0.05	0.67	1.17	1.00
7. Vendor	0.25	0.20	0.21	0.15
8. Fee Summary	0.05	3.00	4.60	3.60
Total Score	1.00	6.49	8.68	7.00

References

Fournier, J. (2018). Vendor Management Starts with a Four-Step Process. Retrieved from https://www.hcmworks.com/blog/vendor-management-starts-with-a-four-step-process

How a Vendor Management Scorecard Basics Monitors Performance. (2018). Retrieved from https://www.thebalancesmb.com/vendor-management-scorecard-basics-2533809

RFP Preparation and Source Selection. (2018). Retrieved from https://www.mitre.org/publications/systems-engineering-guide/acquisition-systems-engineering/source-selection-preparation-and-evaluation/rfp-preparation-and-source-selection

The Importance of Vendor Management Policy Programs. (2018). Retrieved from https://securityscorecard.com/blog/the-importance-of-third-party-risk-management-programs

Tysseland, B. (2008). Life cycle cost based procurement decisions. International Journal Of Project Management, 26(4), 366-375. doi: 10.1016/j.ijproman.2007.09.005

Understanding Government Contract Source Selection. (2018). Retrieved from https://www.oreilly.com/library/view/understanding-government-contract/9781567263114/

Vendor Classification. (2018). Retrieved from https://archive.sap.com/discussions/thread/3378053

vendors, 6. (2018). 6 essential steps for managing vendors. Retrieved from https://www.cio.com.au/article/555629/6-essential-steps-managing-vendors/