Breakdowns in Vendor Management

Managing vendors effectively is a difficult discipline to implement and maintain. Too often the only tools we employ are email, spreadsheets, and documents. This de facto vendor management system is extremely costly for organizations of any size. The good news is, the right combination of tools in a cohesive vendor management system can make the vendor management process simple and efficient.

Vendor Management Across the Lifecycle

The vendor relationship has a lifecycle that starts before an agreement is reached. It may formally start with an evaluation and approval process that involves multiple departments. It may continue through a contracting process which includes documenting and signing an agreement. Each department involved tends to have its own tools and ad-hoc process. What is lacking is an integrated vendor management system that can be leveraged not only through the evaluation and approval process, but also through onboarding and the entire lifecycle of the vendor relationship. This includes regular periodic communication and re-evaluation for the entire time your organization does business with a vendor. 

Which vendor tool is the right one?

Now for the big question: Which vendor management tool is right for your organization? To discover the answer, it’s important that you think about how you currently engage with vendors. In most organizations, it starts with vendor evaluation as part of the vendor approval process, and it usually includes:

• Measurement
• Delivery and Collection
• Communication and Routing
• Review and Approval
• Scheduling

Instead of a single tool, it’s more likely that a set of vendor evaluation and management tools integrated into a cohesive system will be the answer. A vendor management system that significantly improves your effectiveness and efficiency across all these processes at an affordable price is going to be a wise investment.

What Do We Mean by Measurement?

We need to measure what we want to evaluate against a standard. Measurement starts with of a set of questions designed to cover the topic to be evaluated. Questions which allow free-form answers are important to evaluate. But if most questions in a set involve only free-form answers, it’s difficult to translate those into an objective measure.

Objective Measurement

Questions with discrete answers can provide for an objective, quantitative measure, either through a calculated rating or by filtering. Examples of discrete answer choice types are multiple-choice, checkboxes, yes-no, and numeric quantity. These are essentially questionnaires. They are designed to provide a more standard way to measure the degree of compliance, level of risk, or degree of adherence to best practices.

Industry-Standard Questionnaires

Numerous questionnaires have been developed to determine to what extent the vendor adheres to industry standards. Often, they are also designed to gauge regulatory compliance. For example, vendor questionnaires will cover the scope the HIPAA/HITECH regulations in the healthcare industry. In banking or any regulated financial service, vendor questionnaires will cover the PCI DSS regulations.

Is Your De Facto System Too Costly?

The de facto system most organizations use is a combination of spreadsheets, emails, and a manual workflow. Email systems and spreadsheets are relatively inexpensive, but a system built merely on these two technologies requires extraordinary human resources and effort just to be somewhat adequate as a vendor evaluation tool. It’s so expensive, in fact, that most organizations don’t even attempt to re-evaluate vendors on any recurring schedule.

The way the de facto system works is that each spreadsheet holds a questionnaire, and several may be attached to an email message. The message is sent by someone in your organization to the first recipient with instructions to complete answers in the spreadsheet. Once completed, the saved spreadsheet is sent back.

De Facto System Consumes Resources

Many industry-standard vendor evaluation or assessment tools have hundreds of questions. The more questions there are, the more thorough a measurement it will produce. But here’s the catch: Each answer must be reviewed by your staff. Scheduling a call for follow-up questions is often required as well.

In the de facto system of vendor evaluation tools, each file becomes its own project to manage! Furthermore, each vendor usually completes multiple files. Then multiple people from multiple departments must review hundreds of answers, evaluate, and respond. There’s no visibility to the status of the workflow for each project and the risk of bottlenecks is high. Who are we waiting on? Did they receive the email? Have they started to answer?

Administrative Nightmare

Now, consider you have many hundreds, if not thousands of vendors to evaluate each year. It’s an administrative nightmare. It’s a spreadsheet avalanche!

The Right Vendor Management System of Tools

Measure the Right Way

The right vendor management system leverages an evaluation tool with the capability to deliver appropriate industry-standard questionnaires designed to produce a robust, objective measure, plus just the right balance of free-form questions to help evaluate any exceptions. It will include common forms that gather the typical information needed during the vendor approval process plus the ability to insert custom questionnaires that might cover your company’s important policies and procedures, or I.T. compatibility standards, that are not covered by an industry-standard instrument.

