According to Gartner’s Vendor Management Vision for 2019, almost 63% of organizations are looking to revamp their business model in the next three years, to align with their burgeoning vendor management needs.
The Need for Managing Vendor Relationships EfficientlyAs business scales, so will the number of suppliers/ vendors you deal with, making vendor communication that much more difficult to manage. This increases the risk of missed payments, and breakdowns in those key supplier relationships. If your organization pays its bills on time, actively nurtures good relationships with its suppliers, doesn’t cut off suppliers with no reason, and keeps lines of communication open, you stand to get the best trade credit terms possible. It is critical that you identify your strategic vendors and cultivate a good relationship with them if you want to increase your profitability. Inefficient supplier/ vendor management can negatively impact
- Timely availability of critical services or raw materials
- Your company’s cash flow and overall profitability and
- Subsequently, the company’s relationships with its suppliers or vendors
Studying the Disconnect: Vendors, Contracts, and PaymentsVendor payments are frequently the largest non-payroll source of cash outflows in the enterprise. A big chunk of working capital gets used up to pay direct and indirect materials suppliers/ services providers/ miscellaneous vendors each month. These payments can sometimes occur in a vacuum. As there’s limited insight and a narrow view of the enterprise’s working capital position and/or overall financial strategy. In general, the procurement/ front-end function at companies deals with choosing vendors, making the commercial agreements (at the front-end level). Usually, the contracts get signed by business owners. The issue is how the vendors/ suppliers are actually managed in the systems that interact with them on an operational basis. One part has to do with making sure the vendors are compliant – which is covered by the CPQ systems in place. The other critical part has to do with then adding the vendors into the existing systems, and then keeping that information across your disparate systems current. It involves all the ongoing interaction between vendors and the business, including :
- Updates to vendor information (bank accounts, other legal / business info)
- Invoices sent by vendor
- Communications sent by the business to the vendors
Essential Asset, or Wasteful Spend?If the vendor makes a change to their info, they notify the business by email. At times their point of contact is wrong – it may be the business owner who signed their info. In which case it may get deleted or forwarded around until it gets to the back-office person, who then has to continue to interact with the vendor until the updates happen. Again, if there is an invoice submitted, similar events can happen and the vendor may not get paid. As a result, the vendor may be forced to take an unfortunate business action against the business because of non-payment on time. And, if the business needs to contact the vendor regarding any issue, the runaround continues. Given the volume of cash outflow that vendor payables usually have, multiple small events like this can aggregate and become an unmanageable nightmare. Which is why there is a major need for supplier/ vendor management. CloudIO Supplier Connect has been built to address these specific challenges, to simplify supplier management at scale. With CloudIO’s solution extensions, organizations can easily
- Onboard and engage suppliers with smart self-service portals
- Manage vendor payments and relationships with timely communication
- Connect procurement, contracting, and AP systems to ensure vendor payments are on-time.