Vendor Management Software
What is Vendor Management ?
The defination of Vendor Management “It is the practice of managing the Vendors that a company work with”.
The word Vendor Management is made from two words “Vendor and management”
So, who is a vendor? the vendor is the person who is selling a Good, like Raw material,
E.g 1) He bought a copy from a newspaper vendor.
E.g 2) I bought these sunglasses from a street vendor.
If we want to make anything, then we need “raw material“, and the “vendor” is the person, who provides us with raw material.
Like spare parts, for example, we have a company. So, in that company, various types of machinery are there.
Periodically, we need to maintain the expensive machinery. So, if any part of the machine not working, e.g like Nuts and bolts or any part of the machinery not working well or deprecated. So, we need to fix it or sometimes we need to replace it.
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So, basically, we need to buy the raw material from the person. And the person who is providing the raw material like the nuts and bolts, or the spare parts of the machinery is called a vendor and management means, how to systematically with the strategy we can acquire the best product for our company, how to manage it well.
So, every company needs, best vendor management to succeed in their business, vendor management system manages which vendor is best for them, who supplies the best in class material to them, they reduce the vendor-related costs-risks, mainly to negotiate the contracts.
What are the Sources of Vendor Information
We are discussing about the”Vendor“, the first question arises, how is the vendor? , do we can deal with that vendor or not? If we are dealing with that vendor, then is he providing a good product or not? Is he providing the defective product, this type of risk which management a company need?
For this, they use various vendor risk management software, by using that software, you can easily manage the vendors. And reduce the risks.
So, from where do we get the vendor information?
So we need the information about the vendor here is the list;
Trade directories are like a dictionary, which provides us with detailed information regarding the vendor. Trade directories which mainly printed for the businessman.
The chamber of commerce frequently updates this regional directory. And also time to time they print this directory.
Specialized trade directories, is for a specific purpose. Means, different- different directories for the different-different businesses.
Like for the books, there is a different trade directory, if anyone is dealing in electronics then there is a different trade directory; where we can find the name of the vendor, their address, phone numbers, email IDs, all there is mentioned in these directories.
Introductory letters are received by an organization to a company. It means If a company wants to purchase goods worth 30,000 dollars or (20Lakhs INR), then as you see this is a big order.
If the company is ready then the manufacturer will give the introductory letter to the company. If you need the goods then, please kindly contact to that organization.
In this source you can visit the vendors personally, you can think about this idea, as visiting vendors personally is great.
Issues Concerning Vendors
If we are discussing the vendors or discussing the vendor selection, then there are some issues we may face.
If we are an old company in the market, (Not a startup or new one) so, we already approach our old “vendors”, so if in our list, there are five vendors, then we will evaluate those five vendors and we will obtain or we will purchase the Goods from that approved vendor instead of a newer one.
As we discuss above, there are different-different categories, so, if our company needs different products like Electronics, spare parts, material handling, powerhouse equipment.
The company will buy these goods, equipment from different-different vendors, like the company will purchase Electronics from a different vendor, spare parts from different vendors, powerhouse equipment from different vendors.
It all depends on that particular vendor, where we are going to purchase the raw material for our company, sometimes the same vendor will provide us with the two or three different products at the same place.
So, it all depends on the company itself that, how many things we have to purchase from that vendor and what not to purchase. We can divide our product and we can purchase the product category wise.
If we purchase two or three products from the same vendor and we repeat the same process, then there might be a possibility that it will spoil your trust, as the “vendor” knowing your needs. It is helpful but there are chances that the vendor can charge more.
Purchasing from Local or Foreign Vendor
If we want to purchase the good from both the local vendor and foreign vendors, then there are some benefits.
If we purchase products from the local vendor, then we will remain in touch with the local vendor, but it is hard to remain in touch with the foreign vendors.
So, before purchasing we need to keep in our mind that, from where and from which vendor we have to purchase and where to skip.
It means that from which manufacturer we have to purchase the goods. Why we have to purchase it. Like if we want to purchase it from the manufacturer who is producing there own product directly.
We can also appoint an agent, and purchase through that agent. The main benefit of using the agent is that the agent will handle the negotiation part. And help the companies to purchase the best product in affordable price.
It means we have to appoint a regional agent behalf of us. He will work behalf of you handle all the essential things. From Negotiation to all the task.
Six steps in Vendor Management
Vendor Management Strategy
If you are doing any work, without any strategy, then there will be chances of failing.
So, we need a strategy to work systematically; if you are working with vendor without any strategy, and if the vendor will leave then? what will you do at that time?
So, its better to have a strategy. And work smarter and here we need to take the help from the best Vendor Management Softwares.
Create Vendor Selection Criteria
Now as earlier we created a strategy, so we need to create vendor selection criteria here. Here we selected the vendor, how he will provide the goods to us, on which cost he is providing, what type of product he is providing? Hows the quality of that product? What are its specifications? Do the vendor is providing the essential products which we really want?
For example, we have to fix the criteria it means we have to tell the vendor, that we have 30,000 dallors and we need to purchase all the 15 items in that budget only, this is called a criteria. We he provide?
And also we have to consider word of mouth factor, as how is the behaviours of the vendor? we just have to consider this criteria also.
Create a Bid Document
So, when ten out of one vendor is providing best product in 25,000 dallors, then the company will purchase from it, and it is matching to the vendor criteria, then we create bidding here.
Evaluate offers an select supplier
Here we have to check the offers , compare it with other vendor and bidding, if it fulfil your needs then you can negotiate with it.
Negotiation means, try to reduce the price.
Manage the vendor relationship
In this last step we have to create a friendly relationship with the vendor. And maintain it for the long term perspective.
What is VMS? What is a VMS platform?
The full of VMS Vendor Management System. There are many opensource and paid vendor management software available out there.