Skip to content

Vendor Management: What It Is, How It Works & Best Practices

Table of Contents

Vendor Management is more than just a buzzword in procurement – it’s a crucial discipline that can make or break a business’s supply chain. From ensuring your suppliers deliver quality materials on time, to negotiating better rates and reducing risks, vendor management plays a pivotal role in keeping operations running smoothly. In today’s complex supply chains (think Manufacturing, Energy, Food & Beverage, Automotive, Pharmaceuticals, and beyond), having a solid vendor management process is like being a skilled orchestra conductor – bringing harmony to many moving parts. And yes, sometimes it feels like herding cats, but with the right approach (and a bit of wit), you can turn vendor chaos into symphony.

In this comprehensive guide, we’ll explore what vendor management means, why it’s so important, and how to do it effectively. We’ll break down the vendor management process into key steps, tackle common challenges (with a wink at a few mishaps we’ve all experienced), and share best practices to modernize your approach. Let’s dive in!

What is Vendor Management?

Vendor management is the process of strategically overseeing all activities related to third-party suppliers (a.k.a. vendors) that provide goods or services to your organization. In simple terms, vendor management meaning having a structured system to select, onboard, monitor, and maintain relationships with your suppliers. It encompasses everything from vetting and contracting new vendors, to tracking their performance, ensuring they meet your requirements (quality, cost, compliance), and cultivating long-term partnerships. By definition, vendor management aims to maximize the value you get from vendors while minimizing risks and costs.

In practice, businesses use vendor management to improve operations in several ways. First, it establishes clear expectations – through contracts and Service Level Agreements (SLAs) – so vendors know exactly what’s required. Second, it provides a framework for accountability: KPIs and performance reviews ensure each supplier delivers on their promises. Finally, vendor management helps companies build stronger relationships with critical suppliers. Rather than a once-and-done transaction, it’s an ongoing collaboration. For example, a manufacturer might work closely with a key component supplier to improve lead times or innovate new materials. In essence, vendor management turns suppliers into true partners in your success.

Why is Vendor Management Important?

Vendors play an outsized role in business success. In many industries, a large portion of a product’s value or a service’s delivery relies on external suppliers. Poor vendor management – or neglecting it altogether – can lead to chaos: late deliveries halt your production line, sub-par materials ruin your product quality, or a vendor’s compliance violation lands you in legal trouble. On the flip side, an effective vendor management process can significantly improve cost, efficiency, and compliance. In fact, studies have shown that companies with structured supplier management initiatives achieved average cost savings of around 12%(aberdeen.com). That’s a hard dollar impact on the bottom line simply by managing vendor relationships better.

Beyond cost savings, consider risk and continuity. Your supply chain is only as strong as its weakest link (often a supplier!). Without oversight, you might discover issues too late – like a critical vendor facing financial trouble or quality fade over time. According to industry research, 65% of procurement leaders have limited to no visibility beyond their Tier-1 suppliers(supplychaindive.com). This lack of insight can be a ticking time bomb; unknown sub-supplier issues can erupt into major disruptions. Effective vendor management mitigates this by implementing regular risk assessments, audits, and contingency plans, so you’re not caught off guard.

Compliance is another biggie. With increasing regulations on sustainability, labor standards, and data security, companies are held responsible for what happens in their supply network. Poor vendor management might mean a supplier in your chain is using unethical practices or violating regulations – which can result in fines or reputational damage for you. An organized vendor management system ensures compliance requirements are communicated and monitored. It creates a paper trail (or digital trail) of certifications, audit results, and corrective actions. In short, good vendor management = fewer nasty surprises, better performance, and a healthier bottom line.

