What is Vendor Lifecycle Management? Definition
Many organizations struggle to manage their vendor relationships effectively. In fact, according to a study by Forrester, “63% of enterprises struggle to keep track of which vendors they use and only 26% have a centralized view of all vendor contracts.” Vendor lifecycle management (VLM) is a process for assessing, onboarding, and monitoring vendors throughout the course of the relationship. By having a structured VLM program in place, organizations can save time and money while reducing risk. In this blog post, we will explore what vendor lifecycle management is, its benefits, and how to get started with implementing a VLM program.
What is Vendor Lifecycle Management (VLM)?
Vendor Lifecycle Management (VLM) is the process of managing the relationships between an organization and its vendors throughout the entire relationship lifecycle. In other words, it’s a way to track and optimize how an organization does business with its vendors, from initial engagement to contract renewal.
Cost savings: Organizations can realize significant cost savings through VLM by proactively managing vendor contracts and relationships. For example, by consolidating multiple contracts with a single vendor, or negotiating better terms during the contract renewal process.
Risk reduction: VLM can also help organizations reduce their exposure to risk by identifying and addressing potential problems early on. For example, if a vendor is consistently late in delivering products or services, VLM can help flag this issue so that it can be addressed before it becomes a bigger problem.
Improved vendor performance: Finally, VLM can lead to improved vendor performance by ensuring that vendors are held accountable for meeting their contractual obligations. This includes everything from deliverables to service levels to quality standards.
The Benefits of VLM
There are many benefits of Vendor Lifecycle Management (VLM), including improved communication and collaboration between buyers and suppliers, increased visibility into supplier performance, and reduced costs.
Improved communication and collaboration between buyers and suppliers is one of the main benefits of VLM. By managing the supplier relationship throughout the lifecycle, buyers can ensure that communication is proactive and supplier performance is monitored on an ongoing basis. This can lead to improved quality, delivery, and overall satisfaction with the supplier.
Increased visibility into supplier performance is another key benefit of VLM. By tracking supplier performance data throughout the lifecycle, buyers can identify issues early on and take corrective action before problems escalate. This can help avoid disruptions in the supply chain and improve overall efficiency.
Finally, VLM can help reduce costs by streamlining the procurement process and improving negotiation leverage with suppliers. By proactively managing the supplier relationship, buyers can avoid last-minute discounts or price increases. In addition, VLM can help optimize inventory levels and minimize waste associated with excess or obsolete inventory.
The Vendor Lifecycle Process
Vendor lifecycle management is the process of onboarding, managing, and offboarding vendors throughout the entire life cycle of the relationship. The vendor lifecycle begins with the identification and selection of vendor candidates, followed by the onboarding process to get them set up to do business with your company. Once vendors are up and running, they need to be managed effectively to ensure they are meeting your expectations in terms of quality, cost, and service levels. When it’s time to end the relationship with a vendor, the offboarding process takes place to ensure a smooth transition for both parties.
The key to successful vendor lifecycle management is having a clear understanding of your company’s needs at each stage of the process, as well as establishing clear guidelines and expectations for both vendors and internal stakeholders. By following these steps, you can ensure a positive experience for all involved and avoid any unnecessary disruptions or frustration.
Implementing a Successful VLM Strategy
There are a few key things to keep in mind when implementing a VLM strategy:
1. Define your goals and objectives. What are you trying to achieve with VLM? This will help you determine the appropriate metrics to track.
2. Identify which vendors are critical to your business and which can be managed with less stringent requirements. You may want to consider creating tiers of vendor management based on this criterion.
3. Put together a cross-functional team that will be responsible for executing the VLM strategy. This team should include representatives from various departments within your company, such as Procurement, IT, Legal, and Finance.
4. Develop clear policies and procedures for onboarding new vendors, managing vendor performance, and terminating vendors when necessary. These should be documented in a centralized location that is accessible to all members of the VLM team.
5. Implement a system for tracking vendor information and performance data. This could be a simple spreadsheet or an enterprise-level software solution. Make sure everyone on the VLM team has access to this system and knows how to use it effectively.
6. Conduct regular reviews of your vendor portfolio and performance data. This will help you identify any areas of concern and make adjustments to your VLM strategy as needed
Vendor lifecycle management is an important process for businesses to manage their relationships with vendors. By definition, vendor lifecycle management is the process of managing the entire relationship with a vendor, from initial contact through contract termination. This process can help businesses save time and money, as well as improve communication and collaboration with vendors. If your business is not currently using a vendor lifecycle management process, it may be something to consider implementing in order to improve your relationships with vendors.