Better vendor management through program management

program manager CSC Blogs

The Chartered Institute of Procurement & Supply (CIPS) defines vendor management (also known as supplier relationship management)  as the process that “involves reviewing the portfolio of suppliers, categorising supply relationships by their significance, devoting resources in proportion to the relationship’s significance and managing processes between the parties to realise the relationship objectives.”

Traditionally procurement is a full time-role, but on most programs it is uncommon or highly unusual to have a full-time procurement role. More common is managerial, project and program management skills being used to source, procure and then manage the vendor.

Where then can we, as professional program and project managers, get help?

Some methodologies, such as PRINCE2, for example, assume that the project is run within the context of a contract, i.e. the contracting process has already completed and is not included within the method itself.

A similar situation exists within the MSP (Managing Successful Programs) methodology where procurement and vendor management is not handled separately but assumed to take place as required within the transformational flow areas, including planning and control and benefits management etc

Indeed, the Project Management Institute itself acknowledges the situation: “Procurement Management is one of the nine Knowledge Areas of the PMBOK® Guide, but it is a relatively recent focus of academic study and in many business sectors the contribution of procurement is not fully realized or integrated into the strategic considerations of the business.”

The secret sauce

So what is the recipe for better vendor management and how does program management help?

Well I suggest combining best practice with the PMBOK 5 stages of Program Lifecycle, for example:

  • Initiating

We initiate a program, why not a supplier relationship? Look to assess vendors potential for innovation. Understand how they work and their operating model and how they make a profit. Perhaps find new suppliers, or even create new suppliers through the use of a joint venture or vertical integration. Alternatively, invite current suppliers to move into a new market.

  • Planning

Plan assessment of technical capabilities, but also plan to develop the vendors’ technical capabilities. Assess any relevant external factors, environmental factors, social, moral ethical, regulatory. Help the vendor to deal with these hurdles together.

  • Executing

Great execution leads to great purchasing. Use consolidation to increase your purchasing power. Alternatively decrease purchasing levels in order to prevent one supplier becoming too powerful. Share information intensively and make it work throughout the supply chain.

  • Controlling

Conduct joint improvement exercises. Benefits to suppliers also accrue to their clients in a mature supplier relationship. Be sure to always  retain control. By adding value to your supplier you reduce their commercial risks and become a gateway to other markets and other revenue streams.  Supervise your vendors, and by supervising you can turn rivalry into opportunity.

  • Closing

Although projects and programs are fixed, unique one-offs activities the purchasing organization absorbs that information and those suppliers can go on to other procurements in other projects and programs. Playing hardball is one option, but how much better to close a procurement program with a fit, able, technically advanced vendor, ready to work with you to achieve your organisational goals?

Happy purchasing!

RELATED LINKS

46 ways to save costs and add value as an IT program manager

Flexing your agile muscle as a program manager

A project manager and solution architect discuss a successful data center migration

Comments

  1. Here’s another metric for effective Vendor Management:
    U.S. banks, corporations establish principles for cyber risk ratings firms

    http://in.reuters.com/article/us-banks-cyber-idINKBN19B1ZL

    Like

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