Vendor Management Services – What Are The Benefits?
Vendor Management Services (VMS) are a group of services that are
designed to reduce costs, improve vendor performance and also identify
and manage risk. These services include:
- Sourcing of vendors, many VMS consultancies have market knowledge.
- Negotiating with vendors and completing the Master Agreement contract.
- Identifying of opportunities to cut costs and enhance vendor terms.
Enhanced management information feeds the purchaser with considerable
information on costs, inventory and lapses between demand and delivery.
- Identifying vendors that are more appropriate. Sometimes there are
suppliers that will provide better terms and price levels. VMS
consultancies often have this market knowledge.
- Identifying opportunities to consolidate vendors. Providing vendors
with larger or more frequent orders, often results in better pricing and
- Evaluation of current vendors with respect to their performance, quality and pricing structures.
- Evaluation of vendor catalogues in order to find products that are more appropriate.
- Managing the transition from one vendor to another, which can often result in a break of supplies and loss of income.
- Monitoring and evaluation of vendor activities including quality and
contractual and Service Level Agreement (SLA) compliance so that the
vendors comply with agreed delivery times, invoicing procedures and
- Identifying and monitoring risk, which is particularly important when being supplied from third world countries.
Many companies expect that Vendor Management Services will accrue the following benefits:
- Total cost of procurement will be reduced by identifying areas to save money and fine-tuning the procurement process.
- Vendor performance will be enhanced by the regular reviews and
improvement in processes, communications and purchaser/vendor
- Improved information flow between the purchaser and the vendor will
increase management information to both companies. It will also allow
the purchasing company to cut inventory costs by optimal purchasing.
- Efficient purchasing will enhance profit levels and provide more fruitful customer supplies.
- Experienced staff are released from problem solving to concentrate on core purchasing processes.
- Vendor Management Services keep the purchaser/vendor relationship balanced and both companies goals aligned.
- Continual review of your vendor will lessen service problems and
service failures. If problems do occur, alerts as to the any penalty
costs will be activated.
- VMS will lessen misunderstandings and miss communications.
- Where there are legal obligations with any purchase – such as in staffing, a VMS will ensure that these obligations are met.
Vendor Management Services are prevalent in the
staffing environment, particularly when a company employs many temporary
staff. Many Vendor Management Services consultancies will provide the
above services using a combination of staff and computer systems.
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