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The strength of your business’s vendor relationships is strongly correlated with its overall success. When these relationships are mutually-beneficial and managed effectively, your business can be confident of continuity and better outcomes.

Yet, 87% of organisations have had a disruptive incident with a third-party vendor within the past three years according to a study from Deloitte. This is a huge number, highlighting that there’s still a lot more work to be done when it comes to improving vendor relationship management.

In this article, we take a look at when and why businesses should review their approach. We also outline which vendor management best practices should be applied and how technology can support your strategy.

What is a vendor management strategy?

A vendor management strategy is a group of processes carried out when actively nurturing relationships with third-parties, which have at least one unifying principle. These activities include communicating with vendors, reviewing their performance and mitigating any potential risks they introduce to your business.

Your business’s vendor management strategy should be designed to ensure that:

  •  All negotiated outcomes are fulfilled
  • Third-party compliance is maintained
  • Maximum value is achieved without unexpected overheads
  • Business continuity isn’t disrupted

If your current approach doesn’t give you certainty about the areas outlined above, it’s time to review your strategy.

How do you manage vendor relationships?

Your business outcomes will only be as successful as its vendor relationships. If you don’t understand the status of your current vendor base, it will be difficult to nurture third-party relationships and ensure obligations are being fulfilled to a satisfactory standard.

Vendor relationships should be managed collaboratively and built on complete visibility. By working together to create an accurate view of how vendors are currently performing, your business will be able to make informed decisions about remedial actions, renewals and consolidation.

If your business is currently manually managing its vendor relationships and its understanding of key information is fragmented, a lack of visibility will hinder the ability to drive improvements in the future.

Five vendor management best practices you should apply

Vendor management best practices allow your business to improve its current strategy and achieve optimal business outcomes. By applying the best practices outlined below, you can strengthen your third party relationships, get even more value from your existing vendor base and start off on the right foot whenever you start a new vendor relationship.

1. Centralise your vendor agreements and key information

If your business can’t locate your vendor agreements, key metadata is missing or you have duplicate versions, it can’t build a thorough understanding of its vendor base. Knowledge about risk, spend and obligations will be severely limited leaving the business exposed to disruption. It could also face unexpected legal and financial consequences.

Centralising vendor agreements is the number one vendor management best practice. If storage is fragmented, so are the foundations on which you’ve built relationships."

Your business may still be using spreadsheets. It may be using platforms such as NetSuite. It could even be using a combination of tools that don’t work seamlessly together to create a single version of the truth.

If this sounds familiar, you need to create a centralised repository - housing all of your agreements and key vendor information in a single, secure location.

By storing up-to-date agreements in a single location as well as a complete record of interactions with vendors, you will always have the full picture of your vendor base. Gatekeeper offers a document repository, as well as the freedom to view aggregated reporting about individual vendor agreements or to view the entire picture.

See all your vendor agreements in one place with Gatekeeper

2. Build vendor risk management around market intelligence

Due diligence when onboarding any new vendor is paramount. But what may seem like a good relationship at the start can later falter if the vendor’s status changes without your knowledge. Your business needs to know absolutely everything about its vendors in order to mitigate risk and limit external threats on an ongoing basis.

Without an easy way to monitor vendors it may be tempting to de-prioritise this activity. It requires time, resources and swift actions from stakeholders when things change. But no matter how large the task may seem, it is a pivotal vendor management best practice."

Vendor management software can streamline third party monitoring with integrated market intelligence feeds. Stakeholders within your business will receive automated notifications whenever a vendor’s status changes. This includes updates to vendor credit scores, credit limits and other financial information.

Integrated market intelligence allows your business to mitigate existing vendor risk proactively. It also allows you to assess vendors before you even engage with them - so you can grow your vendor base with high quality third-party relationships from the outset. Make informed decisions based on aggregated data from vetted financial and news sources.

See changes to vendor statuses with MarketIQ from Gatekeeper

3. Automate vendor onboarding and compliance

Inefficient vendor onboarding can set a negative tone for the future of your vendor relationships. Manual methods that take too long, back and forth for data collection or processes that are difficult for vendors to follow can cause early frustration, increase the risk of delay and even create vulnerabilities due to data inaccuracy.

Automating onboarding is a vendor management best practice that will save your business time, enhance your vendors’ experiences and improve data capture."

Using a branded Vendor Portal prevents process and data fragmentation, while giving your vendors a personalised experience during their onboarding.

You can also visualise the onboarding process, as well as vendor invitations and any bottlenecks causing delays. This gives you a greater ability to drive onboarding forward and eliminate inefficiencies.

By collaborating with your vendors in this way, you can also encourage your vendors to take ownership of their own onboarding.

Delegate data entry through mandatory public forms to close any knowledge gaps and automate compliance. It will reduce time spent chasing them for key information and will allow stakeholders to focus on more essential areas.

Give your vendors a personalised experience with a dedicated dashboard

4. Prioritise operational resilience by ensuring vendor security

Vendor risk management isn’t just limited to whether obligations are fulfilled. There is also a greater onus on businesses to ensure data security and compliance throughout the supply chain. Regulations such as GDPR, HIPPA and the Australia Privacy Act all outline how data should be stored and shared - especially when third parties are involved.

Despite these stringent laws, 60% of companies admit that they do not have the resources to monitor the security and privacy practices of vendors with whom they share sensitive or confidential information.'

Businesses that don’t have time and resources to dedicate to cybersecurity monitoring, should consider vendor management software. Gatekeeper, for example, partners with SecurityScorecard to give customers real-time and continuous visibility into the security status of their vendors.

By delivering security ratings, Gatekeeper ensures you can strike the right balance of trust, risk mitigation and accountability. All while protecting data security and ensuring your vendor base is compliant with your local regulations. It also saves businesses time and resources for security monitoring, providing the information you need to your fingertips.

5. Drive early remedial action with risk mitigation workflows

When applying a vendor management strategy, businesses should always consider how they can minimise any type of third-party risk. If you would consider your business to be more reactive than proactive when it comes to risk, then you may be finding it's already too late to resolve the issues at hand. Visibility and early action are all keys to mitigating risks and maintaining business continuity.

Businesses are always evolving so it’s best practice to ensure your vendor management strategy is too. Retrospective risk management needs to be a thing of the past."

Centralising, measuring and analysing third party risk can be automated with vendor management software. Gatekeeper offers a dedicated Risk Module that allows businesses to assign Risk Scores based on probability and impact, as well as report on levels of risks via customisable dashboard.

Wrap Up

Vendor management best practices exist to help your business get the most value from third-party agreements. By underpinning best practices with vendor management software, your business will gain more time, accuracy and control over its vendor base. Centralisation, continuous monitoring and preventative action are all key to successful vendor management.

Whether your business wants to assess its vendor’s cybersecurity, credit status or simply wants to know where all of its vendor agreements are, Gatekeeper can help. Book a demo with us today to discover how we can help you to apply vendor management best practices.

Shannon Greaney
Shannon Greaney

Shannon is an experienced marketer, delivering content on a variety of topics and trends within contract and vendor management.


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