10 Objectives of a Vendor Management Organization

Apr 1st 2017 | Posted by Steve Coper

As companies continue to increase their strategic reliance on vendors, outsourced services and collaborative alliances, business leaders should “rethink” Vendor Management.  In fact, the sheer number of vendors engaged in organizations of all sizes is projected to grow substantially, making it more difficult for traditional procurement organizations to manage. Thus it should be an important strategic imperative to establish a vendor management discipline through a best-in-class Vendor Management Office (VMO). 


The New IT Operating Model

Read our strategy brief, The New IT Operating Model, to learn how IT operating models have evolved, and how you should build and execute a new model that supports a better IT operation and business growth.

High-performing VMO’s are increasingly demonstrating their value in Fortune 100 companies as well as smaller organizations. Each is scaled in accordance with the organization’s objectives and needs, but the results are growing every day.  Regardless of size, there are common objectives and measures to drive VMO effectiveness and best practices.  They are: 

  1. Revenue enhancement and increased margins
  2. Optimized vendor performance & leverage
  3. Reduction of run-rate expenses and budgeted capital expenditures
  4. Improved quality (Services, operations, product, supply chain, etc.)
  5. Vendor innovation / marketplace differentiation
  6. Measured risk reduction and compliance
  7. Improved process efficiency and cycle time
  8. Vendor collaboration framework
  9. Analytics, reporting, and business intelligence
  10. Governance model ensuring the following: strategic alignment, value realization, portfolio management, Sponsorship and accountability, Risk management, VMO Process and Policy adoption

Achieving a successful VMO implementation requires a comprehensive approach and methodology engaging hundreds of processes, responsibilities, policies and tools and technologies, threaded together with newly collaborative vendor relationships. The degree of success is largely determined by the ability to bring all of this together in a best-in-class VMO that is tightly aligned with the company’s strategic and tactical business objectives. 

By establishing and evolving an effective VMO, organizations can drive significant value from vendor relationships and serve a key role in the execution of business objectives. Additionally, VMOs with the components of a world-class vendor management function are able to help organizations achieve targeted business outcomes over the long-term.

For more information on WGroup’s Vendor Management consulting services, visit: http://thinkwgroup.com/services/vendor-management

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