Vendor Management 101: An Executive Guide to Vendor Management

Vendor Management 101: An Executive Guide to Vendor Management

The combination of innovative IT and a cooperative orientation toward vendors leads directly to better vendor performance and firm profitability.

What’s the evidence that forging more strategic, collaborative relationships with vendors actually works?

From trade press articles to reports by tech analysts to ubiquitous company-sponsored case studies, tales of increasingly value-added CIO-vendor partnerships abound. The only problem is that, even aside from the blatantly self-congratulatory case studies, so many of these sources of information are tainted by questions about objectivity. When selling advertising or analyst services to the tech industry, it’s generally better business to accentuate the positive when telling stories and reporting on trends. So when reading the latest paean to collaborative problem-solving in the new vendor-as-partner world, it’s likely that many CIOs harbour at least a few quiet reservations.

However, this is a case where reassurance can be found in even top-drawer business publications and much of the recent academic literature. One example is a September 2006 article in Harvard Business Review that summarises results from a survey of 156 procurement executives about how their job responsibilities are changing. More than 90 percent of respondents described jobs that were expanding in scope to include shortening cycle times, taking the lead in product innovation, enhancing the quality of products or business outcomes, and generating incremental revenue, according to authors Carlos Niezen and Wulf Weller, partners at Bain & Company.

Another example comes from the spring 2007 Journal of Supply Chain Management. Two researchers, Antony Paulraj at the University of North Florida and Injazz Chen of Cleveland State University, surveyed more than 200 firms in an attempt to tie savvy vendor management to positive business outcomes. The professors found clear evidence that strategic buyer-seller relationships coupled with smart applications of information could help to integrate external logistics operations and overall business agility.

There’s much more research along the same lines, from such geeky refereed journals as the European Journal of Marketing, IEEE Transactions on Engineering Management and others, all of which basically find that the combination of innovative IT and a cooperative orientation toward vendors leads directly to better vendor performance and firm profitability.

The notion of all this value-added partnering with vendors even crops up in disciplines far removed from IT or even business in general. The March 2007 issue of Notes describes the folly of evaluating vendors solely on the basis of response time and fill rate. (For the uninitiated, Notes is the foremost scholarly journal for music libraries and librarianship; never let it be said that CIO doesn’t scour the intellectual landscape for its readers.)

Vendors who sell new scores and other music publications to libraries add the most value by providing broad recommendations related to new publications — a critical role since so few scores, recordings or books are ever reviewed and so remain doomed to obscurity. Such vendors, writes Daniel Zager, associate dean and head librarian at the Sibley Music Library in Rochester, New York, “are truly our essential partners in the collection development enterprise.”

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