Vendor Management

Proper vendor management is a key activity of any procurement process. It involves identification of right sources, source selection and vendor development. 

What is the Right Source ? 

The materials manager or procurement officer acts as the buffer between the vendors and the organisation. Good vendors can mar or make the organisation. Whether the items do not naive on time, or are of inferior quality or the price is high - the organisation's production cost is going to increase due to increased idle time, increased rejections or high price of inputs. The contribution in terms of profit or loss by the supplier cannot be measured easily because it is usually in the form of an opportunity cost - either gained or lost. Thus, it is very important to know that when is a source, the right source. A vendor source may be considered good when it fulfils following conditions : 

• The vendor supplying a product or service at the most value adding price, with zero rejections and on time, meeting needs during emergencies - sudden stockouts or providing credit during stressful periods or other problematic times, continuously trying to upgrade his services, products and technology. 
• There should be at least one more source who is competing closely. 

There is no right source, if it is one source only. There has to be competition to keep the sources on their toes. In fact, single source suppliers need to be nurtured very carefully as the whole company operations seem to be linked to them. 

Hence, a good supplier who is able to maintain quality, quantity and time schedule at the right prices is an invaluable asset to the company. Therefore, the right source should be identified, developed and nurtured by the company. The right source may be the local whitewashing man or can be a big manufacturer in his own right.