Editor’s Note: When I read this post that was initially submitted to me in February, the first thought that came to mind was the fact that the author was looking beyond technology in terms of managing vendor relations. This is an important point, in that for far too long our industry has put so much stock in Magic Quadrant type analysis, and feature, function, benefit assessments, that we have overlooked what actually drives successful relationships. The fact that an eProcurement vendor has not only recognized this, but has actually written about it, would seem to indicate that technology is finally being viewed in the proper context of being a supporting, as opposed to defining, element of a successful procurement practice.
Supplier relationship management, supply chain risk mitigation, partner compliance development–there are many names that can describe vendor management. Many subject matter experts can (and will) argue over the scope and meaning of such trendy buzzwords. What very few in the procurement world will dispute is that the need for vendor management is not going away anytime soon. Concepts and doctrines surrounding this idea have been pervasive for quite some time, but more recently procurement and vendor management technology platforms have allowed for much more efficient and potentially effective incorporation of these processes into day-to-day procurement functions. There is, however, a trap that procurement professionals must avoid falling into when taking a long-term and strategic look at our operations, so we ask: When does vendor management go too far?
In our ever-changing technological landscape, forward thinking leaders will of course embrace new innovations that allow for increased process efficiencies, but are there times when we sacrifice too much for the sake of process? Continuous supplier tracking and standardized KPI templates are powerful tools, but when adhering too tightly, generalized terms can wrongfully disqualify a supplier or lend to the disintegration of a potentially fruitful, mutual-growth relationship. In these instances, vendor management has undoubtedly gone too far.
Technological advantages should drive efficiency, but holistic effectiveness is just as important. While a procurement or vendor management professional’s eyes focus on process compliance, other long-term and critical strategic goals should never be too far from their minds. Vendor management software and vendor management as a concept built into procurement strategy can be invaluable, but a focus on this area should never stifle innovation, adaptability or growth. When vendor management processes and technologies allow us to achieve goals in a more robust manner, then we know vendor management is truly working for us.
There is significant value in the coupling of vendor management processes and technology in a way that aligns with critical strategic goals. Some legacy institutions trudge through their laundry list of legal, risk, and compliance processes for all suppliers across every category manually. When an institution decides to utilize a vendor management technology platform, at that moment, it has a built-in window of time to rework its processes and strategies for the better. The first step is identifying institutional goals and defining organizational values that should pervade all aspects of process. Legal, risk, privacy, and financial compliance are important, but of equal importance are innovation and adaptability that allow for growth in key areas, such as diversity and sustainability. When these values are established upfront and baked into processes moving forward, the effect can be impressive. Instead of a technological tool leading to the disqualification of small, innovative suppliers, it can instead allow for identification of minority, sustainable, or small business suppliers that may solely require growth and development plans to meet other compliance or financial requirements. The end result is a success story like a once small minority supplier becoming an institution’s largest primary provider in one of its highest spend categories.
Lean and strategic growth focused around an institution’s core values, in addition to parallel growth for one of its key partners is a true win-win. And isn’t that what we’re all looking for in our supplier partnerships anyway?
About the Author
Jaideep Sen is a Project Manager at Source One Management Services, LLC. He leads sourcing initiatives in a wide range of categories for Fortune 500 companies and mid-market organizations, and acts as the direct interface between the client and the internal team. He manages a team of analysts through a strategic sourcing process that includes data collection and in-depth analysis, baseline development, RFP development, pricing negotiations and implementation.