Vendor Management : comparing yourself with Best Practices

Having a formal Vendor Management program in place is a good evidence of Procurement maturity as it requires a robust list of pre-requisits to make any sense:

  • Strategic and Preferred Suppliers must have been identified
  • Contract with Strategic and Preferred suppliers should embed the standard principles of such a Vendor Management program (regular Vendor Master data updates, status report against SLAs and performance KPIs, end-user satisfaction measurement, status review and governance…)
  • End-users must be aware and trained

The table below details the different components of a Vendor Management Program you should think of and highlights the difference between having none, average and Best In Class (BIC) practices.

Components / Practice

No   Program

 Average Practice

Best In   Class

Program Metrics No programs or processes in place Have seen some improvement Performance improvements with >20% of suppliers
Measure <25% of suppliers Measure   >25% of suppliers
Documentation Documentation does not exist. Saved locally, not centrally Documentation shared in online folders
Lack of organized data and quarterly performance plans Supporting   data and comprehensive action plans saved quarterly
Reporting &   Charts No reports exist, due to lack of quantitative   data Reporting is a manual process; occurs only when   users manually input data Reports populated by user-defined KPIs
Charts updated after each review period & used to track   performance.
Standardization   across groups/divisions No standardization exists Little to no standardization exists Pre-configured commodity templates & processes in place
Users have own review processes Users   may use standardized scorecards, but have individual review processes Allows   for standardization & repeatability
End user training No formal training Manuals used to train users, or user is given a scorecard to   fill out Written and/or WBT (Web Based Training) are used
Integration No integration with other systems No integration with other systems exists; data gathered from ERP Integrated with sourcing software
Supplier   Information Management No on-boarding process exists On-boarding process exists; information collected & saved on   shared drive Online on-boarding process
Information gathered from RFI’s stored on local drives Not   indexed / not searchable Automated   systems to capture & report supplier information
Certificate   expiration & document management automated
Supply Risk   Management Key metrics unmonitored; information discovered   through public resources SPM program monitors key metrics to measure   risk, as financial information is unavailable Key financial metrics collected & tallied for Risk Scorecard
Metrics gathered through subscription-based resources to   form holistic picture
Supplier Performance Management No process in place Basic process with quantitative metrics & annual scorecards Advanced, automated process with quarterly reviews, quantitative   & qualitative measurements from surveys, scorecards, & reports
SPM Publication   Process No formal publication processes Email is typically used Automated task lists & scorecards on a quarterly basis
Surveys are often not published Publication   of results
Cycle Time/Review Period Annually if at all Annually except for high risk suppliers Quarterly
Scorecard Review   Sessions Account reviews are not guided by quantitative   metrics Held in person or via teleconference Live meetings
Supplier receives scorecard during review session Supplier   reviews scorecard prior to session
Meetings for data validation rather than corrective actions Focused   on improvement plans
Key Performance   Indicators Do not exist, other than from ERP reports. (IE –   Defect rate, on-time delivery) Quantitative metrics tabulated in an ERP system Comprehensive quantitative & objective   survey metrics such as account management from members of organization
Other KPIs, if they exist, are yes/no questions
KPI Values Do not exist Quantitative measurements on a 0-100 scale Rigorous, multiple-choice values for all KPIs,   with customized responses
Qualitative measurements, if they exist, are yes/no format
# of Survey Respondents Zero Typically <3 10+, accounting for divisions within  organization (engineering, finance, legal,   sourcing, etc.)
Automation No automation No automation Surveys & scorecards automatically created quarterly
Survey scores automatically average & populate   scorecards

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