How to conduct a Vendor Management Maturity Assessment

Vendor Lifecycle Management (VLM) involves the strategic oversight and coordination of a business’s relationships with the vendors it uses to obtain products and services. VLM covers such relationships from initiation, through operation, to termination and sometimes beyond.

The primary goal of VLM is to deliver maximum value from as many vendors as possible, while minimising the associated risks and optimising the operational efficiency of dealing with them.

Like any business practice, VLM typically starts small and hopefully evolves in lockstep with business growth, to deliver increased functionality and capabilities, and improved outcomes. This progression is commonly referred to in terms of increasing maturity levels.

Regular assessment of if and how well a business’s VLM practices are maturing can only be established by conducting a structured audit.

Its goal is to provide an understanding of the strengths and weaknesses of current practices and processes, determine the maturity stage reached, identify and prioritise any areas for improvement, and develop a roadmap for addressing any issues found.

This article discusses why VLM immaturity should be addressed, and outlines a process for conducting a Vendor Lifecycle Management maturity audit, covering:

• Free Vendor Lifecycle Management maturity template
• Common characteristics of process immaturity
• Typical stages of Vendor Lifecycle Management maturity
• How to conduct a Vendor Lifecycle Management maturity assessment.

free Vendor Lifecycle Management Maturity Template

In simple terms, assessing VLM maturity means comparing the actuality of what is and isn’t currently being done in the VLM process, against the characteristics typical of each maturity stage.

This requires:

• A clear picture of the active elements of the current VLM process
• A detailed list of the known operational problem areas currently being experienced that limit the effectiveness of VLM and/or cause downstream issues
• A good understanding of the adopted VLM maturity model.

To help you assess your business’s level of Vendor Lifecycle Management maturity, we’ve created a template that you can use alongside this article. 

It works as follows:

• A range of idealised, maximum-maturity scenarios covering several VLM focus areas is presented, each in its own tab
• Assessors provide a score for each scenario in a focus area to show the likelihood that the scenario exists in the VLM process. For instance, a scenario might state that key vendors are subject to more frequent risk assessments than other vendors. The lower the likelihood that this is the case for that scenario, in the range of never to always, the more immature this VLM aspect is
• The maturity level of the focus area is calculated from its scenario scores using an adjustable formula
• The maturity level of the business is calculated from its focus area maturity levels using an adjustable formula.

Common characteristics of immature Vendor Lifecycle Management processes

Process immaturity refers to the state in which a business’s processes are not well-developed, defined, or optimised. It implies that processes lack structure, consistency, efficiency and effectiveness. Common characteristics of process immaturity include:

• High dependency on individuals: strong reliance on specific people, leading to disruptions when they are unavailable or leave the business
• Inconsistency: procedural steps are not consistently followed, leading to unpredictable outcomes and increased risk of errors or failures
• Lack of documentation: procedures and guidelines are not documented at all, are insufficiently documented or are outdated, making it challenging for new and intermittent users to understand and follow the process
• Limited visibility: process progress status and performance metrics are either not prepared or not made available when needed, making it difficult to identify bottlenecks, inefficiencies or areas for improvement
• Low standardisation: processes are ad hoc and not standardised across the business. There may be variations in how the same notional process is carried out in different teams or locations
• Manual workarounds: processes heavily rely on manual interventions, workarounds or informal communication channels rather than automated systems or standardised protocols
• Poor integration: processes are siloed and lack integration with other related processes or systems, hindering seamless information flow and collaboration
• Reactive approach: issues are addressed reactively rather than proactively, indicating a lack of preventive measures or continuous improvement efforts.

The consequences of immature Vendor Lifecycle Management processes can vary in range from niggling annoyances like operational inefficiencies or an increased administrative burden, to show-stoppers such as audit failures, compliance violations or data security breaches.

Typical Stages of Vendor Lifecycle Management Maturity

There are several ways to model VLM maturity, but the following simple framework with just three maturity stages is adequate for understanding the concept:

How to Conduct a Vendor Lifecycle Management Maturity Assessment

1. Define Goals

Specify the purpose of the assessment, such as identifying strengths, weaknesses, and areas for improvement in vendor management practices, benchmarking against industry standards, or supporting strategic planning. Outline the assessment scope, describing which VLM practices will be reviewed.

2. Determine Participants

Identify individuals from different parts of the business who get involved in VLM activities from diverse perspectives. Select favoured vendors willing to provide an outsider’s view of the ease of engaging with the business.

3. Prepare for Assessment

• Locate and review any existing documentation relevant to and covering the scope of the assessment
• Collect relevant operational details like performance metrics, vendor and user feedback, incident reports, change requests
• Configure any available assessment tools or create new tools to capture all details about VLM elements relevant to the prescribed scope
• Socialise the assessment approach with participants, adjust based on any feedback
• Allocate tasks to involved individuals and prepare a timetable for their completion.

4. Conduct the Assessment

Review all documentation and operational information relevant to each assessment element. Provide an achievement score for each element registered in the assessment tool.

5. Evaluate Current Maturity Level

• Decide if the derived maturity level seems realistic
• Determine the trend direction of the maturity level if not the first assessment
• Isolate and prioritise the key issues requiring attention
• Identify any problems that persist between assessments, and their implications.

6. Respond to Assessment Outcomes

Draft a plan to fix any VLM issues discovered and/or increase VLM maturity further. Present survey outcomes and recommendations to senior management for approval. Prepare a final plan based on senior management feedback, then implement it.

Discover what fully mature vendor management processes look like 

Wrap-up

Undertaking a Vendor Lifecycle Management maturity assessment is not a trivial matter. The main problem is likely to be gathering enough information to deliver insights into how well VLM practices are working. That in itself suggests low VLM maturity.

It takes planning and organisation to conduct a Vendor Lifecycle Management maturity assessment because it needs to be thorough to deliver a credible rating.

That doesn’t mean it has to be a huge project – it can be done in a series of bite-sized chunks over a short period. The consolidated results can then produce an overall maturity picture. Lessons can be learned about the assessment process on the way, not just about VLM maturity.

To learn more about how Gatekeeper can help in the assessment of your Vendor Lifecycle Management maturity, don't hesitate to get in touch with us.