Deliver and Collect the Right Way

The right vendor management system delivers questionnaires and forms through a secure web application system. Answers and uploaded files are collected in real time, question by question, in a secure, central database. Hands down, this is a better solution for your team than storing hundreds of answers in thousands of separate spreadsheets. What’s more, it provides immediate visibility into the stage of the approval process, as well as a question-level granularity to the progress through the stage.

It’s best if the questionnaires are “smart,” adapting to target both new and existing vendors, and dynamically sorting which vendor product or service involves technology or handles sensitive data, what type of data (e.g., PHI), and how much. This means you can send them to any vendor regardless of their product or service. Vendors who attest that they don’t handle sensitive data or introduce technology need only answer a few questions. For those that do handle sensitive data, it gauges their compliance status by asking plenty of relevant questions which address industry standard rules or accepted security practices.

Communicate the Right Way

The right vendor management system will manage communications across the platform. The typical users in a vendor evaluation and approval process will be vendor representatives as well some of your key team members:

• Originators or Sponsors — those who want the vendor’s product or service.
• Processors — those who help administer the process.
• Reviewers — those who review and evaluate.
• Approvers — those who have approval authority.

Each user needs a dashboard that shows the stage of each of the active vendor approval processes they are monitoring, as well as next steps. The tool needs to integrate with email so that users are automatically prompted via an email message that they need to provide input, review, or approve to move it to the next step.

Route Workflow the Right Way

The right vendor management system can also configure and route workflow. It will need to route the evaluation and approval through multiple steps. People in different departments or roles can add questionnaires or forms to collect answers or documents they need from the vendor. Different workflow rules route the vendor path through the correct questionnaires and forms. The vendor representative experiences one continuous and cohesive session. Or, he can elect to invite users with different roles in the vendor organization to help complete sections.

A robust vendor management system makes each question a dynamic communication path between users. If a vendor representative is confused by a question or set of answers, rather than remain stuck or frustrated, he can click a button next to the question to ask the administrator or reviewer for that questionnaire to provide clarification. The administrator or reviewer is automatically prompted by email and can quickly see the context and the vendor representative’s question. She can provide granular feedback or discuss the issue with the vendor until it is resolved.

Review and Approve the Right Way

The right vendor management system includes a tool to automate much of your evaluation process by utilizing questionnaires where most answers are multiple choice. You can configure it with answers pre-designated as acceptable or not. The tool automatically scores certain sections and flags unacceptable answers, which will focus the review on perhaps a handful of exceptions. Yet, all the answers are visible to the reviewer to provide adequate context for a thorough evaluation.

As noted above, the right vendor management system has a tool to make each question a dynamic communication path between users. In this case, the reviewer can ask the vendor representative for clarification or make comments in the tool right on each answer given. There’s no need to call and coordinate a meeting! The vendor representative is automatically prompted for more input for that answer, and an in-tool discussion can ensue if necessary until it is resolved. All the discussion is saved in the system and visible in the questionnaire for future reference or audit. This makes evaluation up to 90% more efficient.

Schedule Recurring Evaluations the Right Way

The right vendor management system consists of a tool to automatically schedule a message to reevaluate existing vendors on a configurable schedule. Vendors can elect to pre-fill their responses with their previous answers, and answers which change from previous years are flagged for more efficient review. Sponsors will receive email messages each year to make sure the product or service is still in use, with prompts to update contacts for vendor organization.

Unscheduled Communication the Right Way

The right vendor management system consists of a tool to handle ad-hoc communication of new or updated policies or urgent issues that will arise. If you employ the right vendor management system, you can leverage the tools you invested in during the approval and onboarding process for unscheduled communication needs throughout the vendor lifecycle relationship.

Conclusion

So, stop throwing more spreadsheets, staff, or consultants at your vendor management problems. The right vendor management and evaluation system of tools is available today! Try ConfidentVMS now, and watch your confidence and readiness rise as your security risk and vendor management resource requirements plummet.