Vendor Management Process: Key Steps

So, how do you actually do vendor management? It helps to break it down into a clear vendor management process. Below are the key steps many organizations follow to manage vendors from start to finish:

Vendor Management Process: Key Steps

Step 1 – Vendor Research & Selection

Every great vendor relationship starts with choosing the right provider. In this first step, procurement and supply chain teams identify potential vendors through research, referrals, or formal RFP (Request for Proposal) processes. The goal is to cast a wide net and find suppliers that can meet your needs in terms of quality, capacity, reliability, and cost.

Once you have a list of candidates, it’s time for evaluation. This includes checking each vendor’s capabilities, reputation, and financial stability. Common techniques involve scoring vendors against predefined criteria (price, experience, certifications, etc.), performing site visits or audits, and contacting references. Think of it as dating before you marry – you want to ensure a good fit. By the end of Step 1, you’ll shortlist and select the vendor(s) that best align with your business objectives and values. Check out our blog on Supplier Qualification.

Step 2 – Contract Negotiation & Onboarding

After selecting a vendor, the next step is making the relationship official – through a contract. This is where you negotiate terms and conditions to protect your interests and set performance expectations. Key elements to define include pricing and payment terms, delivery schedules, quality standards, and SLAs (Service Level Agreements) that specify metrics like uptime or defect rates. It’s wise to also cover compliance requirements (e.g. regulatory standards the vendor must follow, data security, ethical codes of conduct) and outline remedies or penalties if expectations aren’t met.

Once the ink is dry on the contract, vendor onboarding begins. Onboarding is the process of integrating the vendor into your operations and systems. This can involve collecting necessary documentation (tax forms, insurance certificates, NDAs), setting them up in your procurement system or vendor management software, and training them on your processes (for example, how to use your purchase order system or your quality inspection protocols). Effective onboarding is a must for starting off on the right foot. It ensures the vendor knows how to work with you efficiently and meets all preliminary requirements before any real work begins. For a deeper dive on smooth vendor onboarding, see our guide: Vendor Onboarding Best Practices.

Step 3 – Performance Monitoring

Congratulations, your vendor is up and running – but the work doesn’t stop there. Ongoing performance monitoring is at the heart of vendor management. After all, you can’t manage what you don’t measure. This step involves setting Key Performance Indicators (KPIs) for vendors and tracking their performance against these metrics regularly. Common vendor KPIs include on-time delivery rate, quality defect rate, fill rate (for orders delivered complete), responsiveness, and adherence to budget or cost targets.

How do you monitor these? Many firms use vendor scorecards or dashboards that collect data from various sources: internal systems (ERP, QA reports) and feedback from end-users or stakeholders. Regular business reviews (monthly or quarterly) are a good forum to discuss performance with the vendor. If a supplier is hitting it out of the park, you might consider increasing business with them or even collaborating on new projects. If they’re underperforming, this is the time to address issues constructively – perhaps through a corrective action plan or additional support. Consistent monitoring and feedback help keep vendors aligned with your expectations and continuously improving. Read more about Supplier Performance Management here.

Step 4 – Risk Management & Compliance

Managing vendor risk and compliance is a critical step that can’t be overlooked. This part of the process focuses on identifying and mitigating any risks associated with your vendors. Risks can take many forms: financial (vendor bankruptcy), operational (capacity issues, sub-tier supply disruptions), geopolitical (a supplier in a volatile region), or reputational (a vendor involved in unethical practices). A structured vendor management program will include regular risk assessments – for example, checking a vendor’s financial health annually, monitoring news for events that might affect their operations, or requiring disclosures about their own supply chain. Fun fact (or not so fun): disruptions often originate at sub-tier supplier levels – research shows the risk of disruption at a Tier-2 supplier is about 21% higher than at Tier-1, and Tier-3 is 38% higher(bcg.com). Yet few companies have data on those deeper-tier suppliers. This underscores the importance of extending your risk management as far down the chain as feasible. Read more in our guide to great Vendor Assessments here.

