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3 Things Vendor Management Must Deliver to be Successful

There are many goals of a well-run vendor management program, but no program can run successfully if you don’t meet these three key objectives: reduced expenses, improved vendor performance and managed risk.

It sounds simple, but if you’re running your vendor management program as an expense – even if you come in on budget – you can never meet the first objective because you’re paying out money instead of reducing expenses. But you may say, vendor management has always been an expense. That’s just the way it is.

WRONG. There’s a way to run vendor management as an expense reduction program instead of an expense, saving you potentially millions of dollars in the process.

How to reduce expenses

Expenses can take several forms, but the largest cost reductions come from having a contract that works in your favor, not the vendor’s favor. At Maple Street, our professionals do negotiations 24/7. They know how to get the best prices and value for your dollar.

For example, they know the best time to start negotiation is at least two years before a contract terminates. Having time to do due diligence and developing a potential replacement in your back pocket is a huge advantage because the vendor believes you can and will replace them.

Other ways negotiation reduces expenses include knowing the fair market prices for services and products as well as knowing the traps and hidden fees lurking in vendor contracts.

How to improve vendor performance

Improving performance goes hand in hand with reducing expenses because poor performance often means you’re paying for vendor mistakes over and over again – mistakes that cost you money. Paying for vendor errors and having no specified time frame to fix the problem goes back to having a contract that spells out exactly what the vendor will do and how long they have to do it. And, of course, there must be remedies built if the problem doesn’t get fixed.

With the right contract, a vendor can no longer refuse to rectify a situation because a well-negotiated contract says the vendor has to fix it.

Maple Street developed a proprietary agreement called the Performance Addendum in which vendors are asked to agree to work with you to achieve specific results, so everyone is moving in the same direction with the same objectives. Maple Street acts as the mediator and monitor, assuring your relationship with your vendor remains productive.

Together, Maple Street, the client, and the vendor develop a scorecard that will be evaluated and measured at agreed intervals. Because the vendor’s performance is your performance, measuring and monitoring is a keystone of successful vendor management. And if you don’t do it, you’ll have no concrete idea of how well or poorly your vendors are performing, so you can’t improve performance.

How to manage risk

Mitigating risk is becoming even more difficult as new requirements continually develop – and you’re being asked to be responsible for your vendors’ mistakes. How much of your time and your employees’ time is spent devoted to risk?

Managing risk doesn’t need to be a nightmare of endless, time-consuming drudge work. Outsource your headaches to Maple Street and let the experts do it. Our vendor management compliance services include vendor management policy and procedure development, risk assessments, risk ranking, due diligence collection, and due diligence summaries. We provide full vendor reporting and free, unlimited user training on how to follow your vendor management procedures with the Vendor Advantage System®.

A second way we help you manage risk is taking the guess work and anxiety out of bringing on new vendors. Our vendor selection services include new vendor vetting, choosing the right vendor, RFP management, negotiating best terms and pricing, and more. We do most of the heavy lifting for you and will advise you every step of the way.

If your vendor management program isn’t producing the results you want, it’s because you’re not achieving the three key objectives: reduced expenses, improved vendor performance and managed risk. You can change this – call 800-513-6839, email mssales@maplestreetinc.com or visit www.maplestreetinc.com/learn.

MapleStreet is a business partner of the California and Nevada Credit Union Leagues. 

 

 

 

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