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 |