What is Vendor Relationship Management and Why It’s Crucial

Technology procurement, especially SaaS buying, requires Vendor Relationship Management. Companies can cut expenses, risks, and improve services with it. VRM process improvement is best achieved by implementing a VRM system. Transparency, annual reviews, and understanding vendors’ businesses and processes improve vendor relationships.

Organisations may use several terms to characterise supply chain companies. Sometimes “vendor” and “supplier” signify different things. This post will distinguish vendors from suppliers and offer tips for improving vendor relations.

What’s the vendor-supplier difference?

Vendors and suppliers are likely synonymous. Over 10 years in technology procurement, I saw buying organisations and supply chains move from “vendor” to “supplier”.

Nowadays, the phrases are interchangeable, with supplier being more crucial.

For those who don’t use the phrases interchangeably, a vendor can actually sell software from a SaaS source. The supply chain starts with the supplier and ends with the vendor. However, when providers sell directly to consumers, which we want for SaaS procurement, terminology blurs.

The secret of unblurring the lines: Supplier relationship management programmes segment various categories of suppliers, making them comprehensive. Thus, a good supplier relationship management process will likely lead to a good vendor relationship management process.

Vendor relationship management.

Whether short-term or long-term, vendor relationships matter. Simply said, getting along makes everyone’s life easier, but that’s just the beginning. Upon closer inspection, vendor connections touch practically every level of the buying (and selling) organisation.

Gartner calls vendor relationship management a “discipline that enables organisations to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the deal lifecycle.”

So how does vendor relationship management do all that? Consider categorising your supply chain companies by business risk and profitability. That will help you find cost, risk, and value improvements.

Best strategies for managing vendors

Here are some ways to improve your vendor relationship management process, whether you’re starting from scratch or just tweaking it. As you read this, consider how you can apply these supply chain management tactics to your business since every firm manages it differently. Better strategies may come to mind.

Provide VRM to your SaaS stack.

A powerful VRM application can alter your vendor relationship management. Like a CRM solution for sellers, it automates, improves onboarding, and engages buyers for better results. Adding a real-time vendor management system to your SaaS stack simplifies managing many vendors.

A VRM solution reduces vendor-tracking spreadsheets, improves renewal monitoring, streamlines cost tracking, provides end-user metrics, enables data-driven decision-making, and reduces waste. VRM solutions are essential for improving vendor relationship management due to these benefits.

Do KPI-based yearly vendor scorecards

Scorecards are annual vendor performance reviews. Praise and constructive criticism for the vendor’s last year are due now. Given your VRM application, stakeholders are likely providing real-time input on each vendor. Annual scorecards are the time to discuss feedback and KPIs.

It’s crucial to note that concerns may develop throughout the year that require rapid attention. Do not wait for the annual scorecard for important issues. Report those issues to your vendor immediately.

Request a reverse scorecard from your vendors to boost things up by giving your organisation praise and constructive feedback. Consider both sides’ KPIs throughout the process.

Be clear as possible.

Every company has confidentiality restrictions. When possible, involve vendors in corporate strategy and innovation.

As much as you are affected by your business, so are your vendors. This open and honest relationship can increase empathy, understanding, and innovative problem-solving.

About your vendors’ businesses and operations

Have you visited a strategic vendor’s headquarters? Or visited a plant? When I visited a vendor, I became more invested in their product or service, how they made it, and their business model. Knowledge improves negotiations, contracts, and relationships. Additionally, it shows your strategic vendors that you care about their business.

If vendor visits aren’t budgeted, ask ways to learn more and understand their work. Most individuals, including sellers, enjoy to tell stories.

What to anticipate from vendor relationship management benefits

Manual vendor relationship management is complicated and difficult. However, with the correct tactics, including a VRM solution, you’ll have all the tools to accomplish VRM well.

After implementing strategic vendor relationship management, expect these:

• Increased win-win partnerships
• Improved forecasting and budgeting for procurement teams
• Cost avoidance and savings
• Higher stakeholder and vendor satisfaction
• Management of vendor performance
• Better compliance and certification renewals
• Waste minimization, like shelfware
• Better metrics for project management
• Better contract management and deliverables
• Learn about upgrades and innovations