A vendor management policy is a formal set of rules that an organization uses to manage its relationships with vendors. These policies are designed to establish the way in which vendors are selected, procured, paid and monitored to ensure that they deliver the best possible services and products at the lowest possible cost. The Vendor Policy (VMP) is a framework provided by Oracle to manage the risks associated with third party vendors that sell and support Oracle products. This policy has been developed with the objective of achieving a high level of vendor performance, security and stability for Oracle products.
What is vendor management policy
We help customers manage their vendors and vendors to conform to the policies. Our software helps companies develop a robust vendor management process that saves them both time and money, while also ensuring they are compliant with applicable rules and regulations. With the Vendor Management Policy, we set the rules of engagement with vendors – from recruitment to retention. We make sure that our vendors are working in an ethical manner and adhere to all necessary regulations.
It is a policy that ensures that procedures are in place to effectively manage third party vendors and their compliance to the company policies. The Policy is a comprehensive policy that defines how our organization will interact with vendors, which provides guidance on vendor selection, vendor management process and implementation of the policy. It is a policy that describes the procedure to be followed by the management in order to maintain vendor performance and relationship.
Procurement of goods and services from vendors
Vendor Management Policy (VMP) is a comprehensive set of policies, procedures and actions that an organization puts in place to manage their vendors. It helps the organization to identify the right vendor, assess their compliance with the standards required by the organization and manage risk, if any. It is a policy for the effective management of vendors, contractors, and consultants. It covers the essential aspects of vendor relationships and processes that are used to manage them.
Our Vendor Management Policy (VMP) is designed to help our management, business partners and stakeholders in understanding the process for procurement of goods and services. This Vendor Management Best Practices also provides details of various processes followed by the Procurement Department from time-to-time. It is a policy that guides the procurement of goods and services from vendors. The policy defines how vendors are selected and managed in order to ensure the best value for money.
Benefits of Vendor Management Policy
The vendor management policy describes the governance process for managing and performing business with external partners. This can be used by all the stakeholders in an organization to ensure that good governance is practised when it comes to working with vendors. The vendor management policy of an organization is a set of guidelines and rules established by the organization to manage its relationship with its vendors. Such policies define the way in which purchases are made, payments are processed and other such related activities are performed with regard to the organization’s vendors.
Critical component of system integration
A vendor management policy is a critical component of system integration. It will ensure that vendors do not introduce new components into the application without an understanding of how it may impact the existing environment.
Improve the revenue cycle
A well-defined vendor management policy helps to improve the revenue cycle by reducing exposure to fraud, non-payments and recoveries. The benefits of a well-managed vendor relationship include:
- Early identification of suspect vendors;
- Verification of vendors’ credentials;
- Identification of high risk vendors;
- Reduction in the number of bad debt accounts;
- Improved overall credit quality
Maximize the value of vendors
With more than 30% of an IT budget spent on indirect costs such as hardware, software and services, companies need to seek ways to maximize the value they derive from their vendors. This report by IDC discusses how organizations can create a VMP program that allows them to retain control over their indirect spend, while still gaining access to new technology solutions.
Advantages of VMPs
VMPs are critical to any organization’s supply chain and help with many things such as:
- Reduce cost of goods.
- Improve the quality of suppliers.
- Increase supplier accountability.
- Increase sales through efficient channel management.
- Improve operational efficiency and stability.
Manage the day-to-day relationship, including the definition of responsibilities, performance metrics and terms of engagement, while ensuring that vendor management activities are clearly aligned with strategy.