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Business Studies Notes 3
rd.
Year
Undergraduate / Graduate Level
SUBJECT: Procurement
and Vendor
Management
Authors: (Original Study Notes and Lecture Notes prepared by Mr. K.P. Saluja (M.B.A. from Indian Institute of Management Ahmedabad), and by Mr. K. K. Prasad (M.B.A from IGNOU Delhi) These notes are intended to be used by undergraduate students, completing Year 3 Business Degree Courses. These notes will help undergraduates and graduates complete case studies, coursework assignments and pass exams in Business Studies and Economics.
TABLE OF CONTENTS
(1) Procurement management definition (2) Elements of procurement management (3) Importance of Procurement management (4) Ways to improve Procurement management (5) Vendor management definition (6) Importance of vendor management (7) Challenges of Vendor management (8) Benefits of Vendor Management (9) Stages of the Vendor Management Process
Procurement management definition
Procurement management is responsible for overseeing all the processes involved in acquiring the products, materials, goods and services needed for efficient business operations. Depending on the business and industry, the terms “sourcing,” “purchasing” and “procurement” may be used interchangeably to describe the function of procuring supplies and managing the process, with sourcing considered more strategic and purchasing and procurement used to refer to the actual operational function. Organizations across all industries depend on the expertise of procurement management in seeking out and managing external supplier relationships to ensure these needed items are acquired at the best possible cost. For these
contracting cycle can give your group experiences about how the supplier does business, assisting you with deciding if to get their administrations. Purchase requisition Subsequent to laying out an agreement and putting a colleague on your rundown of supported sellers, your group can submit buy demands to put in individual requests. Workers finish up a structure to demand assets for a particular buy from supported merchants, then, at that point, speak with providers in the wake of getting organization endorsement. Rather than having workers make buys at their prudence, having a buy demand process guarantees that nobody makes a copy request or purchases things from some unacceptable provider. Delivery In reality getting the things through on-time conveyances is a focal piece of obtainment the board. Processes engaged with conveyance incorporate gathering with providers to decide a timetable, following shipments, exploring buy orders, planning representatives to get shipments and performing quality reviews. Invoice management Completing the transaction by paying sellers and managing invoices is the final part of the procurement management cycle this includes accommodating requests with the genuine labor and products got, adjusting organization records and following receipts. Receipt the board practices can assist you with following the expense viability of your merchant connections over the long run and recognize opportunities for utilizing your acquirement financial plan all the more effectively.
Importance of Procurement management
Without procurement, it would be outside the realm of possibilities for most business activities to work. Procurement management guarantees that all things and administrations are appropriately procured so that tasks and cycles can continue productively and effectively. Beyond what a business need, obtainment can be utilized as an upper hand when upgraded to save money, time and assets. However, driving down costs by keeping away from postponements and blunders and boosting assets is simply aspect of the explanation obtainment the board assumes a significant part in an organization's main concern. Procurement management can be liable for arranging worthwhile creation and provider contracts, leading imaginative new cycles and have a significant impact in taking a home-grown business activity worldwide. Acquirement the executives can likewise assume a significant part in leading corporate social obligation in variety and consideration by proactively looking for assorted providers. "Just zeroing in on cost is certainly not adequate," says Alex Zhong, production network lead at IBM Real on Production network Plunge. Obtainment the executives holds "an essential situation to help the business development according to an income viewpoint, as a matter of fact." “When you take a look over the last five to 10 years, supply chain has taken on a much bigger role and encompassed procurement as a key function within the organization, as opposed to residing outside of the supply chain functions,” says Zhong.
Ways to improve procurement management
Being deliberate about your procurement management practices can have a huge effect to your group's primary concern and usefulness. These means clear up how for refine the procurement management system at your work environment to improve proficiency and cost-viability:
can assist you with settling on future buying choices and change your acquirement systems to stay away from inconsistent way of behaving. Gathering this information and breaking down it consistently permits you and your group to boost benefits, keep up with effectiveness and forestall defers in conveying your end results to customers.
5. Digitize and integrate One of the most outstanding ways of further developing your current procurement the executives’ cycle is to utilize programming and computerized apparatuses to coordinate each move toward the interaction. Utilizing computerized programming frameworks can keep your whole group facilitated while making buy demands, speaking with sellers and affirming shipments. Incorporating the components of obtainment the board utilizing programming applications can likewise improve on information examination and effectiveness reports to illuminate business decisions. 6. Set up notifications Make a system that consequently tells individuals in specific jobs when certain activities or tasks occur. By designing your procurement management system to in a flash refresh your group on the situation with an undertaking, you work on internal communication and forestall work process or endorsement issues.
Vendor management definition
Vendor management is the process of coordinating with vendors to ensure excellent service to your customers. It involves onboarding vendors, training them to use your platform, and engaging with vendors for improved profitability for both—your vendors and you. Vendor management also involves measures to control costs, mitigate risks, and improve vendor performance.
Nonetheless, managing vendors comes with its own set of challenges. Let’s look at them.
