How Outsourcing Vendor Management Can Cut Both Cost and Risk
Many companies across sectors are under budget constraints. Hiring has been put on hold. Supply chains are under scrutiny. Overall, resources are being stretched thin. Yet that doesn’t mean businesses can afford to cut back on areas like vendor management. On the contrary, placing more emphasis on vendor management could ultimately help free up some budget while also streamlining risk management.
As Gartner explains, “Vendor management is a discipline that enables organizations to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the deal life cycle.”
Of course, mastering this discipline is easier said than done. That’s why many organizations benefit from outsourcing vendor management to a trusted, experienced partner.
Unlocking Cost Savings
To find cost savings, procurement teams can evaluate their vendors to see whether switching to new suppliers would be advantageous or whether renegotiating with existing vendors could pay off. However, procurement teams might not have the bandwidth to take on all that goes into these evaluations.
Not only might procurement teams need to assess their current spend and see if other suppliers in their networks offer better rates, but they also may need to actively conduct requests for quotations (RFQs) to find new vendors with more competitive pricing. For companies whose finance and procurement teams are already stretched thin, outsourcing could be a way to cover these areas rather than taking on the commitment of hiring new employees.
From there, an outsourced partner could unlock additional cost savings, perhaps to the point where the savings are even more than the cost of utilizing their services. An outsourced partner with significant vendor management experience and resources can help you easily find the suppliers that fit your budget, perhaps by introducing you to vendors you were previously unaware of.
An outsourced partner can also take on the heavy lifting of conducting RFQs and negotiating contracts with vendors so that you don’t have to worry as much about weighing time and effort against finding the best prices.
Managing Supply Chain Risk
In addition to helping you reduce procurement spend, an outsourced vendor management partner can also help manage supply chain risk. Due to COVID-19, many companies want to reduce supply chain risks that they might not have previously considered, such as the risk that a disruption in one geographical area could affect your ability to receive products on time.
As such, an outsourced partner could evaluate vendors based on these types of risks and help you expand your supplier pool to more geographical areas. That way, if, say, a severe storm hits one manufacturing region, you could quickly switch to ordering from suppliers in another unaffected region.
Outsourcing vendor management can also reduce supply chain risk in the sense that a third party could have the experience and resources to fully vet vendors, onboard them into your procurement system and continue to monitor them thereafter.
While you may want to switch suppliers to save money, you wouldn’t want to switch to a vendor that could create compliance risks for your company or reputational risks depending on their business practices. So when an outsourced vendor management partner helps you identify new suppliers to switch to, they can also help find ones that align with your risk management needs.
Increasing Procurement Efficiency
By turning to an outsourced vendor management partner, your organization can unlock new cost savings and get a better handle on your supply chain risk.
Plus, since these third parties provide additional resources to your organization and often have deep expertise in vendor management, they can also help you increase your procurement efficiency. Whether you need to quickly source new suppliers due to budget or risk issues, or if you need to make operational changes like streamlining vendor payments, an outsourced partner can often help.
In addition to helping finance and procurement teams through our e-procurement software, GoProcure’s outsourced services help companies simplify and improve vendor management.
Want to learn how you can save money, reduce risk and increase efficiency by working with GoProcure as an outsourced vendor management partner? Request a free consultation with our team of experts today.