Vendor Management Automation – Why Your Business Needs It
Effective vendor management is a mission-critical process for any business. A lack of control of the diverse processes contained within a complex vendor management ecosystem can cripple an enterprise’s ability to achieve, and maintain, market competitiveness. Poor vendor control can also create financial havoc that leads to prolonged negative bottom-line results. Many enterprises are turning to vendor management automation to enable vast improvements in the ways that they manage their suppliers.
The complexity and size of a vendor management process can vary widely depending on factors such as business type, company size, customer base, competitive landscape, etc. However, in basic terms, a typical vendor management ecosystem will contain the following process phases:
- Vendor Qualification. Qualifying the right vendors for the right products and services.
- Contract Negotiation. Negotiating terms and pricing that are mutually acceptable and that deliver maximum value.
- Vendor Selection and Onboarding. Vendor selection based on objective criteria followed by successful onboarding.
- Performance Monitoring and Issue Resolution. Monitoring of critical KPI’s and effective resolution of issues.
A lack of control within just one of these phases can create negative impacts that trickle throughout the entire vendor management ecosystem. Businesses that continue to rely on vendor management processes that are manual, non-integrated, non-intuitive and technology-poor increasingly report a common set of problems.
Outdated Vendor Management – the Problems
- Vendor management driven by manual processes that are static, non-collaborative, inefficient, and ineffective.
- Vendor qualification processes that are inflexible in design and difficult to execute.
- Contract negotiations impeded by inefficient handling of critical documents.
- New vendor onboarding processes that are cumbersome and prone to error.
- No ability to monitor vendor KPI’s in real time and to take timely actions.
- Debilitating vendor performance issues that are not realized until significant damage has been done.
The cumulative effects of these problems can be devastating and long-lasting. High costs, ineffective utilization of procurement resources, an unstable vendor base, unbalanced vendor spend allocations, dissatisfied customers, and loss of market share can all be side effects of poor vendor management.
Vendor Management Automation – A Game-Changer
Today, a good customized vendor management solution will provide a workflow-based platform that enables a 360° approach to managing all critical vendor management activities. Many of these new vendor management solutions can be fully integrated with other cloud-based applications to provide a seamless, process-automated, vendor management ecosystem.
Companies that have prioritized the integration of vendor management automation solutions have realized significant improvements in vendor management efficiencies and effectiveness. Specific benefits have included the following:
Workflow-based automation of critical vendor management processes such as…
- New vendor qualification. Automation of qualification routines and validation processes. Ability to customize specific routines for specific vendor types.
- New vendor onboarding. Automation that reduces the potential for costly onboarding errors and delays. Gets new vendors up and running quickly and effectively.
- Legal Doc Handling. Automated handling of vendor-related documents (contracts, SLA’s, SOW’s, etc.). Automation of routines such as document creation, review, redlining, approval, release, and storage. Reduces overall document management costs.
- Spend Allocation Management. Ability to create custom analytics and reports to monitor real-time vendor spend data. Allows for quick assessment of actual vendor spend dollars vs targeted allocations. Enables much tighter control to reduce the risk of becoming too dependent on one or two suppliers.
Analytics and Dashboarding
State-of-the-art analytics and dashboarding provides the ability to establish vendor-specific KPI’s to monitor real-time performance and trends. Drag and drop customization of dashboards and scorecards provide real-time views of data contained within the vendor management ecosystem. These capabilities provide the enterprise with the power to take corrective or preventative actions in time to minimize negative impacts.
Analytics that are fueled by Big Data technology provide the enterprise with the ability to collect and analyze large volumes of vendor data. Taking advantage of this data can provide tangible operational and competitive advantages.
AI/ML Enabled Innovation
Artificial Intelligence and Machine Learning have exciting implications within the realm of vendor management automation. A vendor management solution that utilizes AI and ML technology enables the enterprise to “learn” from the data generated within its vendor management ecosystem. This “learning” allows the enterprise to predict potential performance issues before they arise. It also provides the enterprise the ability to establish vendor performance criteria that meets the predicted demands of the customer.
A Real Imperative for Business
According to Gartner the three components of robust vendor management are: Data and Insights, Reviews and Governance, and Action Plans. Over the next decade increased customer demands—combined with tougher competitive landscapes—will work to put increased pressures on vendor management processes. Businesses that fail to incorporate sufficient levels of vendor process automation will run a significant risk of failure. Conversely, those that are able to take advantage of today’s automation technology will be better positioned for long-term success.