The evolution of vendor management solutions and why you must adapt

  Published : January 18, 2024
  Last Updated: May 23, 2024
The evolution of vendor management solutions and why you must adapt


The very definition of vendors has undergone a sea change over the years. Earlier, vendors were brought in to reduce labor costs and to take over the ‘dirty’ tasks that onsite employees didn’t wish to do. However, with the advent of the digital economy, these roles are evolving. Businesses desire partners who can drive innovation or bring business-critical skills to the table. With this change in expectation, companies cannot afford to look at their contingent workers only as a cost-saving convenience.

A 2023 Key Issues Study from The Everest Group measured the top ten priorities that businesses expect from service providers. Yes, cost optimization continues to hold its number one position, but digital transformation and productivity improvement follow closely. Some of the other priorities include customer experience improvement, innovation, talent acquisition and management, and service delivery resilience.

In this radically changed scenario, the importance of managing vendors cannot be overemphasized. It is crucial that businesses recognize their role as partners, and invest in making the relationship with them positive for mutual growth and success.

What is vendor management?

Before we delve in deeper, let’s spend a moment to understand the basics of vendor management.

A vendor management system is a cloud-based program that provides businesses with the right set of tools to manage and collaborate with their suppliers. A centralized platform stores all supplier data and the software supports onboarding suppliers, monitoring their performance, and ensuring business compliance.

Of course, you might believe that you can manage suppliers using a spreadsheet and email, and don’t need a ‘complex’ software program to do these tasks. It might seem simple at the start, but very soon you’ll be overwhelmed with the sheer number of tasks that will need to be completed. Keeping track of each vendor, the communication with them, and all the countless tasks will take up a lot of your time and effort. And even after that, you cannot be certain that there are no errors.

Benefits of a good vendor management process

Every business is unique and has its own set of challenges. However, maintaining a healthy working relationship with your vendors can do wonders to promote your business. When you create an environment of collaboration and mutual respect, it is easier to achieve set goals, enhance the quality of your offering, and make your processes more efficient. The long-lasting partnership thus created means greater success for everyone involved.

Here’s a quick look at some of the key benefits of vendor management system:

  1. Reduce operational risks: The right vendor management system can help you identify supplier risks before onboarding. With the right data, you can get a broader picture of a vendor’s risk level and protect your organization by taking the right steps.
  2. Optimize performance: Once your supplier is onboarded, the vendor management system can track and measure performance to ensure that the output is in accordance with your requirements and matches optimal performance.
  3. Reduce costs: Increased visibility can give you better control over expenses and help negotiate better rates to increase your profit margin.
  4. Nurture relationships: A good vendor management system can help you strengthen your relationships with your best vendors and build loyalty. Through better processes, you can retain great suppliers for longer.
  5. Improve administrative efficiencies: A great vendor management program can replace tedious manual tasks and reduce human error. A single data repository can cut down on duplication of data, loss of contracts, and even lower administrative labor costs.
  6. Faster onboarding: Vendor management can gather, collate and input all vendor information much faster and without any errors. The faster your vendor is onboarded, the faster they can begin to deliver.
  7. Safeguard your brand: An unprofessional or unethical vendor can tarnish your brand value. A supplier management program can get you access to the vendor’s social and environmental information and reduce the future risk of a serious incident.

Unfortunately, many businesses still haven’t understood the advantages of implementing vendor management in their operations.

Also Read: Understanding the Synergy of Production and Operations Management in Digitally-Focused Industries

Key challenges and concerns faced by vendors

What are the challenges that vendors face and what stops them from performing at their peak aptitude? Let’s take a look.

Adapting to the new way of working

While the more traditional offices put a manager on the floor who could oversee offshore workers, today’s hybrid method has completely changed this. On the one hand, companies are concerned about their remote workers’ actual productivity. And on the other, they are struggling to address their demands to work remotely at least part of the time.

Responding to increased attrition

Attrition is a reality every business faces, irrespective of the industry. According to the Bureau of Labor Statistics (BLS), 3.9 million people quit their jobs in January 2023, up from 3.5 million in January 2019. When a good worker quits, it impacts the vendor as well as the companies who work with them. It helps to know the top talent in the outsourced team and to have a good strategy to retain them. This requires insight and data, and at the right time.

Enabling better work-life balance for employees

More than enough reports have shown that workers seek out employment where they get a good work-life balance, and are likely to stay with employers who provide that. According to a 2021 Gartner study, 52% of employees would choose to stay at a company that offered flexible work policies, and 16% would be willing to quit if they were required to work onsite. While many companies are willing to allow their employees to continue working remotely, they fear a loss of communication and collaboration with remote and hybrid work, and believe that their employees will be less productive offsite.

Seeking to build stronger partnerships

In order to transfer knowledge and set expectations, clients need to treat members of the vendor like their own people. However, many vendors cite a lack of support and collaboration from the client side that hinders true collaboration and, therefore, productivity, efficiency and eventually success. To overcome this challenge, companies need to create a plan to collaborate with vendors, and then track it to ensure that onsite managers are spending enough time with outsourced teams.

Key challenges and concerns faced by clients

Now that we’ve had a look at vendor challenges, let’s turn our attention to the top vendor management challenges for clients.

Lack of visibility

Traditional outsourcing models don’t provide as much visibility as desired, and phone calls, e-mails, or site visits are required. The latter does offer direct insights, but wastes resources like time and money, while also providing insights only during the actual visit. Phone calls, email check-ins and video conferences do provide more timely information, but they hamper productivity.

Concerns about productivity

A hybrid work model raises concerns about worker productivity. If there’s no direct management, can clients be certain that workers are spending enough time on core tasks? With no one to verify, can workers be trusted to report their time accurately?

Reliance on manual reports or one-sided reports from vendors

In the traditional work model, clients have received manually filled time sheets and reports from vendors that raised more questions than answers. There were always doubts about whether workers were filling timesheets accurately and whether vendors were billing them based on actual hours. A recent report from the Association of Certified Fraud Examiners (ACFE) showed that occupational fraud, which includes timesheet falsification, costs the victim organization an average of more than $1.5 million.

Lack of predictability in outcomes

Everyone benefits from predictable schedules. However, the inability to predict when work will be completed can cause frustration and lead to missed deadlines. It gets even more challenging when the team is large, works remotely and is often scattered, making it harder to check in with workers about progress.

Understaffed vendor management teams

Companies that outsource work already face staffing shortages, making vendor management an additional challenge. The solution lies in effective and efficient collaboration between the clients and the vendors, and not in hiring more people to take over project management.

So, what’s the solution? An automated workforce management system that can take over most manual and repetitive tasks can reduce the stress of effectively managing a remote, offsite team.

ProHance – your new partner ecosystem management solution

ProHance is that solution. As a new-age workplace analytics and operations enablement platform, it enables leaders to make SMART decisions and get accurate insights when managing outsourced vendors. ProHance enables collaborative partner ecosystem management that leads to better results for clients and vendors. All teams become better connected, visible, engaged and optimized. And partnerships become future-ready, with operational resilience and seamless delivery.

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