Vendor Management is a complex process with a wide variety of responsibilities – and the maturity of your Vendor Management has a huge impact on how you execute your tasks and generate benefits.
There are so many different aspects around Vendor Management – from supplier relationship management, reporting, performance measurement to contract management, purchasing, and price comparisons and negotiation – that the criticality of the maturity can hardly be underestimated.
But let`s begin with the basics:
Why is a structured and mature Vendor Management important?
- Especially within IT, a huge portion of annual budgets are spent on vendor services.
- External service provision can be efficient and effective – resulting in saving money. But it needs to be monitored, steered, and executed with a strategy.
- Using vendors is a trade-off between risks and savings – to keep the first under control and benefit from the second.
- It plays a key role when transforming a fragmented vendor landscape to a key supplier strategy.
What prevents companies from setting up a mature Vendor Management organization?
- Vendor Management needs a structure of resources, processes, guidelines, and a strategy – it is not a short-term initiative.
- Often, there is no clear focus on managing relationships and cooperation with vendors – the spotlight is on cheap purchasing, not on long term benefits, efficiencies and capabilities.
- To allow Vendor Management to contribute to the long-term success, it needs to play a central role together with operational teams, purchasing, legal, and finance – guided by a strategy, shaped by a vision.
Which benefits does a mature Vendor Management organization offer?
- Generating of savings
- Enhancing business capabilities
- Bundling purchasing power
- Streamlining relationships
- Reducing the number of vendors
- Mitigating risks
- Benchmarking and challenging suppliers
- Leveraging from supplier expertise
- Identifying best fitting vendors for specific areas
What are critical and key capabilities of a mature Vendor Management?
- Supplier Onboarding
- Transition Support
- Supplier Performance Management
- Supplier Assessments
- Supplier Audits
- Financial Management and Savings Monitoring
- Supplier Relationship Management
- Termination Support
- Supplier Risk Management
As we know now why it is important to have a structured and mature Vendor Management, the next step is to figure out how mature your Vendor Management is currently. Therefore, we offer a structured and easy-to-understand framework which is based on a 5-level model.
- Our maturity model is focusing on two key aspects:
- Get to know where you are – what is the baseline?
- Offering a clear improvement path to increase capabilities
In order to address these two aspects, our assessment is specifically designed to offer valuable insights into the implications of your as-is situation. It not only brings attention to the risks of not improving, but also highlights the numerous benefits that can be gained from growth and development.
Level
|
Description
|
| Apprentice |
- Nonaligned functions
- No strategy
- No documentation
- Manual processes
- No integrations
- Fragmented supplier landscape
|
| Associate |
- Loosely aligned functions
- Basic processes documented
- Weak guidelines
- Mixed skills
- Initiatives to streamline supplier landscape
|
| Senior |
- Aligned functions
- Initiatives started
- Documented and partially executed processes
- Strategic suppliers identified and partially implemented
|
| Advanced |
- Focused functions following clear strategy
- Key processes established and followed
- Partially automated tasks
- Resources with clear focus and expertise
- Strategic suppliers established
|
| Expert |
- Focused functions with defined responsibilities following clear strategy
- Key processes established and followed
- Strongly automated tasks
- Resources with clear focus and expertise
- Strategic suppliers established and under benchmarking
- Added value for automation and transformation contributed to the organization
|
Now that the individual maturity levels have been clearly defined and explained, let's take a look at the individual focus areas targeted by this assessment.