How do you create vendor management policies?

1 Assess your vendor portfolio

Before you can create vendor management policies, you need to understand your current vendor landscape. How many vendors do you have? What are their categories, types, and scopes of work? How critical are they for your business operations and outcomes? How well are they performing and delivering value? You can use various tools and methods to assess your vendor portfolio, such as vendor segmentation, vendor scorecards, vendor risk assessments, and vendor surveys. The results will help you identify your vendor management priorities, challenges, and opportunities.

2 Define your vendor management objectives

Next, you need to define your vendor management objectives. What are the specific goals and outcomes that you want to achieve through your vendor relationships? How do they align with your business strategy and vision? How will you measure and evaluate your vendor management success? You can use the SMART framework to define your vendor management objectives: Specific, Measurable, Achievable, Relevant, and Time-bound. For example, you may have an objective to reduce your vendor costs by 10% in the next quarter, or to improve your vendor quality by 15% in the next year.

3 Establish your vendor management roles and responsibilities

Another step is to establish your vendor management roles and responsibilities. Who will be involved in the vendor management process? What are their duties and accountabilities? How will they communicate and collaborate with each other and with the vendors? You can use a RACI matrix to assign your vendor management roles and responsibilities: Responsible, Accountable, Consulted, and Informed. For example, you may have a vendor manager who is responsible and accountable for overseeing the vendor relationship, a project manager who is responsible and consulted for managing the vendor deliverables, and a finance manager who is informed and consulted for approving the vendor payments.

4 Develop your vendor management processes and procedures

The next step is to develop your vendor management processes and procedures. These are the steps and actions that you will follow to manage your vendor lifecycle, from selection and contracting to monitoring and evaluation. How will you source, qualify, and negotiate with potential vendors? How will you onboard, train, and support your selected vendors? How will you track, measure, and report on your vendor performance and compliance? How will you handle issues, disputes, and changes with your vendors? How will you terminate or renew your vendor contracts? You can use flowcharts, checklists, templates, and guidelines to document your vendor management processes and procedures.

5 Create your vendor management standards and expectations

The final step is to create your vendor management standards and expectations. These are the criteria and requirements that you will use to evaluate and manage your vendor quality, performance, and compliance. What are the minimum standards and expectations that you have for your vendors? What are the best practices and benchmarks that you want your vendors to follow or exceed? How will you communicate and enforce your standards and expectations with your vendors? You can use contracts, service level agreements (SLAs), key performance indicators (KPIs), codes of conduct, and policies to create your vendor management standards and expectations.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?