Vendor Management: Selection and Process
Infrastructure management (IM) is the management of components that are essential for a company. Infrastructure management’s ambition is to reduce duplicates, making sure standard are adhered to and enhancing flow of information and maintenance of policies in an organization (Purcell, 2014). Infrastructure-as-a-service (IaaS) model of the cloud has emerged infrastructure management virtually. Companies are now able to manage their infrastructure privately or as a hybrid cloud. Virtual IM helps in providing a homogeneous resources access (Sotomayor et al., 2009). A discussion on vendor management in regard to managing infrastructure is done in this document. Issues in vendor management, complexity in management and how the complexity could be reduced are also discussed. The case study used to discuss vendor management is Microsoft.
By deploying vendor management, a company could ensure its costs are controlled, ensure service delivery is of quality, and risks could be mitigated to improve value derived from its vendors throughout their deal. Vendor management is a function of the supply chain management of a business. It includes searching for vendors and sourcing for them, quotations, negotiations, assignment of jobs, evaluation of performance and payments. Creation of relationships is involved. Different vendors might be employed in an organization to supply different types of goods for its operation. Different rates of payment and contract terms apply to the vendors. In order to realize benefits for both parties, managing vendor relationships is important. Understanding the type of services needed and the goods to be provided is important for an organization in order to know the type of vendor to be outsourced(Kumar and Van Hillegersberg, 2009).
The ability to meet requirements, perform accordingly and prices are not the only criteria for vendor selection. This is because selection is done to accommodate future requirements and not only current needs. Vendors are analyzed based on their dependency and willingness to do business with the company. Interpretive structural modeling (ISM) is a tool used to for evaluation(Govindan et al., 2012). Sourcing commitments in Microsoft are advanced by analyzing risks and opportunities, assurance and accountability; and building capacity(Michalski, 2008).
The process of vendor management is initiated by relationship creation after the required type of vendor is selected. A business could obtain value from the services offered by its third parties, vendors, by overseeing its relationship. Microsoft nurtures its relationships with its vendors and suppliers effectively. It works with suppliers that have the capability, are competitive and compliant in order for the organization to achieve its goals.
Vendor management could be done using three approaches. The centralized approach is the first one. Consistency and control are offered in this approach. It is handled by the vendor manager or the procurement officials. Decentralization is the second approach. Response to issues is offered by this approach. The technology department handles this approach. Hybrid is the third approach. The vendor management functions are shared in the company’s departments(Willcocks, Venters and Whitley, 2013).
Relationship building with Microsoft requires adherence to documents being provided by the company. The Master Supplier Services Agreement (MSSA) document specifies standard payment terms and reports on spending. The Supplier Code of Conduct (SCoC) document provides rules on codes of conduct. Business partners of Microsoft are expected to adhere to these standards for conduct. The Supply Guidelines document specifies the requirements for the vendors. Supplier Security and Privacy Assurance (SSPA) is a Microsoft program that helps drive compliance of suppliers in data processing and protection of requirements. Microsoft also has the Account Payable Support Desk for supporting vendors(Jeon, Lee and Park, 2011).
Inventory Management for Vendor Management
Managing suppliers is the next step. Webb (2018), states that management of suppliers ensures that the business gains a competitive advantage. Strategic Supplier Management (SRM) technique is used. Ensuring that the vendors have a clear understanding and an honest view about the company is important in order to ensure strategic supplier relations. Microsoft gives guidelines and referencing documents to its suppliers to ensure they are familiar with the company.
The relationship could be strengthened by effective communication between the parties. Microsoft ensures that there is effective communication using its support system designed for its vendors. Meetings held in the presence of the suppliers are also important. Discussions about performance and organizational goals could be done during these meetings. These meetings help vendors gain knowledge about the company. Microsoft has programs for training and conferences for its employees.
Ensuring that vendors act accordingly also ensures strategic supplier management. Formulation of policies and guidelines is therefore important. Unacceptable behaviors like late delivery imply that the supplier is not well invested in the business. Microsoft aims at ensuring its suppliers uphold the rights of humans, health and safety of labor, and ethics in the environment and business. It has a document for supplier code of conduct available publicly. Suppliers of Microsoft devices are evaluated using the Social and Environmental Accountability (SEA) program(Chan, 2014).
Inventories that are vendor managed allow suppliers to manage inventories in their possession. Stock-outs and operational costs could be reduced by use of the system. This helps in making decisions about resupply. The supply process could also be tracked using the system(Darwish and Odah, 2010). A product of Microsoft, Dynamic 365 has a enterprise resource planning (ERP) capability. It includes an inventory management feature that could help in carrying out outbound and inbound operations, assurance of quality, inventory activities and control on an inventory(Bauer et al., 2012).
Outsourcing of vendors helps in improving quality of service, improve efficiency in operations, reduce costs, accelerate service delivery and more focus be put into business functions. A consolidated vendor management system helps to reduce costs. Consolidation among reduced number of suppliers increases power of purchase(Bookbinder, Gümü? and Jewkes, 2010).
Vendor management changes responsibilities like shifting infrastructure support to third parties. Access to an organization’s assets is allows a vendor to provide appropriate services. Management of vendors promotes delivery of quality service, provides support for users during system deployment and allows sharing of roles in adjusting to changes(Muhart et al., 2014a).
(Tan, Cater-Steel and Toleman, 2009) explains that syncing with vendors needs understanding of the requirements in one language, identifying handoffs and developing expectations. In order to have effective communication, meetings should be used to stay in contact. Microsoft also suggests that dealing with issues as they come, risk evaluation and management should be done before they are enforced into the contract.
