How to Improve Supplier Management Processes with Vendr

From communication breakdowns to compliance issues, the hurdles in managing suppliers can impact every area of your operations and output from procurement to delivery, and therefore affect customer satisfaction and your bottom line. 

Whether you're grappling with service interruptions, inconsistent quality, or rising costs, our insights will help you streamline your processes and foster stronger, more productive partnerships.

Explore our recommendations to learn more about supplier management and how to improve it, the KPIs you need to track, and how solutions like Vendr make a positive difference. 

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An overview of supplier management 

Supplier management involves overseeing and coordinating a company's interactions with third-party sellers to ensure quality, cost-effectiveness, and timely delivery of products or services. 

Let's discuss this in more depth: 

How companies benefit from an optimized supplier management process

A robust supplier management process enhances operational efficiency, improves risk management, and fosters strong relationships with suppliers. It ensures consistent product quality, reliable supply chains, and better negotiation power, ultimately leading to cost savings and improved customer satisfaction.

What the ideal supplier management process looks

A high-quality supplier management process includes:

• The strategic sourcing of reliable suppliers
• Clearly defined performance expectations
• Regular evaluation of supplier performance
• Communicative and transparent partnerships

By implementing structured procedures and leveraging technology, you can reduce your SaaS costs, mitigate risks like shadow spend, and minimize manual tasks throughout your software procurement processes.

3 supplier management models

Here are three common supplier management models you can adopt:

1. The partnership model: This model emphasizes collaborative, long-term relationships with suppliers. You work closely with suppliers, sharing information and resources for your mutual benefit. This fosters innovative problem-solving, improved product quality, and enhanced supply chain efficiency, and is ideal for businesses that value trust-based relationships.

2. The integrated model: Suppliers become an extension of your operations and are deeply involved in your core processes, including planning and development. This close integration helps you streamline workflows, reduce lead times, and ensure consistent product quality. This model is suitable for businesses that require high levels of coordination with suppliers.

3. The strategic model: Suppliers serve as key stakeholders in your strategic planning and decision-making processes — offering long-term value with highly aligned goals. It’s most effective for critical suppliers whose performance directly impacts business success.

6 metrics & KPIs for managing supplier performance

A supplier's delayed delivery or subpar service can disrupt your internal operations and affect the customer experience. To prevent such issues, tracking supplier management metrics and KPIs is crucial. 

Here are six key metrics and their general formulas:

1. Supplier compliance

This metric measures how well suppliers adhere to the terms and conditions outlined in their contracts. It ensures that suppliers follow agreed-upon quality standards, service delivery times, and regulatory requirements.

Formula: Compliance rate percentage = (No. of compliant services / Total no. of services) x 100

2. Maverick spend

Maverick spend tracks purchases made outside of agreed procurement processes, comparing the planned procurement budget with actual expenditures. Measuring this helps you identify unauthorized spending, ensuring budget adherence and highlighting discrepancies between expected and actual expenditure. 

Formula: Maverick spend percentage = (Total maverick spend / Total spend) × 100

3. Supplier defect rate

This metric helps you identify the reliability and quality of your SaaS suppliers by measuring the percentage of delivered services or software components that fail to meet the required standards or contain defects.

Formula: Defect rate = (No. of defected services / Total no. of services delivered) × 100

4. Purchase order coverage

Ensuring control over procurement processes involves measuring the percentage of supplier invoices that precisely match existing purchase order numbers. Achieving a high percentage, ideally close to 100%, prevents unauthorized spending and reduces processing costs.

Formula: Purchase order coverage percentage = (No. of invoices matching POs / Total no. of invoices​)×100

5. Procurement cost reduction

This KPI tracks the percentage decrease in the total cost of procurement over time. You can use it to identify opportunities for reducing spend while maintaining or improving the quality of your software and support.

Formula: ((Previous period cost - Current period cost) / Previous period cost) x 100

6. Process compliance rate

The process compliance rate measures how well procurement activities follow established purchasing policies, with a high rate indicating efficient and consistent procurement operations.

Formula: (Number of compliant transactions / Total number of transactions) x 100

Related read: Learn how Vendr helped conversational sales leader Drift save $1.6m on SaaS software.

6 Ways to improve supplier management

Now that you know which metrics to track to effectively stay on top of supplier management, here are six ways to improve your supplier management practices:

1. Centralize how you store and manage supplier contracts

A centralized contract management system helps streamline contract retrieval, track key dates like renewal and compliance deadlines, and maintain a single source of truth for contract terms.

You need a single repository to quickly locate contracts, reduce the risk of missed renewals, and improve overall contract visibility. 

2.  Regularly audit supplier performance

By systematically reviewing suppliers' adherence to agreed-upon standards, service level agreements (SLAs), and performance metrics, you can identify areas for improvement. Plus, you can address potential issues before they escalate.

For instance, conducting quarterly performance reviews can highlight consistent issues with a supplier’s service reliability or software quality, so you can take corrective action or seek alternative suppliers. 

If you're using Vendr, it's easy to stay on top of procurement performance throughout the quarter and gain real-time supplier insights.

3. Closely track your supplier management KPIs

Monitoring KPIs such as the ones listed above lets you to make data-driven decisions, manage risks effectively, and make sure suppliers meet business needs and standards. 

Picture this: After tracking supplier defect rate, you find outdated features and poor quality control are causing consistent issues. With this data, you negotiate new pricing and terms to compensate for the disruptions. Regular monitoring then reveals a significant reduction in defects, which informs your next round of negotiations.

4. Standardize and automate supplier management workflows

Implementing standardized procedures for selecting new suppliers, processing orders, and evaluating performance helps ensure consistency, efficiency, and accountability in your procurement processes.

Automation tools streamline tasks like approving orders and processing invoices, freeing up your team to focus on strategic activities. 

Vendr standardizes workflows with criteria and processes for evaluating and onboarding suppliers, making sure every supplier is assessed using the same metrics. 

Vendr’s automated features include: 

• Contract renewal reminders
• Real-time spend tracking
• Integrated communication tools for seamless procurement-supplier interactions

5. Automate contract analysis

This involves using software tools to review and analyze contract terms, identifying potential risks, compliance issues, and opportunities for improvement or cost savings. AI-powered contract analysis tools can quickly flag unusual clauses or deviations from standard terms, allowing for prompt review and adjustments.

Check out Vendr’s contract analysis feature for real-time insights and analytics on contract performance, spending patterns, and supplier compliance — so you can make better decisions. 

6. Use experts to negotiate favorable deals

Leveraging the specialized knowledge and experience of procurement experts when negotiating with your suppliers wins you better terms and significant cost savings.

At Vendr, our experts use internal data on industry benchmarking and discount levers like timing negotiations with quarterly targets to get you the best price on the software you need.

Related read: Discover how the cryptocurrency leader Luno saved $1.8M in software thanks to smart SaaS management with Vendr.

Build foolproof procurement & supplier management processes with Vendr

With Vendr, you can centralize all your contracts and spend information into a single, intuitive platform. This gives you clear visibility into key metrics, helping you track and manage your procurement activities and supplier information management more effectively. 

Vendr also enables precise comparisons between contracted and actual spend, so you can stay on budget and identify any discrepancies or supplier risk early. By streamlining your procurement processes and leveraging detailed insights, Vendr empowers you to:

• Optimize your supplier management strategy
• Drive cost savings
• Maintain control over procurement operations

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