by VentureStreet  Join Our Network
Vendor Management

Before I indulge in the meaning of vendor management, I first want to give a brief definition of what a vendor is. For all intent purposes, a vendor is a third party entity that supplies a service or provides a product on behalf of another business. To give an example of a vendor relationship, I will start with a call center in a collection agency. The following examples are third party vendor relationships that may need to be contracted in order for the collection agency to run effectively and efficiently.

Phone Service Provider : Collection agencies cannot operate without having a path of communication to reach their customers i.e.(AT-T, MCI)

Database or System of Record Provider : Collection agencies have to use a computer system or database that stores their customers data and can facilitate the calls to their customers. i.e.(Melida Auto Dialer, Davox Auto Dialer)

Information Storage and Disposal Provider : collection agencies maintain a great deal of confidential information from their customers such as, social security numbers, addresses, phone numbers, date of birth, employment information, relative information, etc. That said, when this information is no longer needed the information has to be properly disposed of or stored. i.e. (Iron Mountain Storage and Retention Company)

Property Landlord : Most collection agencies reside in a rented facility, so the facility has to be maintained for safe and proper business operations for its tenants and customers.

These are just a few vendor types that can be identified for a business; however, once you have identified your vendors, how do you manage them?

What happens if your business phone service provider decides to charge you an inaccurate amount on your bill and you decide to dispute it and then your service is threatened to be turned off for non-payment?

What happens when you have been using your database system of record for years and all of sudden the provider of your system of record goes bankrupt and cannot maintain your service agreement no longer?

What happens when you find that your storage and disposal company is sub-contracting their services to a lower level company to expand their business services; however, your contract does not have a provision prohibiting the use of subcontractors?

There are a variety of answers to these questions that businesses can come up with and most will say 'Get rid of the vendor', ' Cut your losses now'. Is this a good reaction to a contractual disaster? No..No..No..!!!!!!!!!

First and foremost, a business to business relationship should be treated like an instrument of mutual consideration. One side provides a service for a fee and the other side receives the service for a need. Throughout the relationship each side needs to mutually agree on the management of the business relationship and that is where the contract comes into play. A contract dictates what should be done and what should not be done within the business relationship and should not be ignored.

The biggest contractual error a business can make is not to incorporate business requirements into a standard contract with their vendor. Going back to one of the examples of the collection agency stated earlier, if part of the business requirements is to perform a financial viability assessment on a vendor, such as the database system of record provider, then a properly implemented vendor management process would have classified this vendor as a Critical vendor because this vendor houses all of the company's customer confidential information and is highly necessary to the operation of the business. Within the vendor management process frequent financial risk assessments along with other risk assessments would have been performed to alert the collection agency of this vendor's financial insolvency, therefore, a business contingency plan would have been implemented to lower the risk of transistioning the database information to another system while exiting the business relationship with the current vendor.

Yes, in a perfect world, a proper vendor management process would be flawless and elimate all risk; however, we deal in a society of learned experiences through trial and error and many companies become highly exposed to vendor risk due to benign ignorance or ego tripping because some leaders do not want to take the time to learn more about effective contract/vendor management or refuse to invest in an expert that will in the long run save their company from high exposure to vendor risk.

If you are unfamiliar with the process of negotiating terms of a contract, not too informed on how to evaluate the services of your vendors and executing effective action plans, do not have the time to build strong business relationships with vendors, then hire yourself a good qualified contract/vendor manager. And if you cannot find one, contact KRI Consulting Solutions L.L.C. Contract and Vendor Management is our specialty!

Need a management consultant? Get matched to a local professional near you.
Find Management Consultants
Other articles you may like:
3 Big Reasons Why Online Businesses Fail And Ultimately Disappear
Know these 3 biggest mistakes committed in sales and marketing and you will never commit...

7 Steps to Growing a Business More Rapidly
Your business maybe running you instead of you growing it. If that's the case, you...

Are Seven Percenters Killing Your Business?
How much time are you and your top team spending on strategic initiatives? You'd be very...

“…That's Not What They Pay Me For”
If the first impression you make “stresses” me (the customer), any opportunity you had...

“One Thing” Every Entrepreneur Absolutely Must Do
In the movie City Slickers the trail boss “Curly”, played by Jack Palance, was a...

Be the first to find this article helpful.
Need a management consultant? Get matched to a local professional near you.
About the Author

Katrina Henderson, KRI Consulting Solutions L.L.C.
Burlington, NJ 08016
800-316-6320 ext 9

If you would like to re-print this article, please contact the author.
Other articles you may like:
Why Do I Need Project Management Software?
Project management software supports in dealing with perplex and multiple projects...

Leadership…An Informed Perspective
I have published articles, written books, taken courses, done extensive research, and...

Should business owners be concerned about lawsuit risk?
One aggressive lawsuit can destroy and business owner's financial security.

Poka Yoke
Mistake proofing is a technique for eliminating errors. It is based upon the premise...

What is the Significance of a Business Logo?
When it comes to branding, there is perhaps no more important factor than your business...

Editorial Disclaimer: The views expressed in articles published on this website are those of the authors alone. They do not represent the views or opinions of this website or its staff. The articles on this site do not constitute a recommendation or endorsement with respect to any views, company, or product. Authors affirm that article submissions are their original content or that they have permission to reproduce.

Home   |   Articles & Videos   |   Affiliates   |   Networking Groups   |   Search by Category   |   Professionals

Terms of Use   |   Privacy   |   About Us   |   Contact Us   |   Member Login

© 2003-2014 - VentureStreet, LLC

Join Our Business Network