This week BMP attended Gartner’s webinar titled ‘The Comprehensive Guide to Effective Vendor Management’ with Research VP Helen Huntley. Below are our notes. The archived recording can be found here.
A couple of questions that were raised early in the webinar that you might want to consider about your own organization:
- Is traditional procurement too price intensive?
- Should vendor management be a function or a discipline?
As responsibilities for vendor management are divided up, who is responsible for what? As confusing as it might be to you internally, imagine how confusing it is to your vendors as they interface with so many points of contact in your company. Are you practicing contract management or relationship management?
It is important to decide who within your organization will manage each supplier – this should be determined by what the product or service requires in order to succeed. It is common to manage product contracts with metrics but to manage services contracts through relationships. Either way, if a contract contains a metric it must also contain a penalty, but vendors should not be rewarded for simply meeting their SLA’s.
Gartner identified an interesting vendor category – “future expected spending”. I wonder how many procurement departments have visibility into the categories within their organization that are expected to increase significantly?
The big question is: what REALLY makes a strategic supplier?
You need to define the benefits for your suppliers: is the designation about references? Access to your company’s spend information and/or budget forecasts? Executive relationship building? (Note on the last one – make sure Procurement acts as the gatekeeper and stays involved). Based on what you should hope to accomplish, you can only have a handful of strategic suppliers.
Vendor risk management
- What does the vendor’s leadership picture look like in terms of leadership stability/turnover/position consolidation?
- Where does the product/service you buy from them fall on their strategic roadmap?
- What role does risk play in your supplier categorization strategy?
The question we asked (but unfortunately didn’t get an answer to) was how can you treat a supplier as strategic without losing all of your negotiating leverage? How much could a strategic supplier designation indirectly ‘cost’ your company?