Managing Your Vendors, Suppliers and Contractors Starts with Procurement
I worked on a project for a client a little while ago. They wanted two things. One, they wanted to know whether the existing suppliers and contractors they procured services from were well aligned with their needs, culture, goals and objectives. That one was easy. Essentially the procurement process didn’t have any criteria related to the alignment, so there was never a way to select vendors on the basis of their fit.
The second part was about supplier management. They had many different managers in different parts of their territory along with suppliers who worked in various parts of the territory, sometimes spanning several manager’s territory. They recognized that their methods were causing some issues, that’s why they wanted a review.
Based on an in-depth review, it seemed that there were problems in some areas with vendors but not in others, even with the same vendor. Some of their vendors were even starting to raise issues about the inconsistency in how they were dealt with.
What it came down to was two key issues. One, the contract and the RFP process did not have anything related to performance management and relationship management built in. In fact, each manager had a different approach and expectations when it came to performance and management of the contracts and suppliers, even though the contracts were all the same and suppliers often spanned across multiple managers. The same vendors were dealt with differently by different managers.
There were no formal processes, service levels (beyond contract specifications), performance measurement or even any performance management as part of the contracts. There was also a lack of structure around communications and feedback to the suppliers or even communications internally to the managers’ supervisors that would enable them to see the full picture at a higher level.
After reviewing their procurement and contract documentation, interviewing suppliers and the field managers and then looking at the processes, expectations and documentation they used, the recommendations I made for improvements to their vendor management were:
1. Build performance measurement and management requirements processes, including quality assurance and other service delivery related qualities into the RFP process for evaluation and into the contract for execution.
2. Provide tools to managers which enabled a consistent and standardized approach to managing the performance of the vendors. This included a roll up and cross communications between managers where they had the same vendor. This included a way to judge performance more objectively, formal vendor management meetings that fostered communication, using a well documented process that ensured everyone was literally on the same page when it came to service and performance requirements, and apply management tools, including action plans by the vendors to correct issues that come up.
Since the client was in the process of re-procuring a significant part of their vendor services, they incorporated many of these techniques into their new procurement process and their contract.
What it comes down to is this: managing vendors is an important part of the job and doing it well requires tools and techniques like everything else. When your vendor struggles and fails to deliver, you suffer the consequences and it may impact your reputation and cost you money.