When working with vendors, there are several challenges faced. Unresponsiveness to requests is the first challenge. Companies that offer vending services encounter challenges that would translate into client’s problems. Issues in interests and conflicts in security like in the case of Walmart could also arise. Another issue is the slow improvement in products(Malthouse et al., 2013). It is challenging to track supply records of a vendor. If the organization is not conversant with the vendor, it becomes an issue to build healthy relationships.
Vendor Management Importance
Different buyer and vendor cultures are also an issue. In Microsoft, people from different ethnic groups can contract them. Microsoft carries out its operations in English therefore people who are not familiar with English might not communicate effectively with Microsoft. Inadequate communication and lack of understanding of the organization’s goals is also an issue. A vendor may not have interest in understanding the goals of an organization. Lack of transparency during the process could create a gap in the relationship.
Overloading a vendor could affect vending. An overloaded vendor might deliver services of poor quality due to pressure from different customers. In some cases this could lead to late service delivery. Delivering on time ensures relationships are sustained. Late deliveries weaken relationships. Different requests from different clients could make a vendor deliver incomplete services. The products could be delivered when broken. Other suppliers need training and nurturing on quality service delivery. An organization might not get quality service from a supplier that lacks adequate skills and understanding of the business.
Continuous nurturing of relationships after contracts are terminated is another issue. Whenever a company wants to outsource for a vendor, new relationships are formed. The process of requirement determination and selection of a vendor wastes time in such a case. Additional costs would incur compared to when the relationships are nurtured(Carter and Rogers, 2008).
Small businesses face a challenge in acquiring and documentation and automating vendor process. In big businesses, assessment of risks and security are the challenges. A small company cannot demand proper documents from its vendors. It also does not have skills required for report analysis. Large organizations lack expertise for vendor management. In order to carry out assessments of risks, experts are needed(Behmoiras et al., 2010).
Refreshing and creating management of vendors should be prioritized. The programs available should be reviewed in order to ensure they perform as required. A vendor manager should be specifically assigned in order to assist in management of the vendors. The assigned manager is expected to follow the rules given and biasness in vendor management or recruitment should not be evident(Muhart et al., 2014b). Vendor managers are hired using a procedure in Microsoft. Vacancies that are available are publicly announced in its website for legible candidates.
It is important to implement a risk management solution. Programs for risk management ensure that the organization understands risks in it and how to mitigate them. Making changes on big data cannot be done using spreadsheets because they are not very effective for risk management. Minutes should be written during board meetings. These minutes could be used by both parties to evaluate progress and for better understanding. All relationships with vendors should be strong in order to prevent cyber security cases to ensure security of information(Liu and Yetton, 2010).
Standardization is one of the trends in vendor management. It helps a company gain a competitive advantage by improving vendor management. Consolidation of vendors is a technique that increases a company’s purchasing power. Companies that have few employees could use this technique. Robots could be used instead of humans for management using the Robotic Process Automation (RPA) technique. This reduces costs in operation. A multi-vendor model should be governed in order to improve profit opposed to labor management. Transforming the model into a service and accounting for the model are ways of implementing multi-vendor governance models.
Building Effective Vendor Relationships: Best Practices
Complying with vendor management is another trend. Compliance has been enrolled in management and not only in an organization’s departments. Microsoft has set guidelines and terms of compliance to ensure compliance from its employees. These terms are publicly given. An organization’s reputation could be protected by having corporate culture.
Governing third parties is another trend. In order to have a competitive advantage, companies are venturing into innovative methods. Long term contracts are becoming a trend for organizations in order to ensure profits are continuous and costs are reduced. Management of vendors is not the only aspect in vendor governance, relationships management is also part of it. In order to realize long term benefits from outsourcing, clients and vendors should have required experience(Wu and Olson, 2010).
Some suppliers do not up hold their end in meeting the requirements of a contract. Compliance with the terms set and delivering on time might be an issue to them. These problems could be caused by language barriers and differences in culture. This increases operational costs, delays and deliverables of poor quality. Multi-vendor systems are complex and its dependency adds to short-comings. Suppliers might not have adequate understanding of the business requirements. There are guidelines set in order to handle the complexity in vendor management.
In vendor management, communication is very important. There should be effective communication between suppliers and an organization. Board members should hold regular meetings with the project team and suppliers on a regular basis. Roles and responsibilities should be assigned. Appointing a project leader is important(Rosemann and vom Brocke, 2015). Reports on performance should be provided regularly. Updates on progress and emerging issues during the process should be in the report. Solutions to the problems and plans of mitigation should be stated in the reports.
To ensure the deliverables are given timely and in good quality, it is recommended that more time should be spent on the raised issues and management of risks. Multi-vendor systems are likely to incur issues. It is important to have a centralized system for raising issues that arise. The Account Payable Support Desk for vendors is deployed by Microsoft.
Looking into change management is important. Determining the effect of a proposed change should be done before its consideration. Putting in place an effective change management process is recommended. Any changes that occur in scope of work, schedule of projects and costs that incur are dealt with differently. The project should be divided into different phases. Deliverables to be produced at the end of every phase should be made known to the vendors. During planning Gantt charts could be used.
Conclusions
Vendor management systems are used to manage vendors. Complex multi-vendor systems are used by organizations that have different vendors to deliver different types of services. These complex systems are likely to incur issues thus necessary measures are taken into consideration in order to handle their complexity. In vendor management, setting guidelines and codes of conduct are important to realize an organization’s goals. Strong organization-supplier relationships are important to build in order to generate value from outsourcing vendors. Microsoft is a company that has guidelines and regulations for its vendors. It has a support system. Its vendors are evaluated before supplying devices. It allows contracting form different ethnic groups and strives to ensure that its vendors have sustained environmental and business ethics.
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