Organizations looking to formalize a vendor management program can learn a lot from a department most already have in place -
When hiring new employees, human resource managers know that one of the most important first steps in the process is to create a job description. A well-crafted job description not only spells out the knowledge, abilities and skills required to perform a job successfully, it also provides an outline for expectations, reporting relationships and performance management.
Sounds like a great tool for any relationship you need to manage. So why is that same mindset rarely applied when an organization hires a new vendor?
A vendor's success hinges as much on their overall fit with your organizational culture and needs as it does on the products and services they sell. This becomes really important when you procure services and solutions that are more strategic and/or risky in nature such as information technology, data services and professional services. The same holds true for any and all types of outsourcing relationships where you delegate responsibilities and rely heavily on vendors to perform effectively.
In these riskier vendor relationships it’s as important to select the right vendor as it is to select the right solution.
If you're looking to beef up your own vendor management program, vendor profiles are a great tool to use. Just like job descriptions for prospective employees, vendor profiles provide an opportunity for you to document the responsibilities and important attributes of the of type of vendor you are looking for and then use that document to help create your request for proposal (RFP) and to evaluate finalists as you work to select the right vendor for you.
Here are four simple steps you can follow to create a solid vendor profile that will increase the odds of finding the right vendor and strengthen your vendor management program.
Step 1: Create a Draft Profile of Your Ideal Vendor
When you develop the technical requirements for the solution you need to procure, also create a profile of your ideal vendor. In addition to profiling basic requirements like industry specialization and service capabilities, be sure to also include other important criteria related to things like operational risks, account management and reporting. Some of the important attributes to define when creating your vendor profile include:
What is the role and responsibility of the vendor for the procurement you are undertaking?
What type of subject matter and industry expertise is needed?
Is there a level of experience (in terms of years, number of clients, etc) that is required?
Should the vendor have any specific certifications or training?
Are there different roles the vendor will play and, if so, do you need separate profiles for each role?
This is the starting point for the process so it's really important to get this part right. Think about all of the components that will drive success in your relationship with the vendor and be sure to outline those in the profile.
Step 2: Vet the Vendor Profile with Stakeholders
Engaging key stakeholders in the completion of a well-crafted vendor profile is critical to ensure you not only have an accurate profile, but also to help build consensus and gain buy in from your key stakeholders. Be sure to identify and include these folks in the review and refinement process. Different stakeholders have different objectives and needs - so it’s critical to get their input and refine the profile based on their feedback.
Step 3: Integrate the Vendor Profile into your Competitive Solicitation Process
Once you've completed the vendor profile it's ready to use in your competitive solicitation process. This is especially important when requesting formal proposals (RFPs), as these are oftentimes more costly and complex procurements.
Using vendor profiles in your RFP development process will ensure you are clear about the type of vendor you’re looking for, and that prospective vendors can evaluate whether or not they are a good fit for your organization. A well designed profile that is properly incorporated into an RFP will actually result in some prospective vendors self-selecting out of the process.
Don’t worry, this is actually a good thing. Just remember - more is not necessarily better when it comes to finding the right vendor.
Step 4: Use the Profile as Part of your Vendor Evaluation and Scoring Process
Finally, you should use the vendor profile to establish criteria for evaluating and scoring all of the proposals that you receive. Since the vendor profile helped you establish a clear picture of the type of vendor you want to work with, it will be much easier for you to evaluate the 'vendor fit', in addition to technical capabilities, once the proposals start rolling in.
I have on many occasions selected a vendor that costs more but is a much better fit for our company or for our clients. And it’s been the right choice nearly every time.
So the next time you have a competitive bidding situation that requires a formal solicitation or RFP, spend some time building your vendor profile. It's a great addition to any vendor management program.
Tom is Founder & CEO of Vendor Centric. He writes and speaks frequently on the topics of procurement and vendor management. Connect with Tom on LinkedIn or drop him a note at email@example.com.
Vendor Centric specializes in helping organizations create and mature the policies, procedures and systems they use to manage their important vendor relationships. Learn more about our vendor management software and services.