Vendor governance, also known as vendor management, is an important strategy that enables organizations to get more value from their vendors by controlling costs, increasing value, and mitigating risk. Most companies focus on how to manage their vendor governance framework once the contracts are in place; however, what most do not realize is that there should be policies and procedures put in place for signing the contract with the vendors. The objective of putting in place vendor governance strategies before executing new contracts with vendors will enable you to get more bang for your buck and mitigate risks that could cost your organization more money than initially anticipated.
Defining Vendor Governance Framework
To control vendor costs, increase value, and mitigate risk, organizations need a vendor governance framework. This framework provides a set of guidelines and best practices for managing vendors. It includes roles and responsibilities for both the organization and the vendor, as well as metrics for measuring success. By following these guidelines, organizations can ensure that they are getting the most out of their vendors. They also know what will happen if there is a problem with one of their vendors because it is spelled out in the document.
In addition to these benefits, an organization’s governing documents will have been created collaboratively by all parties involved. As such, everyone has ownership of them and understands them. The result is greater alignment on goals and less uncertainty about processes when issues arise. To further enhance the process, an organization may want to incorporate an open-book approach into its vendor management strategy. Such an approach requires transparency from both sides so that neither party feels like it is being cheated or taken advantage of.
Some other considerations for developing a vendor governance framework strategy include who should be included in decisions about purchasing from vendors; how often should employees update their knowledge about specific vendors; what happens if employees work with different departments but are working together on deals?
Vendor Governance Roles and Responsibilities
The vendor governance framework provides a structure for organizations to get more value from their vendors. The framework outlines roles and responsibilities for both the organization and the vendor. By controlling costs, increasing value, and mitigating risk, the organization can get more out of its vendors. Here are some examples of vendor governance:
- Roles & Responsibilities: Vendor management responsibilities typically fall on someone within the company who is often referred to as a vendor manager or vendor relationship manager. These are often people who have some expertise in procurement and contract negotiation but may not be full-time employees at that company.
- Roles & Responsibilities: Here are some sample vendor management roles and responsibilities that help outline how a company can manage its vendors.
Why Does Vendor Management Matter?
- Vendor management is important because it helps organizations control costs, increase value, and mitigate risk.
- A vendor governance framework can help organizations formalize their vendor management processes and improve communication between the organization and its vendors.
- The framework can also help organizations identify and track key performance indicators, set expectations for vendors, and create contingency plans in case of vendor failure.
- By implementing a vendor governance framework, organizations can improve their overall vendor management strategy and get more value from their vendors.
- Implementing a vendor governance framework can be a challenge, but there are many resources available to help organizations get started.
On the other hand, vendors usually expect an employee of the organization to take responsibility for managing their relationship with that company it’s an important job with significant responsibility including financial obligations.