• by Vikram Gajjala

What Is a Vendor Management Office (VMO)?

The quality of the services that vendors deliver can help a business gain a competitive edge over its rivals. The level of customer satisfaction is heavily linked to vendor-supported touchpoints. Firms usually source products and services from different suppliers and manage many vendor contracts that can run to millions of dollars. Therefore, making the management of the suppliers in the business ecosystem a very crucial task. Many organizations have thus seen it fit to adopt vendor management programs.
 

This is where a vendor management office comes in! A vendor management office is an internal unit within an organization that is responsible for evaluating third-party providers of goods and services, supervising the daily activities, and building long-lasting relationships with these vendors.

 

A vendor management office spearheads the vendor strategy. It ensures that a firm is in a good position to create more value by minimizing its operational costs and strengthening the business relationships with other stakeholders in the service delivery journey. An effective vendor management office seeks to boost the overall vendor performance, minimize client risk, and boost vendor data accuracy. Keep reading to learn what vendor management and office entail!

 

Core Functions of a Vendor Management Office

1. Contract management

A vendor management office is in charge of crafting the contract terms and handles all the legal administrative tasks required when making contracts with a firm’s vendors. Some of the tasks related to contract management include contract negotiations, invoicing, support, purchase orders, and authorization.

 

2. Financial management

The VMO handles the total investment over time with every vendor. Here, some of the tasks involved in financial management include tracking volume commitments, revenue rebates, recurring costs, final costs, and initial costs.

 

3. Relationship management

A vendor management office is responsible for building and maintaining a mutually beneficial client-vendor relationship. To ensure this is a success, the VMO handles tasks such as creating the vendor strategy, implementing existing projects related to the vendor management program, and tracking the performance.

 

4. Performance management

The vendor management office is responsible for tracking the performance of vendors to ensure the firm’s objectives are achieved. Here, the VMO ensures a proper alignment between the firm’s service level targets in client Service-level agreements (SLAs) and the targets for vendors explicitly outlined in the contracts. The vendor management office uses scorecards, dashboard rankings, and KPIs to manage the performance of the vendors.

 

5. Compliance management

The vendor management office seeks to ensure vendors handle their business operations according to laws and standards provided for by state, provincial, or federal guidelines. The VMO liaises with the legal department of a firm to make compliance management successful by creating an environment where corporate policies, data privacy, and other regulatory requirements are strictly observed.

 

6. Governance management

Governance management ensures that risk arising from increased visibility over the vendor management program is kept at a minimum. A firm can therefore control costs while uncovering hidden value simultaneously.

 

7. Value management

Value management entails discovering and optimizing value.

 

Roles Involved in The Vendor Management Office

The success of the vendor management office heavily depends on building the right and dedicated team. Some of the people involved in vendor management include:
 

1. Vendor manager

The vendor manager is responsible for evaluating vendors to ensure the quality is as per the set standards and services are cost-effective.

 

2. Sourcing consultant

This role entails evaluating competitive vendor bids and assessing the proposed vendors. The sourcing consultant focuses on things such as pricing and the capacity of the vendor to satisfy the organizations’ needs.

 

3. Value initiatives project manager

This role entails researching and developing purchasing strategies that aim to raise the value of the vendor-client relationship. A value initiatives project manager is also responsible for developing the necessary exit strategies when the need arises, as well as identifying new vendors when a firm wishes to replace the existing ones.

 

4. Transactional purchasing manager

This individual is responsible for handling the daily purchasing transactions as well as coming up with ways of boosting the vendor Return on Investment.

 

5. Vendor director

The role entails creating the best vendor strategy and setting metrics for vendor management.

 

6. Vendor auditor

A vendor auditor is in charge of ensuring regulatory compliance and also maintains a vendor risk scorecard that is a crucial element of performance review.

 

7. Vendor analyst

The main roles of a vendor analyst are managing the vendor service-level agreements (SLAs) and the vendor management system. In addition, the vendor analyst also helps in the analysis of vendor data to allow the firm to achieve its cost-saving objectives.

 

 

Benefits of a Vendor Management Office

Some of the benefits of a vendor management office include:

• Improved relationships between firms and their suppliers.
• A more centralized procurement and contract management system.
• Improved governance that helps to boost compliance.
• A more efficient dispute resolution management process.

 

Final Take Away

A dedicated vendor management office can help firms reduce costs and boost vendor relationships’ value. Maintaining corporate compliance also becomes easy. All in all, any firm wishing to improve the quality of its services must invest in a vendor management office.