Having the right supplies, equipment, and services can make or break your project. Whether you’re running a startup biotech firm or building the best boutique beauty shop in town, you need vendors you can rely on. Vendor management provides an efficient framework for choosing the right suppliers so your team can concentrate on the things you do best. From finding hidden cost savings to developing long-term supplier relationships, vendor management helps you run your business more effectively.
This article provides insight into how vendor management can help your company or organization run more smoothly. While we can’t build vendor relationships for you, we can help you find ways to assess potential suppliers and manage those relationships over the long term.
What is vendor management?
Vendor management includes everything a business does to develop and maintain relationships with suppliers. This includes finding and selecting suppliers, negotiating vendor contracts, managing deliveries, maintaining inventory levels, scheduling service visits, controlling supply costs, and identifying ways to mitigate risks related to the vendor supply chain. Most companies work with multiple vendors, and each supplier has their own contracts, delivery schedules, and points of contact within the organization. Negotiating all of these relationships is a big part of project management. Understanding the importance of vendor management helps project managers set priorities when it comes to allocating resources to this vital task.
Why is vendor management important in project management?
Building good relationships with vendors helps your projects run smoothly by ensuring that your team has everything they need to complete tasks in a timely, efficient manner. In many ways, vendor management is a collaborative process. It involves long-term contact and mutually beneficial agreements, not simply one-time contracts and impersonal interactions. Involving your employees in the process to select vendors gives them a stake in the process.
Good project managers recognize the needs of employees in their departments and develop reliable supply chains to keep those workers performing at their best. Vendor management gives you the insight you need to provide consistent access to the supplies your team needs.
Vendor management is part of your overall project management strategy, so it ties into other aspects of developing a project. You need supplies and equipment on hand before you can engage in resource management within the company, for example. It’s also part of procurement management, which covers how employees and managers requisition supplies, the execution of contracts related to the project, and data analysis to determine how your team utilizes supplies and what purchases might improve performance. Drilling down into exactly how vendor management works can help you set up a process of choosing and establishing long-term relationships with suppliers.
How does vendor management work?
Project managers involved in vendor management begin by assessing the supplier needs for the project and setting objectives for cost, delivery schedules, and reliability. Once you know what your team requires, you can collect information on potential suppliers and choose the best vendors for your company. Contract negotiations are the next step once you’ve settled on specific vendors. Regular assessments of vendor performance and supply costs lets you know when to consider switching vendors or renegotiating a contract. Vendor lifecycle management is an approach that takes a wide view of the supply chain and how it relates to your company’s procurement processes, so you can track those relationships from the initial contact through the final closure of a vendor account. To get an idea of how this works in practice, let’s look at some examples of vendor management in different industries.Vendor management is company- and industry-specific, so the vendors you use depend on the unique needs of your business.
Examples of vendor management and what they mean for your team
A project manager at a company that creates mobile games may need to source hardware, office supplies, software, and content assets. Contracts may include licensing details for digital assets, address security concerns, or set schedules for updates. Some suppliers may provide a service, such as cloud storage or web hosting. Nowadays, businesses may opt to find a cost-effective web hosting plan and have an outside supplier provide the maintenance.
Managing service-based IT vendors might involve assessments of cybersecurity and legal issues in addition to cost analysis and software features.
Vendor management in a restaurant may include sourcing meats, produce, seafood, dry ingredients, kitchen equipment, and cleaning supplies from various suppliers. In some cases, a single vendor can fill multiple needs at a lower cost, providing regular shipments of fresh ingredients on a set schedule. Some restaurants may prefer to individually source specific ingredients from local suppliers.
In some cases, you may have the option of choosing a service vendor or purchasing supplies directly from a product vendor and performing the same service in-house. An example of this would be hiring a cleaning service to come to your place of business and provide janitorial services vs purchasing cleaning supplies for in-house janitorial staff. Choosing between these options may be part of vendor management. No matter what industry you’re in, vendor management templates can help you assess your supplier needs and compare local vendors in an organized way.
Vendor management and monday.com
Tracking vendor relationships and supplier information helps ensure your team has everything necessary for success. On monday.com, you can use the Vendor List Template to create a high-level overview of various external suppliers for your industry as well as producing individual cards for each vendor with in-depth information about current contracts, special deals, prior interactions, and contact details. Visual representations of vendor information helps you assess your team’s needs and decide on the best course of action no matter where you are in the development process. Action items are fully customizable, making it easy to adapt the template to various industries. If you’re still curious about how vendor management might work in your company, get answers to the most-asked questions about this topic below.
Frequently asked questions
What is a vendor management system?
A vendor management system is a strategic process designed to identify, choose, and monitor the companies and individuals who provide necessary products, services, and equipment for your business. Vendor management includes finding ways to streamline the supply chain for your company or team through regular assessments of current vendors and identification of alternatives to the current way of doing things. Performing a vendor analysis involves collecting data and assessing suppliers according to important metrics.
How do you perform a vendor analysis?
A vendor analysis involves determining your company’s specific supply needs and assessing the available options to find the best supplier for your team. Specific things to consider when analyzing potential suppliers include:
- Cost, including initial monetary outlay and ongoing costs
- Return on investment (ROI)
- Service commitments, including timely delivery and available scheduling options
- Quality of the product or service being supplied
- Operational stability of the supplier
- The potential for building long-term supplier relationships
- Past performance of the supplier based on historical vendor data
Vendor analysis can become complicated when you have a lot of possible suppliers to consider. Tools such as vendor management software and vendor list templates can help you collate the data and make visual comparisons to simplify your decision about each potential supplier.
What is vendor management software?
Vendor management software lets you easily compile information on specific suppliers and generate reports for quick comparisons. You can use a software solution to track current vendors’ performance, including contract fulfillment and overall performance. Having this type of vendor data at your fingertips reduces risks involved in managing a supply chain. You can use software to track various types of business vendors.
What is a vendor in business?
A vendor is a company that supplies a product or service to your business. This can include companies that provide the equipment necessary to operate your business, suppliers of the goods you sell to consumers, or non-tangible services that keep your business running.
Effective vendor management makes your long-term projects run efficiently
Whether you’re starting a new project or determining where existing suppliers fit into your overall production strategy, a good project management system simplifies the process. Keeping all of the information about vendors in one place lets you share with other team members, so all stakeholders understand why you’re using specific suppliers. From collecting supplier data to managing the life cycle of your project, monday.com provides reliable solutions to your most pressing vendor management needs.