4 Essential Steps for Vendor Management that CIOs Should Follow

By Don Q. Dao - Last Updated on January 6, 2020
Essential Steps for Vendor Management that CIOs Should Follow

Vendor management can be difficult, learn how you can succeed with these steps.

It’s important to have an action plan to ensure success.

Businesses continuously strive to create strategies for improvements to various internal processes, however, implementing a strategy can be a lot more difficult than coming up with one. Many decision makers recognize that in order to improve efficiency with other goals, it’s important to have a comprehensive vendor management process. A vendor management process is essentially a web-based application that acts as a tool for businesses to manage and procure staffing services whether it may be a temporary contract or outsourcing labor. However, there are many essential steps that you need to follow in order to have an effective process. Here are some essential steps for vendor management that CIOs should follow:

Developing a Vendor Management Strategy

Like most implementations, the first step is coming up with an effective strategy. To ensure that you’re planning effectively, the first step should be to understand how your approach aligns with the organization’s overall strategy. For example, if your business focuses on safety and a quick response, your approach should embody this as well. Some important key factors you should look out for are the budget, market research and understanding the requirements.

Creating a Vendor Selection Criteria

It’s important to decide beforehand how you’re going to select your vendors to reduce bias. The overall strategy should directly influence your selection process criteria. Many businesses tend to adopt a scorecard or points system regarding criteria. For example, a business can prioritize pricing and give it a 30 point rating out of 100. The weighting system will reflect both your goals and understanding of what solutions can provide for you.

Creating Contracts

Due to how large scale transactions can be, the general process of managing all of this is to use a “RFx” document to summarize your organization’s needs and seek bids. There are typically three types of bid documents that you can use: RFQ, RFP, and RFI.

RFQ: A Request for Quote document is used for commodity purchases where price is the most important criteria.

RFP: A Request for Proposal is used to describe a business problem or need for vendors to propose a solution for. It’s important to be very specific in these documents and make sure the expectation is clear and communicated.

RFI: A Request for Information is used to obtain information from the market and support internal planning.

These tools can help you work with your vendors in a very effective manner.

If your bid documents are clear and precise, you can receive many bids from vendors. Once you’ve received these bids, it’s important to use your criteria to select the best vendor for you. Although the lowest prices may be very appealing, it’s best to look at other criteria as well to ensure that the tasks you need completed are done right.

After you’ve selected your vendor, it’s time to negotiate the contract. To ensure that both parties are satisfied, make sure that you communicate all of the needs and expectations during the stage. There are many times when miscommunications have ruined working relationships and businesses. If it takes longer than what you’d expect, don’t worry. There are times when these negotiations takes months.

Keeping the Relationship

After both parties have reached an agreement, it’s important that you manage the vendor relationship. Like managing an employee, it’s important to keep a constant communication with the vendor. This does not mean micromanaging but ensuring that expectations are met is always key. A tip would be to use KPIs to measure the success of the project.

Don Q. Dao | Always striving to learn, Don Dao is driven by new adventures and challenges. His love for media and social interactions has led him to pursue a career in marketing. Over the years, he has developed a broad skill set in all aspects of marketing, specifically in event organization, social media marketing, and content marketing. He enjoys working with passionate people to bring visions to life and inspire the world.

Don Q. Dao | Always striving to learn, Don Dao is driven by new adventures and challenges. His love for media and social interactions has led him to pursue a ca...

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