Recently, a number of companies have endured high-profile outsourcing failures in service delivery, project execution, and realization of the expected value. These incidents have opened eyes to how business in moving into a decentralization of technology purchasing, and increased complexity in vendor pricing and licensing. Vendor management has gained prominence in the recognition that vendors need to be managed through the whole processes, not just at the end.
Within the procurement processes, there are three different departments that must represent a strong front to the vendor. This can be a challenge since the three departments have different sets of skills, methods, and processes. This is were a VMO steps in, facilitating contracts across the three departments and improving vendor relationships.
No wonder more enterprises are looking at establishing a VMO to help IT sourcing and make it more effective. A VMO get’s more value out of existing suppliers and lowers overall costs via better rate negotiations and demanding consolidation.
A VMO’s effectiveness depends on the ability to follow eight guiding principles:
1. Manage VMO as a business with in a business
2. Leverage consolidated purchasing power
3. Continuously manage contractual relationships with suppliers
4. Treat suppliers as an extension of internal resources
5. Use the minimum numbers of suppliers possible
6. Select the highest valued supplier; not the lowest purchasing price
7. Negotiate win/win deals with all suppliers that balance risk, speed, and performance
8. Actively monitor, manage, and improve supplier performance
A VMO can bring tools to the business that will abundantly improve the time cycle and reduce costs. No matter how formally the position is executed, these 8 guidlines help reduce cost risk and improve vendor relationship.
Joseph B. Kappernick works with companies to help them reduce their logistics and shipping costs. Please visit NPI to learn more about transportation vendor expense reduction