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10 Objectives of a Vendor Management Organization

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). 

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 / 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 & compliance
  7. Improved process efficiency and cycle time
  8. Vendor collaboration framework
  9. Analytics / Reporting / Business Intelligence
  10. Governance Model ensuring: 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, please visit:  http://thinkwgroup.com/services/vendor-management/

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Steve Coper is a Managing Principal at WGroup. He has 30 years of senior IT management and consulting experience, specializing in IT sourcing strategy, contract development and negotiations.
 

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