Vendor management
Overseeing a company's suppliers after they are chosen: tracking performance, managing contracts and costs, and keeping relationships productive.
In short
- It starts where sourcing ends: after the contract is signed.
- It covers performance, cost, risk and the relationship itself.
- The most important suppliers deserve regular reviews; the rest need basic tracking.
Vendor management is the ongoing work of getting value from suppliers. Choosing a supplier and signing a contract is only the beginning; vendor management makes sure the supplier delivers what was agreed, at the agreed price, and that the relationship improves over time.
What it involves
- Performance: tracking delivery, quality and service levels against the contract.
- Cost: checking invoices against contracted prices, claiming credits and rebates, and watching total spend with each supplier.
- Contracts: knowing renewal dates, notice periods and obligations on both sides.
- Risk: monitoring financial health, security and compliance.
- Relationship: regular reviews, clear escalation paths and joint improvement plans with key suppliers.
Segmenting suppliers
Not every supplier needs the same attention. A handful of strategic suppliers, those that are costly to replace or critical to operations, warrant quarterly business reviews and senior relationships. The long tail of small suppliers needs accurate master data, correct payment and periodic checks, not meetings.
Finance's part
Much of the evidence for vendor management sits in finance: what was invoiced, what was paid, how often invoices were disputed, and how spend with each supplier is trending. Sharing that data with the people who manage suppliers turns reviews from impressions into facts.
Worked example
A quarterly review with data
In its quarterly review with a packaging supplier, a food company brings data from AP: 7% of invoices had price mismatches, on-time delivery was 91% against a 97% target, and a volume rebate of $8,400 had not been paid. The supplier agrees to correct its pricing file, issues the rebate as a credit note and commits to a delivery improvement plan.