How Can Companies Leverage Vendor Management Transformation to Unlock Value?

July 20, 2015

Old fashioned key and lock


Here’s our interview with Vendor Management Transformation expert Maureen Llewellyn. Maureen is a Strategic Vendor Management pro who has spearheaded numerous successful transformation initiatives within Insurance and IT.  She was able to fill us in on this vital sub-discipline within Supply Chain: Why and when should companies consider a top-down Vendor Management transformation?  What are the challenges inherent in getting buy-in for such a transformation, and what are the most important areas to address? What skills are important to succeed in Vendor Management, and what do organizations tend to miss in their Vendor Management frameworks?

Ms. Llewellyn is a true leader in this Supply Chain specialization, with the ability to have an enterprise-level vision for how sound Vendor Management capabilities (people, process, technology and governance) leads to cost savings and strategic advantage for companies. We quite enjoyed this interview and we’re sure you will too.

Factors that Lead Companies to Consider Vendor Management Transformations:

“From a transformation perspective, there can be a number of drivers,” says Llewellyn. “Those drivers are typically driven top down.  It could be that vendor management practices are not robust enough – lacking key controls to be compliant from a corporate risk management perspective.  Perhaps there are significant gaps around organizational capability maturity that impede the effectiveness of vendor management.  Or maybe Vendor Management practices has been ticking along in the background for 10-15 years operating, but in a less formal or optimized manner. There’s an opportunity to do different things, better things strategically.  This requires a transformational approach to operational excellence, by looking at where your organization is now, assessing where you want to be, and what it will take to get there.”

 “This kind of transformation would be tied to overarching corporate strategic plans at the very top level.  Executive leadership would define the vision ‘this is how we want to perform in the marketplace, these are our longer term aspirations”, turning to strategy execution, organizational change transformation experts to drive the business outcomes and determine ‘how do we get from here to there?”

According to Ms. Llewellyn, some of the key challenges faced in realizing successful vendor management transformations include:

  • Lack of sustained, top down executive sponsorship and engagement for overall strategy execution
  • Not enough focus or investment on the ‘people’ aspect of transformation, and managing organizational change and regular communications as part of evolving the vendor management practice.
  • Failing to look at the long term ‘big picture’ and how each of the strategic initiatives integrate
  • Failing to engage strategic suppliers in shaping supply chain business plans and engaging them in process changes.
  • Downplaying the importance of building a solid foundation for internal organizational capabilities necessary to operational excellence and supplier relationship management.
  • Lack of ongoing investment in sustainment and ongoing continuous improvement initiatives.

The Transformation in Action:

“Part of transformation is around delivering organizational capability maturity,” says Llewellyn. “Before you go racing to the end of the game, you need to understand where you’re at right now. It starts off with that executive vision and mission. What are the business drivers? What sorts of strategies did we employ in the past that we want to stop because they are no longer relevant?  Transformation can be incremental changes, focused on targeted improvements, but generally it should be tackled from a big picture strategic lens.  You can choose which initiatives are most critical to your organization to deliver the greatest transformational results – sooner.  Your Vendor Management transformation roadmap keeps that vision focused over time.

“Implementing a formalized Vendor Management Governance Framework focuses first on building organizational capability; assuring supplier risk controls and resilience; and assuring internal best practice process in contract management, supplier relationship and supplier performance management from three perspectives – operations, tactical strategy execution and strategic management.  It also focuses on where and how key elements integrate with other corporate disciplines including strategic sourcing, procurement, risk, security, and legal.” 

Skills that are Most Important in Vendor Management Transformations:

“Making sure that you have tactical leaders in place who have big picture thinking to help understand what the necessary interactions are with other corporate disciplines,” says Llewellyn. “Often folks are operating down in the weeds, focused on their category, their contracts, what their accountabilities are, but they’re not looking at it from an enterprise touch point perspective.”

“Having tactical vendor management leaders with a solid understanding of industry and global best practices and supply chain risk management for the disciplines of Contract Management, Supplier Performance Management, and Supplier Relationship Management is important. Those are immensely helpful during any transformation – whether it’s implementing a new services structures or building a new strategic relationship; or focusing internally on improving your overall spend, supply chain risk management, supplier performance / cycle time or net promoter scores.”

Communications expertise.  Transformational or continuous improvement initiatives, should include a communications strategy with regular, targeted communications to impacted vendor management stakeholders, including your strategic vendor partners.  Openly communicating with and actively listening to your business partners and suppliers is really important to assure alignment and harnessing evolving needs and addressing unforeseen issues early.”

“Other key skills required in leading the implementation of strategic Vendor Management Governance Framework includes:  well developed leadership, collaboration, engagement and relationship management skills – including strong problem solving skills.  Knowledge of business process re-engineering, organizational change, project management skills are also very desirable” skills.”

And lastly, the ability to navigate ambiguity is massive. Often during transformational initiatives, you have multiple internal supply chain silos to navigate through, with various owners of process, services and products.  Achieving strategic alignment can be sometimes be challenging.  Organizational change experts can help with that!

What Companies are Missing in Vendor Management:

“When I’m thinking through transformation and strategic vendor management,” says Llewellyn, “Having a robust and formalized Vendor  Management Framework in place is the predominately missing piece in many organizations.   When I hear of pain points in the vendor management lifecycle activities, I tend to look at organizational capability maturity first.  Typically those pain points are a result of specific gaps in skills, subject matter expertise, governance, formalized processes, roles & responsibilities; formal KPIs, Metrics and scorecards, and continuous improvement – which all fall within a formalized framework.”

“I look at four disciplines under the umbrella of ‘strategic vendor management’ – contract management and vendor governance and compliance. Once a contract has been negotiated and signed it shouldn’t go in a drawer. Having governance mechanisms in place to manage vendor risk and compliance is becoming much more mainstream – particularly in IT using ISACA’s CoBIT 5 risk framework.  The next piece is around supplier performance management – having the right KPIs, metrics / SLAs, scorecard, customer satisfaction / net promoter scores.  And then there’s the strategic supplier relationship management piece, which I think tends to gets less focus in a lot of organizations – integrated strategic supplier planning, driving collaborative innovation and continuous improvement; and leveraging supplier industry insight and knowledge for win /win business outcomes.”

“Typically in less mature organizations, a huge amount of effort and focus is spent down in the weeds on the operations side. At the strategic level, supplier analytics and rolled up scorecards ‘show how we’re doing’.  There tends to be less focus on that middle tactical part – connecting those strategy dots showing progress against vision, and tangible results compared to pre-transformational activities.  With focus on ‘running the business’ organizations don’t necessarily commit resource capacity to building out the organizational vendor management capability.”

 Finally, Ms. Llewellyn provided us with a list of key factors behind implementing a robust Vendor Management framework. Check out the infographic we put together below!

Vendor Management Infographic v2

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Thanks to Maureen Llewellyn for providing such great info about this crucial aspect of strategic Supply Chains. And stay tuned in the coming weeks as we continue to interview Supply Chain’s high fliers about skills to succeed, hiring challenges, industry trends, and new developments in the field.logo_icon

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