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7 Steps to Improve Vendor & Supplier Management

7 Steps to Improve Vendor & Supplier Management

No matter how many vendors your company works with, creating an efficient supplier management process and fostering strong relationships with them is essential. When your business success is dependent on third parties to help you deliver your product, it’s vital that you’re able to manage those vendors efficiently. Even small problems with suppliers can lead to big setbacks within your supply chain.

In this article, we’ll be discussing the specific benefits of supplier management optimization as well as seven useful tips to help you improve your vendor management process, from vendor selection and risk evaluation to supplier management software solutions. Read on to learn more.

Why Does Your Company Need to Optimize Vendor and Supplier Management?

There are four main benefits of optimized vendor and supplier management:


Having a strong relationship with your vendors can not only help you negotiate better rates and have access to discounts and incentives, you'll also have a more transparent way to track every cost that applies to your supplier process. You'll be able to see potential invisible costs, giving you better control over your flow of money.


Optimized vendor management allows companies to track the data needed to identify supplier risks, ensuring you can take the necessary steps to mitigate them. Additionally, you can easily verify supplier qualifications and keep tabs on their overall performance to get a broader picture of their risk level in order to protect your organization.


Once you have an optimized vendor management method, you can measure supplier performance against your contract to ensure that the company is complying with your requirements. This will enable you to ensure optimal performance and efficiency. And, you'll be able to signal issues before they become problems and identify areas that may need improvements.


With the ability to track and manage your vendors, you create transparency throughout the supply chain. This transparency can help you improve your vendor relationships. Juggling multiple vendors at once gets complicated, but compiling vendor information in a single place and regularly conducting status checks ensures everyone is happy and on the same page.

How Can You Create a Streamlined Supplier Management Process?

With the reasons for an efficient supplier management process outlined, let’s take a look at seven ways your company can take action to optimize your process.

  1. Define your business goals

Before you even begin setting up your actual vendor management method, you need to outline your company’s primary goals when it comes to this process. Sit down with your team and brainstorm a few objectives you’re hoping to accomplish by implementing a streamlined supplier management program. This will help your employees and your vendor understand the requirements you outline for them and will prevent the duplication of efforts and resource waste when it comes time to communicate with suppliers. It will also aid in the later stages of measuring vendor performance since these original goals can help you establish suitable key performance indicators (KPIs). 

  1. Select competent suppliers

Next, it’s time to choose suppliers that you deem to be competent and experienced. The vendors you select should complement the goals and potential KPIs you outlined in step one. Do extensive research and ask yourself if each vendor has the necessary resources and knowledge to yield optimal operational results. If your company already has established vendors and aren’t looking to add any, just ensure that up until this point they have been meeting your company’s needs. If they seem to be lacking, communicate this with them and consider different supplier options.

  1. Evaluate potential risks

In order to prevent future challenges, complete a risk analysis of each vendor before signing a contract with them. Ask them for the following:

        • References
        • Examples of their previous work
        • How many years they’ve been in business
        • Areas of expertise
        • How they deal with a crisis
        • What they did the last time they had to deal with a crisis

Additionally, consider if they are competitively priced and whether they have the capacity to manage your orders.

Conducting a thorough risk assessment will help you understand the risks posed by a third-party vendor and ensure that any potential issues are being addressed before you get into business with them. You don’t want to end up in a position where a vendor lets you down and you have no way to deliver to your customers.

  1. Perform comprehensive onboarding

Once your vendors have been fully vetted and approved, make sure their onboarding process is extensive and comprehensive. Obtain all relevant vendor information, such as bank details, capability information, regulatory information, and capacity details and store it in a safe centralized location so you can access it when necessary. It’s important to remember that no two vendors are the same, conduct this process in a flexible way that benefits both parties.

  1. Create benchmarks

The next step in the supplier management optimization process is to create measurable and realistic benchmarks. Taking your business goals and vendor profiles into consideration, outline the specific ways you expect your suppliers to perform moving forward. You should aim to keep track of two to three key metrics to get a well-rounded idea of your vendors’ performance. Companies will generally start with a combination of a few of these metrics:

        • Product quality Responsiveness
        • On-time delivery
        • Price-variance
        • Errors or missed deadlines
        • Delivery accuracy

In addition to KPIs, your company needs to determine what type of scoring approach you’ll use. The grading scale you choose will provide a visual representation of the vendor’s overall performance. This will help ensure your benchmarks are both measurable and realistic as you move forward with your supplier relationships.

  1. Monitor your processes

Once your benchmarks are properly outlined, it’s important to keep track of how your suppliers are measuring up to these goals. Set up a schedule to have your team analyze the data flowing in from your supplier and compare it to the KPIs you set up earlier in your vendor management process. Perform this process frequently enough that no issues fall through the cracks, but not too frequently that you can’t get a big enough picture to notice potential patterns.

If your company finds that one or more vendors are lacking in certain categories, it’s time to re-communicate your needs and consider switching suppliers to achieve a more streamlined process.

  1. Invest in a supplier management software

The last step we’ll discuss is the implementation of a centralized supplier management software. In order to truly optimize all stages of supplier performance management, you need digital tools that let you capture, organize, analyze, and review supplier performance data in real time. Software solutions allow you to measure supplier performance over time with vendor management KPIs and provide efficient ways to integrate your previous business software to achieve true end-to-end optimization throughout the supply chain.

Supplier management software can help you implement each of our previous tips with the following capabilities: 

        • Link suppliers to specifications
        • Streamline supplier collaboration
        • Manage supplier and vendor documentation
        • Share this documentation with approved outside suppliers and vendors when necessary
        • Generate custom reports that show you trends, point out customer habits, highlight supplier strengths and weaknesses, and warn you of non-conforming supplies or products quickly

Businesses in any industry shouldn’t underestimate the power of comprehensive vendor management. Every penny saved in efficient supplier management goes straight to your bottom line. Defining your business goals, selecting competent vendors, performing comprehensive onboarding, evaluating potential risks, creating benchmarks, monitoring your processes, and investing in a supplier management software will not only help you save money and reduce risk, but will also give your organization the insights necessary to continue to review and improve the value of your suppliers as you foster strong relationships with them.

Check out some of our other resources on streamlining your vendor & supplier management:

By streamlining the way you store, update, verify, and otherwise manage all of your supplier and vendor documentation and information, ENSUR Specification Management Software gives your company the power to make quicker, smarter decisions. This gives you a better edge in a wildly competitive business world, enabling you to act at the right time, based on the latest information. To find out more about how the ENSUR document management system can help you manage all of your supply chain and vendor relationships more intelligently, request a demo today.

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Tags: document management software, save money, supplier collaboration, vendor collaboration, supplier management software