Compliance goes hand-in-hand with risk management. It’s all about ensuring your vendors follow applicable laws, industry standards, and your company’s policies. This could mean verifying that a factory supplier follows safety and labor regulations, or that an IT vendor meets cybersecurity standards. Many procurement teams implement a vendor compliance checklist and request certifications or audit reports periodically. If your industry has specific regulations (say, FDA requirements for Food & Beverage or Pharmaceuticals), you might conduct on-site audits or require third-party inspections of vendor facilities. Managing compliance also increasingly includes ESG (Environmental, Social, Governance) criteria – making sure suppliers meet sustainability goals and ethical practices. By proactively handling risk and compliance, you avoid costly disruptions, legal issues, and damage to your brand’s reputation. Read more on Vendor Risk Management Software here

Step 5 – Vendor Offboarding or Renewal

Vendor relationships aren’t necessarily “’til death do us part.” Contracts have end dates, and business needs evolve. Step 5 in the vendor management process is about deciding whether to continue or end the relationship when the time comes, and handling that transition properly. If a vendor’s contract is up for renewal and they’ve been performing well, this stage may involve renegotiating terms and extending the contract (perhaps adjusting pricing or scope based on past performance data). Renewals are also a chance to consider competitive bidding – even a good incumbent supplier should occasionally be benchmarked against the market to ensure you’re getting the best value.

On the other hand, if you decide to part ways with a vendor (offboarding), it should be done in a controlled manner. Proper vendor offboarding includes communicating the decision, ensuring any final deliveries or obligations are completed, revoking the vendor’s access to your systems or facilities, and updating your vendor records to mark them as inactive. It’s also wise to conduct a brief post-mortem – what went well, what didn’t, and lessons learned for next time. Offboarding might involve transitioning the work to another vendor or bringing it in-house, so having a plan in place prevents lapses in supply. And remember, ending on a professional note keeps the door open – you never know if you might need that vendor in the future or if a new contact at that vendor shows up at another company you deal with. In short, close the loop gracefully.

How Kodiak Hub Solves Vendor Management

Kodiak Hub is built to tackle vendor management challenges head-on, providing a modern, digital solution for today’s procurement teams. As an end-to-end Supplier Relationship Management (SRM) platform, Kodiak Hub streamlines each phase of the vendor management process we outlined above. Here’s how Kodiak Hub adds value:

NEW - Scorecard Risk - front laptop_3x2_3x

  • Centralized Supplier Data: No more scattered spreadsheets or hunting through emails. Kodiak Hub provides a single, cloud-based hub where you can store and view all vendor information – from contacts and contracts to performance history and risk profiles. This full visibility into your supplier base means you always have up-to-date information at your fingertips (a lifesaver when you need to make quick decisions or respond to disruptions). Read more on why you should be Consolidating Your Supplier Data here.

  • Automated Workflows: Kodiak Hub leverages smart automation (and even a dash of AI) to reduce the manual workload in vendor management. Vendor selection and onboarding can be accelerated with automated vetting checklists and approval workflows. Similarly, performance data collection and analysis is automated – the platform can pull in data, calculate KPI scores, and even send out periodic vendor evaluations or surveys without you lifting a finger. This not only saves time but also ensures consistency in how vendors are managed. Read more about our Automated Workflows here.

  • Real-Time Performance & Risk Monitoring: The platform acts as an early-warning system for vendor issues. Kodiak Hub continuously tracks vendor KPIs and can alert you if, say, a supplier’s delivery performance drops below a threshold. Its analytics dashboard helps you spot trends (good or bad) in vendor performance. On the risk side, Kodiak Hub can integrate external data sources (e.g. news feeds or financial risk databases) to flag potential risks in your supply chain. The result is fewer surprises and the ability to proactively address small issues before they become big problems. Learn more about Kodiak Hub's Supplier Performance Management Software here.

