Managing Vendors – Articles by Jim Everett

Tips on managing vendors, skills and competencies required

Engaging Vendors, Purchasing Departments, Ancient Rome

Posted on | April 3, 2008 | CLICK HERE TO COMMENT OR ASK QUESTION

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The terms, “vendor” and “purchasing”, come from way back ancient Rome. Yep, Latin. Who would think that these origins, thousands of years ago, would affect (or at least reflect) the way that people in companies manage resources they engage from outside their company. Hey, there’s another word, “engage”. That one comes from way back in old French. More recently, companies have adopted a “sourcing” strategy, which is more suited to complex business (the word “source” comes from Latin BTW (meaning: to spring forth) via Middle English.

So what?

Here’s the thing. When an outside company is providing a commodity or basic service, you are simply buying their product or service. Like supplies and materials, or repairs. But when they are under the hood of your business processes, or dealing with your customers, they are actually part of the broader running of your business.

The term “vendor” simply means “seller”. If they are doing payroll administration, or simple product fulfillment, this may be appropriate. But if you have outsourced your entire data center operations, recruitment, or customer care, then what they do becomes part of your business. They are engaged.

“Engage” means to involve, interact, mesh. See where I am going with this. Engaging a vendor suggests more of a partnering, collaborative relationship. You meet with them, make joint decisions, gather and analyze data, reshape what they do, and vice versa. They are a source of expertise, as well as supplies.

So for vendors you engage with, the chemistry between you is important. If you clash, or they are just a totally different business culture, then solving business problems and planning for the future with them will not be as effective. I wrote a short article on the called “The 7 Soft C’s of Outsourcing”.

When Purchasing Departments get involved in the selection and contracting of external resources, they bring a different mindset. Even the term “purchasing” reflects this. The word “purchase” means to grab, get hold of, buy. It is a one time action. Find it, get it. Purchasing Departments (aka “Procurement” – now there’s a word! It has a strong military influence, as well as a few negative connotations – check out http://dictionary.reference.com/browse/procure).

Purchasing departments (and more recently Sourcing functions) have an important role in ensuring the best deals with suppliers, and containing rampant spending by departments. They create supplier lists (aka vendor databases) of companies they have done business with before. They weed out those who do not deliver value for money, or are overly difficult to deal with. They streamline and contain the number of vendors their company deals with. And there is strong business merit in this. See my earlier article on “Purchasing and HR”

Problems arise (and I have had numerous clients express their frustration) when the need is for a specialized vendor with a unique approach and set of expertise. This is often the case with creative agencies, customer care providers, developers, and others. Purchasing wants the operational department to select either the lowest bidder, or a vendor who is already on the Purchasing preferred vendor list.

When and organization has a “sourcing” mindset, and strongly supports the collaborative and strategic working together of the Department that is outsourcing, and Sourcing function with strong expertise in the legalities and process issues, then outsourcing is far more effective.

So what I have done when working with clients is help them create a strong business case for the vendor they need, and also help them work with Purchasing to create a more collaborative interdepartmental way of getting the right resources for the project.

(“Collaborate” – co = with, labor = work – therefore “work with”. “Work with me here”.)

It is wonderfully refreshing to see the work that is being done by specialized industry groups, such as Sourcing Interests Group, or SIG. These experienced professionals have a highly strategic and innovative mindset, and really “get” what broader organizational resources mean to a company. They have a powerful collection of partners, with world-class industry expertise, and offer very informative weekly webinars delivered by these partners. If your company engages vendors, a visit to the SIG site is well worth the time. Some of their resources require membership and a financial commitment.

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