Discover how DHL Group increased connectivity across the enterprise and automated multiple processes end-to-end
Vendor management is the process of managing a network of vendors that an organization relies on to do business. The term is described by Gartner as “A discipline that enables organizations to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the deal life cycle.” It includes vendor selection, contract negotiation, onboarding, performance and risk management, and payments.
For large organizations that have an extensive vendor base, and even more so for those with international stakeholders, it’s important to ensure that vendors are properly managed.
Proper vendor management helps businesses source the most suitable supplier to meet their business need and build strong relationships that can be leveraged to negotiate better deals.
"Effective supplier management is vital for maintaining cost efficiency, mitigating risks, ensuring quality, and building a resilient supply chain. Strong supplier relationships foster better pricing negotiations, regulatory compliance, and consistent service or product standards," says Bizagi's Business Development Director, Alex Zuckerman.
"Conversely, poor supplier oversight can result in delays, inflated costs, non-sustainable multi-sourcing, reputational harm, and ultimately profit loss. To safeguard business continuity and operational excellence, companies must implement strategic supplier management practices that enhance reliability and performance."
Tracking vendor compliance
Compliance of any organization relies heavily on the compliance of its vendor network. Communicating and enforcing compliance requirements with vendors can be difficult due to a lack of visibility into their operations and the number of suppliers within the network.
Quality issues
Suppose vendors fail to deliver goods and services that meet quality standards. In that case, the quality of the final product can be affected resulting in returns and customer feedback or production may grind to a halt until the issue is rectified costing the business in unfulfilled orders.
Missed delivery deadlines
Failure to meet the delivery schedule outlined in the contract can also bring production to a standstill and cost the business money due to missed sales caused by unfulfilled orders.
Price increases
As the cost of raw materials, transportation, and other factors within the supply chain rise, vendors must factor this into their pricing and pass the increase on to their customers.
Unable to scale with your business
Some vendors may not have the capacity to scale up supply to meet the increasing demands of your business as you grow, leaving you without crucial supplies and having to find alternative vendors.
Building a more resilient supply chain
Keeping track of all vendors allows organizations to identify which aspects of the business each vendor supports, identify any risks that may arise, and put measures in place to combat them.
Better rates
Building strong relationships with vendors enables businesses to negotiate better rates and discounts.
Protect brand reputation
Gaining insight into vendor operations allows businesses to ensure that they are working with suppliers that align with their own values to avoid any damage to their brand reputation by association.
Performance tracking
Regularly evaluating vendor performance enables organizations to ensure that each vendor within the network delivers value to the business and provides the opportunity to reevaluate the relationship if this isn’t the case.
Automation can be used throughout the vendor management process to benefit both internal and external stakeholders. Zuckerman advises: "Business process automation (BPA) revolutionizes supplier management by streamlining critical functions such as onboarding, contract oversight, procurement, performance tracking, and risk mitigation. By reducing manual inefficiencies and leveraging real-time insights, automation enhances decision-making and operational agility.
"Additionally, you can add AI-driven analytics to your processes to predict risks, optimize supplier performance, and foster seamless collaboration. Embracing BPA not only ensures compliance and cost-effectiveness but also fortifies the supply chain, enabling businesses to thrive in an increasingly complex and competitive landscape."
This video shows how a low-code automation platform can enhance the vendor management process, with a focus on vendor onboarding and evaluation.
You should consider the five sub-processes outlined below to automate the process end-to-end and deliver benefits such as speed, cost saving, and reduced risk of supply chain disruption. Using a single platform to orchestrate these tasks provides a central reference point and ensures visibility across the process to further enhance efficiency.
1. Vendor selection
This is typically a lengthy process involving numerous parties and even more documents. Once you’ve defined your business requirements, you’ll send out requests for quotations (RFQs) and requests for proposals (RFPs). As this information comes in, you’ll need a way to manage and view the documents to make the correct decision in a suitable time frame.
Automating vendor selection saves all your RFX documents in a single place and, when integrated with other intelligent technology, can determine which vendors match your requirements. It helps reduce the time spent managing the lengthy, and arguably most important step, of the process, so your employees can get through more RFPs in a shorter space of time.
2. Contract negotiation
Negotiating a contract can be time-consuming. Inevitably, there will be a few back-and-forths over email before you both agree to the terms laid out. It’s important to get these right, or you may face setbacks later in your relationship.
Using a process automation platform allows you to manage the contract in one place. Notifications can still be sent out over email, but by automating the process, the email triggers are sent out automatically and the process is tracked through the platform. This means you have complete visibility of the process and know exactly who the contract is currently waiting with.
3. Vendor onboarding
Onboarding is the opportunity to gather all the information you need from the vendor to ensure they can be paid for the goods and services they will provide. The sooner you get your vendor onboarded, the sooner you can start doing business with them.
Automating your vendor onboarding streamlines the entire process, which decreases the setup time so you can start purchasing sooner, ultimately decreasing your time to market. An added bonus is that when tasks are automated, you can rest assured that you’re meeting all legal and compliance requirements. Nothing will fall through the cracks.
4. Monitoring performance and managing risk
It’s vital to monitor service level performance to ensure that all the agreements laid out in your contract are met. This work is usually highly manual and can be especially time-consuming if you have a large vendor base. Automated data gathering integrated with dashboards provides a visual view of the contractual KPIs.
Having a constant overview of how your vendors are performing reduces the chance of small issues escalating into huge risks. By monitoring performance, you can ensure that you retain the best vendors, and quickly look to replace those who aren’t meeting your expectations. Automated reminders and alerts to both you and your vendors also help eliminate delayed payments and benefit the supplier-buyer relationship as you don’t have to write those irksome, repetitive follow-up emails.
5. Payment
It’s important to ensure your vendors are paid on time per your agreed terms. You can automate the approval of vendor requests so that purchase orders are always paid on time, allowing you to take advantage of early payment discounts. The approvals will be automatically triggered to issue payment to the vendors once invoices are received and processed.
Automating the payment process means it's easier to spot fake invoices as all invoices from approved vendors will come through your automation platform. The visibility of payment information also helps to predict cashflow which can aid with financing in other areas of the supply chain and take advantage of early payment discounts – money that can be better spent elsewhere in the business.
Improve your vendor management processes with Bizagi’s vendor management solution.
DHL Group turned to process automation to optimize its Vendor Master Data Management (MDM) portal. This covers vendor onboarding, monitors their performance and ensures automated payment is correctly executed.
This process previously relied on time-intensive manual collection and validation of data to fill the gaps between system breaks.
A portal was created as a centralized access point for 320,000 employees and over a thousand vendors. It uses business rules to automatically validate data upon entry to minimize repetitive review steps. Supplier details were also automatically replicated in the ePurchasing system to save further manual effort.
Automation eases the process by authenticating external users, checking data for errors, submitting forms, requesting approvals, and duplicating data in the ePurchasing solution. Bizagi ensures that the process is fully compliant and also eliminates the need for an API to connect to their ERP, orchestrating with SAP and automatically handing data over to RPA bots for interpretation.
“Bizagi is the tool which holds together everything end-to-end and is the go-to portal for our service providers who log into Bizagi to process a case,” said Timo Neff, Team Lead, Automation Designers & Architects at DHL Group.
Find out more about how Bizagi can automate the vendor management process from selection to long-term performance monitoring for improved efficiency and better supplier relationships.
