In crisis, effective vendor management is a necessity
- The pandemic has made it necessary for businesses to focus on some initiatives that bring vendor management back under control.
- Experts recommend accelerating innovation of organizations’ approach to vendor management.
The Covid-19 pandemic has forced an evolution of the traditional ways of working and companies are now focused on monitoring and increasing productivity from a remote workforce. Organizations are accelerating their reliance on third-party vendors, partners, supply chains, and external digital services. Businesses of all kinds faced difficulties in identifying, verifying, and onboarding new vendors over the last year as global supply chains dried up and physical contact became restricted. Be it suppliers, sellers, merchants, agents, or delivery partners, navigating effective vendor management has been anything but a breeze.
Regardless of the size, scale, or nature of a business, multi-step vendor document collection and validation before giving access to only genuine and reliable vendors have gotten the best of us all at some point. Some failure is inevitable for example when NASA incurred losses of more than US$700 million due to supply of faulty aluminum products for their satellite launch missions.
Of course, the pandemic has created perfect nesting conditions for vendor fraud by giving rise to a culture of uncertainty, isolation, and a lack of information. With all the drastic changes in working conditions and methods over the past year, procurement purchase teams will have to look for new ways to keep the supplies steady and fraud at bay. Even giants like IBM are trying to build technology platforms for vendors and suppliers who have pivoted from their traditional business models to address the erratic demand resulting from Covid-19.
These platforms can be used by buyers to connect to new vendors outside their immediate supplier circle who might be in a better position to meet their needs. It is, however, crucial that the vendor validation process must be real-time, contactless, thorough, and potent enough to filter out the fraudsters at the preliminary stage.
Shift to digital
AuthBridge Research Services recommends businesses shift vendor onboarding to a completely digital model, which could save them time, increase efficiency and build scalability. It will also allow businesses to save precious resources that can be deployed to a strategic vendor relationship management with high-priority vendors. “By adopting a digital vendor onboarding process that is easily customizable, you can also make way for a standard onboarding procedure of global vendors,” it added.
Plans and backups
Above all, businesses should move beyond the traditional annual or semiannual vendor performance reviews. Organizations can start with preparing vendor contingency plans and offboarding processes, especially for critical vendors. An offboarding process that includes cutting off system access, disposing of data, and collecting outstanding payments would also be ideal.
Another way to approach this is also by developing a new vendor management group or program focused on strategic, reputational, operational, financial, compliance, and security risks, with the goal of reducing costs and preventing future disruptions. Expand monitoring beyond cyber and data to include compliance and other evolving risks, such as financial viability and business continuity status is also necessary.