A key external party that plays a big factor in the success of procurement is vendors. Procurement teams may be directing their personal attention to other activities in the procurement process such as requisition and payment but leave vendor management in the back burner.
Effective supplier collaboration has the ability to derive long term value and benefits. Garnering those benefits, however, is not without its challenges.
These challenges are common across a lot of procurement teams, hence acknowledging them is the first step to identifying the necessary solutions for improved vendor management.
Challenge #1: Finding the right vendor
A lot of procurement teams still struggle with finding a suitable supplier. Generally, businesses know which suppliers carry their desired product and service but fail to specify further criteria that impacts your vendor relationship.
The most important criteria to look out for when it comes to finding the right supplier is their reliability.
“Is the supplier able to fulfil in terms of product and service quality? “Is the supplier able to meet your desired delivery arrangements?” are some of the questions you could ask yourself in determining the vendor criteria you’re looking for.
When you’ve determined the criteria, outlining your expected level of service and desired outcomes in a Service Level Agreement (SLA) contract to convey the required deliverables of the vendor.
Communicating and solidifying these deliverables are important towards having long term strategic plans in place that ultimately reflect a vendor’s effectiveness and helps you gain value in your vendor relationships.
Challenge #2: Selecting the best vendor
Narrowing down the right pool of suitable suppliers is just the first step of selecting the best vendor for your business.
Often, businesses would select their preferred supplier based on who can give them the best price. While price does play a big role in generating savings for your business, it’s not the sole factor when it comes to selecting the best vendor.
There are non-price factors that should be considered as well. These non-price factors include the vendors’ capability, capacity and reliability as mentioned above.
A vendor’s capability refers to the vendor’s ability to meet the requirements set by your business. These requirements include specifications on quality and timely delivery. On the other hand, a vendor’s capacity refers to the supplier’s capability in meeting requirements from a quantity standpoint.
Challenge #3: Price negotiation
Negotiating prices is an essential part after you’ve engaged with the right supplier. While price negotiation efforts enable procurement teams to maximise savings, recurring negotiating activities can be time-consuming and inefficient in the long run.
Contract pricing can help mitigate recurrent negotiation activities Contract pricing helps save time by minimizing price negotiation efforts, especially for tail-end spend items which tends to require a certain amount of repurchasing.
Through contract pricing, procurement teams are able to lock down prices over a preferred duration. The duration often depends on the agreed product or service and the nature of that item to a business’s operation. Generally, contract renewals are done on a monthly, quarterly, bi-yearly or yearly basis.
Challenge #4: Vendor onboarding
So you’ve overcome the challenge of finding the right vendor and negotiating the right price. The upcoming stage of onboarding those vendors comes with its own set of challenges.
Certain vendor registration processes can be lengthy as some businesses would require extensive information and documents for vetting purposes.
While it’s a customary process for vendors to go through, there might be smaller vendors who would face difficulty in when it comes to complex registration processes.
The time taken for a vendor to complete the registration process may interfere with the urgency of a requisition which can result in users getting creative and bypassing set compliances in order to get their products and service on time.
To minimize the time and effort taken in registering vendors, businesses seek services and solutions where there is a master vendor. This master vendor will act as a single solutions provider for any products and services needed by a business. By utilising a master vendor, businesses are able to access the variety of offerings without the need of onboarding different suppliers hence eliminating the time taken to register vendors.
You’d be surprised to know that these challenges are common across the board for other businesses as well. Despite these challenges, the activities that come along with them are key steps that all businesses have to go through to ensure they’re able to obtain the necessary products and services for their company to run.
Solve your vendor management challenges with Supplycart. Access our pool of over 400 vendors without going through the complexities of registering and onboarding them.
You can also keep track of your contract pricing agreements through our cloud-based procurement platform, ADAM.
Solve your vendor management challenges through ADAM today!