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Vendor management in construction industry focuses on enlisting the vendors, managing the services and goods provided by the vendors to execute the project in a less complex way. Every construction organisation demands vendor management to handle complexities associated with vendor sourcing, getting quotes, capabilities, quality works and turnaround times.
Features of Vendor Management
The major features covered by vendor management are:
- Contract Negotiations
- Job Assignments
- Relationship Management
- Evaluation of Performance
- Payment Dissemination
It serves the following objectives:
- Better selection of vendor from a large group of vendors, resulting in better choices and costs.
- Better Contract Management
- Performance Management
- Quality Vendor Relationship
- Better value by long term savings and improvement of earnings over a period of time
Vendor management hence is an effective and productive way to manage vendors. This management technique requires the proper skill, resource, time and specific management tools.
Vendor Management Systems
There are basically two main vendor management systems, namely:
- Vendor Management Systems (VMS)
- Contracted Service Management (CSM)
- Employer of Record (EOR)
The VMS is a computer program that serves the function of distributing the job requirement to the recruiter, staffing companies and consulting companies or other vendors. This system hence takes part in the hiring, interview and payment process.
The CSM system works with the help of software. The software used for this purpose possesses large manufacturing facilities. This can capture real-time data between the vendors and the clients. CSM is hence a great effort that can help to minimize the timekeeping process along with the improvement of project cost visibility.
The EOR system is associated with the management of independent contractors. The main managing processes involved in EOR are auditing, reviewing and other management issues.
Vendor Management Process
The four major processes involved in vendor management are:
- Business Goal Establishment
- Selection of Best Vendor
- Management of Vendors
- Consistent in Meeting Goals
1. Business Goal Establishment
A clear picture of the business goal in a very specific manner helps to enlist the vendors precisely. A clear idea of what to achieve makes the vendor selection process easier. A proper business goal defines the respective performance parameters that help in easy management of the vendors.
2. Selection of Best Vendor
Among the list of vendors, the pros and cons of each must be studied before selecting the final vendor. A thorough vetting must be done before a final decision is taken. Some of the questions to ask here are:
- The experience of the vendor
- Experience in a similar work environment
- Stability in work?
- Process are standardized or not
- Have they been subjected to any legal action?
3. Management of Vendors
Once the vendor is selected and work is started, their work is monitored on a daily basis. Performance and output are studied. This way it is assured that the agreements as per the contracts are fulfilled. An efficient management of vendors is better carried out by proper communication that involves offering approvals and disapprovals, changes in work and feedbacks etc. All those communications that deepen the relationship and work commitments are followed.
4. Consistent in Meeting Goals
Work is performed so that there is consistency in meeting goals at every stage of the project. Regular management of the vendor helps to achieve this process. This hence checks whether the performance and objectives are met at each level of the project process.
Role of Vendor Managers in Vendor Management
The major roles of Vendor Managers in Vendor management are:
- Control of supplies by working with management and budgeting offices
- Control the cost of supplies by checking it is below the market value
- Performs negotiation for bringing a price that is within the scope of the company without compromising the work quality
- Make appropriate decisions on the cost of work by seeking bids from multiple suppliers.
- Selection of right vendor by tracking their past records, financial history, and service.
- Proper communication with the vendors throughout the supplies, work process until the end of the project.