Importance of vendor management
Vendor management is significant for various reasons. For a certain something, seller the executives assume a key part with regards to choosing the right merchant for a specific business need. Furthermore, organizations can utilize seller the board to accomplish business objectives, for example, outfitting open doors for cost reserve funds, as well as doing whatever it takes to accelerate the on boarding system. Vendors likewise should be overseen successfully to lessen the risk of supply chain disruption and guarantee the labor and products gave are followed through on time and to the normal norm. Past this, a compelling seller the executives cycle can assist organizations fabricate more grounded associations with their merchants which may, thus, lead to chances to negotiate better rates. Vendor management benefits Improve vendor selection Harness cost savings Speed up vendor on boarding Reduce the risk of supply chain disruption Strengthen supplier relationships Negotiate better rates Vendor management process The vendor management process includes a number of different activities, such as:
Payment. Ensuring vendors are paid on time for the goods and services they provide, in line with the agreed terms. As well as the vendor management process, the term 'merchant the executives' may likewise allude to online devices which keep all seller data and related exercises in a single spot for the association's reference. Seller the executives or provider the board programming can satisfy various capabilities, from dealing with the RFP cycle to smoothing out supplier communications. Challenges of Vendor management For organizations with an enormous supplier base, as well as a complex geological impression, it tends to be challenging to acquire an incorporated perspective on the merchants utilized by an organization. Difficulties can emerge all through the various phases of the merchant the executives interaction, from getting the right documentation from sellers to completing any vital gamble appraisals. It's in this way critical to embrace appropriate cycles and apparatuses to keep away from any issues. Organizations might utilize a merchant the board methodology to guarantee seller connections convey the expected worth, with productive cycles. A technique might incorporate regions like defining out clear and quantifiable objectives, following KPIs and fabricating and keeping up with compelling associations with merchants. Organizations may likewise characterize their providers to recognize their essential merchants and put resources into reinforcing those connections. Different contemplations might incorporate doing whatever it takes to try not to depend too vigorously on a specific merchant.
Benefits of Vendor Management
1. Better vendor selection
A comprehensive vendor management plan supports the selection of the right strategic vendor partners. By identifying business needs and setting clear expectations, a business can find and invest in high-quality supplies that pay off in the long run.
2. Streamlined processes When the responsibilities of both a buyer and vendor are outlined, it’s easier to establish smooth workflows. Delivery, compliance, and payments are managed according to a pre-defined scenario, making it easier to guarantee predictable outcomes and an overall more effective procure-to-pay process. 3. More efficient vendor on boarding On boarding new vendors and getting those up to speed might take a lot of time and resources. With a vendor management system, new vendors follow a tried and tested path which allows them to navigate through the on boarding process faster. 4. Reduced risk of disruption to supply chain Vendor management gives you better control over your supply chain and eliminates the risk of disruptions. Having a handle on vendor relationships allows you to obtain critical vendor information promptly and oversee possible issues. 5. Better relationships with vendors You can’t eliminate the human factor from your vendor relationships. Effective supplier management strengthens loyalty and encourages your vendors to maintain the quality of provided products or services. 6. Reduced costs with more overall efficiency and better vendor rates
It’s good to research your vendor’s business model at this stage and try to understand their objectives. This way, you’ll manage to negotiate the best terms without sacrificing the supply quality.
3. Vendor on boarding Once the vendor is approved, they’re on boarded into your company’s system. To set them up for success, you’ll need to introduce them to the relevant procedures, establish standards, and set efficient lines of communication. The vendor on boarding process involves collecting the documentation, sharing permissions, and other activities aimed at integrating a new vendor into the supply chain. 4. Monitoring performance and managing risk You can’t always be sure that your vendors will keep to the standards set in your contract. That’s why you should be continuously monitoring supplier performance until the contract is terminated. To make it easy to assess the performance of your vendors, you’d better set KPIs when negotiating contract terms. These might include: Order completion time Shipping time Product or service quality Compliance Customer service quality Keep track of these performance metrics and keep open communication with your suppliers to have full control over your supply chain. 5. Payment collection and processing
Strong vendor relationships are based on mutual respect. The best way to show your respect to vendors is by making payments on time, in accordance with the terms outlined in the contract. Vendor management entails building a standardized procedure for processing invoices and making payments, eliminating unnecessary friction from the processes.
6. Feedback from vendors You aren’t the only party that can share their feedback. It’s important that your vendors also feel encouraged to provide their views of this collaboration. Collecting feedback from vendors will help you get a 360-degree view of the state of things and make more informed decisions. References Staffing Industry Analysts, Inc: "VMS Marketplace Profile", page 1. Staffing Industry Analysts Insight, 2007 "FRB: Supervisory Letter SR 13-19 / CA 13-21 on Guidance on Managing Outsourcing Risk -- December 5, 2013". www.federalreserve.gov "Third-Party Relationships: Risk Management Guidance". www.occ.gov 2013 - 10 - 30. "CFPB to Hold Financial Institutions and their Service Providers Accountable > Newsroom > Consumer Financial Protection Bureau". Consumer Financial Protection Bureau. Staffing Industry Analysts, Inc: "VMS Marketplace Profile", page 1. Staffing Industry Analysts Insight, 2007 Staffing Industry Analysts, Inc: "VMS Marketplace Profile", page 1. Staffing Industry Analysts Insight, 2007 Staffing Industry Analysts, Inc: "VMS Marketplace Profile", page 1. Staffing Industry Analysts Insight, 2007 Using Managed Service Providers, http://govpro.com/mag/managed-service- providers- 201002 - 03/index.html Staffing Industry Analysts, Inc: "VMS Marketplace Profile", page 1. Staffing Industry Analysts Insight, 2007