  • Collaboration & Relationship Building: Vendor management isn’t just about policing vendors – it’s about collaboration. Kodiak Hub includes communication and collaboration tools, like a supplier portal where you and vendors can share updates, documents, and feedback. By providing a transparent channel for interaction, the platform helps foster long-term relationships. Vendors are more engaged when they have clarity on your needs and an easy way to communicate. Over time, this drives improvements on both sides of the partnership. Check out Kodiak Hub's Vendor Collaboration Software here.

  • Compliance & Sustainability Tracking: Worried about regulatory compliance or meeting your organization’s sustainability targets? Kodiak Hub has modules to track compliance documents (think ISO certificates, audit reports) and even rate vendors on ESG criteria. You can set mandatory fields or reminders for vendors to update their certifications, ensuring nothing slips through the cracks. When an auditor asks, “Are your suppliers compliant with X regulation?” – you can confidently pull up the evidence in Kodiak Hub. Learn more about Kodiak's Sustainability & Compliance Features here.

In essence, Kodiak Hub’s value proposition is taking the heavy lifting out of vendor management. It provides procurement and supply chain professionals with a smart assistant of sorts – one that never sleeps, never forgets, and crunches the data diligently – so you can focus on strategic decisions and supplier innovations.

Frequent Vendor Management Challenges

Even with a solid process, vendor management is not without its hurdles. Let’s look at some frequent challenges organizations face when managing vendors (chances are, you’ll recognize a few of these from experience):

  • Communication Gaps and Poor Collaboration: Ever play the telephone game? Miscommunication with vendors can lead to incorrect orders or missed deadlines. Without clear, frequent communication, small issues can snowball. For example, if a supplier doesn’t know about a design change in time, they might produce wrong parts. Gaps in collaboration – like siloed information or “us vs. them” mentality – reduce efficiency and breed frustration on both sides. The best vendor relationships have open lines of communication and a partnership mindset.

  • Lack of Visibility and Transparency: One of the biggest headaches is not having insight into what your vendors are doing or what risks lurk in your supply chain. If you don’t have real-time data on inventory levels, shipment statuses, or a vendor’s supply network, you’re managing blind. Unfortunately, many companies still operate this way – 65% of procurement leaders report little to no visibility beyond their immediate suppliers (supplychaindive.com). This lack of transparency makes it hard to anticipate disruptions or identify performance issues early. It’s like driving at night without headlights. Achieving better visibility (through data sharing, systems integration, or vendor management tools) is critical but often challenging due to disparate systems or reluctance to share information.

  • Vendor Performance Inconsistency: Another challenge is dealing with vendors who are not consistently meeting expectations. Maybe they have A+ performance one quarter and C- the next. Such fluctuation can wreak havoc on your planning and trust. Common causes of inconsistency include high supplier turnover, overcommitment (taking on more orders than they can handle), or quality control issues. It takes effort to continuously manage and support vendors to stabilize performance. Without regular performance reviews and follow-ups, inconsistency can slip through until it causes a major failure (like a late delivery that halts your production).

  • Compliance and Regulatory Risks: As mentioned earlier, ensuring vendors comply with all requirements is tough – and non-compliance can bite hard. Different vendors may be subject to different regulations (think food safety, cybersecurity standards, environmental laws) and keeping track of who needs to do what is complex. If you’re in a regulated industry, you might face challenges getting timely documentation or audit access from suppliers. There’s also the growing need to manage sustainability and ethical practices. Many companies struggle to verify things like fair labor practices or carbon footprint in their supply chain. In fact, 85% of companies find it challenging to achieve procurement sustainability goals due to difficulties finding suppliers with sustainable practices (veridion.com). Balancing cost goals with compliance and sustainability goals is a real tightrope walk. It’s a challenge to gather reliable data and enforce standards across diverse vendors, especially globally.For more on these challenges and how to address them, see our article Supplier Management Challenges and Solutions.

