10 Objectives of a Vendor Management Organization

As companies continue to increase their strategic reliance on vendors, outsourced services, and collaborative alliances, so to do business leaders need to rethink their vendor management organization.

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 a strategic imperative to establish a vendor management organization 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 in smaller organizations. Each is scaled following the organization’s objectives and needs, but the results are increasingly visible by the 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 and leverage
3. Reduction of run-rate expenses and budgeted capital expenditures
4. Improved quality (services, operations, product, supply chain, etc.)
5. Vendor innovation and 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. One that can seamlessly weave the multiple processes, responsibilities, policies, tools, and technologies together in every vendor management organization relationship.

Best-in-class VMOs are tightly aligned with the company’s strategic and tactical business objectives. They drive significant value from vendor relationships and serve a vital role in the execution of business objectives, driving organizations towards achieving targeted business outcomes over the long term.