5 Ways a CPO can Get the Most Out of their Vendor or Supplier Relationship Management
Ethan Healy Junior Consultant
Preface

Having a collaborative and easily manageable portfolio of your vendors is an integral part of your organisation’s ability to outsource and strategically align your business along with the partnership and negotiations held with your vendors. More and more key assets are outsourced to third-parties which help to continually improve your business, and in many cases, can add up to 80% of spend. The management and interaction with your vendors is becoming increasingly important as it determines major costs contributing to your frontline, meaning that it has never been so important that your Supplier Relationship Manager stays strategically aligned to the business whilst realising the value of managing your vendor strategy effectively.

1. Obtain full visibility over your Vendor Portfolio.

In order to truly understand the value your vendors provide both individually and collectively, you need to have a collaborative and insightful view of all the vendors you are associated with. Keeping and updating a centralised database which records the progress and relationship you have with your vendor is the best way the SRM function can obtain quick, yet detailed information on each of their vendors. You can pull relevant KPIs and metrics based on contractual agreements in place and the status of your relations through a simple framework provided on our software solution.

Your organisation may hold supplier performance reviews, but how well informed are these reviews? Can it be a struggle to pull together the right information without quick automation of what actually matters? Do you have clear oversight of each supplier you hold agreements with, in enough detail to take away and build upon, whilst maintaining those agreements through consistent and measurable meetings? To stay in control, ensure you review your vendors using robust metrics and a solid reporting framework, as well as key meetings organised and tailored to the structure of your organisation.

For your ease of use, these metrics would include:

  • The CIPS LifeCycle, especially focusing on the Supplier Relationship Management stage.
  • A robust Vendor Management Framework with checkpoints based on actions and areas of discussion with your vendor relations
  • KPIs – track and rate the performance and level of ownership and work your SRM Team may be accountable for.
  • Scorecards and Ratings – dependent on the area in which you are focused on for your vendors, you need to have solid data outlining the performance and effectiveness on your vendors, as a baseline for future discussions.
2. Build your function and tailor it to get maximum value of your vendor management initiative.

Your vendors should be managed by a clearly defined team, along with responsibilities clearly understood by each individual across the IT Procurement Office. This team should always be in the loop, aligned with the business aims and long-term objectives outlined for each vendor and the provision of our supply chain solution. This will help keep the requirements of the SRM tool at the heart of your way of working.

Introducing a clear understanding of the roles and responsibility of each person in alignment with the day-to-day functioning of your systems means that the automation of your supplier relations is forevermore easier to contain, acting more like strategy consultants to the business rather than custodians of data. This can be done by building a dedicated internal team, or engaging with external partners to help you build upon a friendly user-interface and provide support with our services.

Here is a list of functions we suggest need to be fulfilled on a regular basis in order to help you run and maintain a stable solution:

Chief Procurement Officer – Having this C-Level role helps to make fact-based decisions about vendor selection and spend.

  • Understand how much is spent on top vendors to drive accountability across teams.
  • Investigate variances/trends to ensure your spend is aligned to your IT Strategy.
  • Understand vendor performance from the SRM Team, as well as opportunities for review or contract renewal.

Team Leader/SRM Owner – An individual managing vendor contracts and relations across the database for value is crucial in gaining the most out of your bespoke framework.

  • Identify contracts or performing relations where it may be time to review or avoid renewal if related to underperformance or redundancy.
  • Manage your team of Supplier Relationship Managers and their collaborative performance against their assigned vendors.
  • Analyse and manage vendor spend and invoicing against contracted vendor planned PO spend vs actual invoices spend.

A Team of Supplier Relationship Managers – Each manager should take ownership of certain Vendor Portfolios to manage your vendor relationships effectively.

  • Optimise the vendor portfolio by identifying non-strategic vendors for checkpoints and review.
  • Avoid over or underspending and meet with the Team Leader to agree upon minimum spend commitments.
  • Track and manage outsourcing to vendors across the IT department based on contractual negotiations and review meetings with the vendor. Renegotiate accordingly in order to strengthen contracts.
3. Hold your key people accountable

In order to keep track of the decisions made within your organisation, based on scheduled meetings and their outcomes, rational decisions made form metrics, and key performance reviews, you will need to ensure there is a robust internal governance frameworks over the operation of these services, including the Procurement Office.

Ideally, each contract should have an owner who is wholly responsible for the delivery of services from their dedicated vendor. As well as this, there should be escalation procedures built into your contracts’ processes to ensure each phase of the contractual lifecycle are completed to schedule.

In addition, you need to ensure that data is always made available so that contract owners have the transparency not only of the contract lifecycle, but also of the performance and use of the assets and services each contract relates to within your IT department. Traditionally, there has been a wide gap between both procurement or contract management and the IT department, and the way in which they use assets and services to attempt to deliver value to the business. This can result in opportunity being missed, as well as the potential of decreasing your value if certain assets were to fall behind and stay hidden from the IT department. This can inevitably result in assets being decommissioned, without supporting contracts being embedded, over or under subscription enterprise-level SLA conditions and poor visibility of key information going into renewal negotiations or other important meetings on key contracts.

Therefore, to stop this lack of availability from occurring, the use of a centralised database will allow you to track and audit key performance indicators and ratings against both contracts and performance ratings, allowing more collaborative relations alongside rational decision-making.

4. Use industry-recognised frameworks to uphold collaborative relationships.

If you co-operate transparently and regularly with your vendor relations through one platform, this can be of massive benefit to your business. This will help to build upon their capabilities to innovate, reduce risk factors, achieve value and improve quality, which all have an add-on effect to the successful operations of your business. Rather than focusing on just the start and end of the supplier relationship (e.g. on/off boarding), you should endeavour to manage all contracts mid-cycle. This is referred to by CIPS as the 10th phase of the vendor management lifecycle (“Supplier Relationship Management”). 

To avoid this, you need to adhere to a disciplined schedule based on a framework surrounding vendor management. This will keep you proactive with the escalation and negotiation of contracts, improving efficiency and strengthening the relationship even further moving forward.

5. Stop relying on spreadsheets and email. Start using the best tools.

The Vendor Management function today is required to oversee a host of new IT services and difficult suppliers, as well as judge upon upcoming, more nascent suppliers that must meet increasing performance expectations, with little increase – or worse – a decrease in funding for them.

So how can you manage your suppliers in a more effective way? How can you assess and ensure your vendors reach their maximum potential on a regular basis for the sake of your business? Well the answer is in the ever-increasing need for purpose-built tools which can automate and inform the vendor management function in its growing complexity. At this point in time, many IT organisations and their data for internal processes, is still held within spreadsheets, whilst decisions are transacted via email. This is a poor way in keeping track of the data or audit trails associated with your vendors. Spreadsheets can cause disparities across versions, provide limited transparency and collaborative functions, and make the supplier / vendor manager’s role more like that of an administrator rather than strategical inclined for the business in assuring value for money and maximum performance from the third-parties in which they outsource to.

You need the ability to align all of your contracts and performance reviews across all of your vendors within a simple user-interface, leaving you with simple audit trails and easy tracking of your vendors’ performances against business expectations. To make this even easier, maximise the use of collaborative and transparent communications and initiatives, and use best practice vendor management frameworks which are tailored to your organisation’s needs in order to add to the strategic alignment of your outsourcing.

What’s next?

The Collaborative SRM – 5 Reasons of Importance in Business Today

Why is it so important to have a collaborative and effective supplier relationship manager? We talk about the many valuable outcomes the SRM can bring to the procurement office.

Read article
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