Benefits of Modernizing Vendor Management Processes

If the challenges above sound familiar, the good news is that modernizing your vendor management processes can deliver huge benefits. By leveraging technology and updated practices, organizations can transform vendor management from a tedious task into a strategic advantage. Here are some key benefits of going modern:

  • Automation and Digital Solutions for Vendor Tracking: Ditch the spreadsheets and email chains – modern vendor management uses digital platforms to track everything in one place. Automation handles repetitive tasks (like sending out RFQs or following up on late delivery notices), which reduces errors and frees up your team’s time. Perhaps more importantly, digital tools provide real-time data and analytics. You get a live pulse on vendor performance and risk. In a recent survey, 57% of risk professionals noted that technology providing risk insights has led to improved decision-making (pwc.com). In other words, investing in vendor management software or AI-driven analytics helps you make smarter, faster decisions based on facts, not guesswork.

  • Improved Vendor Relationships and Collaboration: Modern approaches often involve closer collaboration with suppliers, supported by tools like shared portals or communication platforms. When you and your vendors are connected through a system, it’s easier to share forecasts, demand data, or design specifications. This transparency builds trust and aligns goals. Over time, vendors become more like partners, proactively suggesting improvements or innovations rather than just fulfilling orders. Plus, automating the mundane stuff means your vendor managers can spend more time on strategic engagement – like supplier development programs or joint cost-saving initiatives. Stronger relationships can lead to preferential treatment, early access to new technologies, or simply a more reliable supply chain.

  • Stronger Compliance and Risk Management: Modern vendor management processes incorporate robust risk management practices. For instance, you might integrate third-party risk intelligence feeds or use compliance management software. The benefit is early identification of risks (say, a supplier’s credit score drops or there’s news of a strike at their factory) so you can act before a disruption occurs. Digitizing compliance tracking also means you’ll never lose sight of expiring certificates or pending audit findings – the system will flag them for you. Ultimately, a modern process improves resilience: when everyone saw the fragility of global supply chains in recent years, companies with advanced vendor management systems had a clear advantage in navigating the turmoil.

In short, modernizing vendor management makes your supply chain more efficient, collaborative, and secure. It’s an investment that pays off in continuity and performance. If you’re still relying on outdated methods, now’s the time to consider an upgrade – your future self (and your CFO) will thank you.

Vendor Management Best Practices

To truly excel at vendor management, organizations should not only follow the basic process but also embrace proven best practices. Below are some vendor management best practices that can help procurement and supply chain professionals up their game:

Vendor Management Best Practices

Establish Clear Vendor Selection Criteria

Don’t wing it when choosing suppliers. Before you even go to market for a vendor, define clear selection criteria aligned with your business priorities. This could include quality standards (e.g. ISO certifications), capacity and lead time capabilities, technological capabilities, cost structure, financial stability, and cultural fit (yes, that matters too – a partnership mindset can go a long way). By establishing these criteria, you create a structured scorecard for evaluating vendors. It makes the selection process more objective and transparent. For example, if sustainability is important to your company, weight that criterion highly and require evidence of sustainable practices during RFPs. Clear criteria not only help you pick the right vendor; they also signal to potential suppliers what matters to you from day one. That alignment sets the stage for a smoother relationship.

Implement Regular Performance Evaluations

“Inspect what you expect.” High-performing procurement organizations put in place regular performance evaluations for their vendors. Don’t wait until a contract is about to expire to review how a supplier is doing. Instead, conduct periodic reviews – monthly for critical metrics and quarterly or annually for a comprehensive evaluation. Use those KPIs and scorecards we mentioned in the process section. Share the results with vendors honestly. The goal is twofold: recognize and reward vendors who are doing well, and work with underperformers to improve or decide on an exit plan. Make sure to include qualitative feedback too: input from stakeholders who work with the vendor, feedback from end-users of the product/service, etc. A best practice is to hold biannual or annual business review meetings with key suppliers, involving executives from both sides, to discuss strategic alignment and future plans in addition to past performance. Regular evaluations keep everyone on their toes and shows vendors that you’re serious about continuous improvement. Read more on supplier evaluation.

Foster Long-Term Vendor Relationships

While it’s important to keep an eye on cost and performance, don’t treat vendor engagements as purely transactional. Fostering long-term relationships with key vendors can yield benefits that far exceed a short-term price cut. Best-in-class organizations segment their suppliers to identify strategic partners – those vendors that supply critical components or services, or those with whom innovation and joint growth is possible. For these suppliers, invest time in building the relationship: conduct executive-to-executive meetings, invite them to planning sessions, share your product roadmaps (under NDA, of course) so they can align their development with your needs. Long-term partnership can lead to things like co-innovation, preferential allocation during shortages, or collaboration on cost reduction that helps both parties. Also, people matter: over time, your teams and the vendor’s teams develop trust and smoother ways of working, which boosts efficiency. In industries like Automotive or Electronics, it’s common to work with the same suppliers for decades, constantly pushing for mutual improvement. The bottom line: treat key vendors as an extension of your company – invest in them and many will invest in you.

Use Vendor Management Software for Efficiency

We live in the digital age, so naturally one of the best practices is to leverage vendor management software (often part of a Supplier Relationship Management system) to automate and streamline your processes. As discussed in the modernization benefits, a good software solution can track all your vendor info, send alerts, and even provide predictive insights. The efficiency gains here are significant – one study found that automated vendor management can cut the time to onboard new vendors by as much as 70-80%. Beyond saving time, software reduces the human error element (no more accidental deletion of an important column on the spreadsheet!). It also facilitates better collaboration through shared platforms and provides analytics that a manual approach simply can’t match. If your organization still relies on email and Excel for managing dozens or hundreds of suppliers, it might be time to explore tools that fit your budget and scale. Just remember, tools are enablers – you still need the right strategy and people using them – but they can be a game-changer for efficiency and insight.

For recommendations on vendor management software and features to look for, see our Guide to Choosing a Vendor Management System.

Frequently Asked Questions About Vendor Management

What is the difference between vendor management and procurement?

Procurement is a broad term that encompasses the entire process of sourcing and acquiring the goods and services a company needs. It includes activities like identifying needs, sourcing suppliers, negotiating contracts, purchasing, and payment (P2P – procure-to-pay). Vendor management is a subset (and an extension) of procurement focusing on the post-selection relationship with the supplier. In simpler terms, procurement might get the contract signed and the vendor on board, while vendor management takes it from there – ensuring the vendor meets obligations, monitoring performance, managing ongoing communication, and handling issues that arise over the life of the relationship. They overlap significantly (and in many organizations, the same team does both), but procurement is often project-oriented (buy something at the best value) whereas vendor management is relationship-oriented (maximize the long-term value of the supplier). Both are critical: good procurement gets you a good deal; good vendor management makes sure that deal pans out over time.

How does vendor management improve supply chain efficiency?

Effective vendor management can be a huge booster for supply chain efficiency. By clearly communicating expectations and KPIs to vendors, you reduce errors and delays (think fewer late shipments or last-minute fire drills). Continuous performance monitoring means you can identify bottlenecks or weaknesses in your supply chain early and work with the vendor to fix them – preventing small hiccups from causing big slowdowns. Additionally, when you collaborate closely with vendors (sharing demand forecasts, for example), they can plan and allocate resources better to meet your needs, resulting in shorter lead times and more reliable deliveries. Over time, vendor management also encourages vendors to improve their own processes to maintain your business, which can lead to innovations like faster production methods or better logistics on their end – all contributing to your efficiency. Finally, managing a stable of high-performing suppliers gives you flexibility: if one vendor faces an issue, you often have backup options ready, so your operations keep flowing smoothly. In short, vendor management greases the gears of the supply chain, reducing friction and increasing speed.

What tools can help automate vendor management?

There are several tools and technologies available to automate and streamline vendor management. A dedicated Vendor Management System (VMS) or Supplier Relationship Management (SRM) software is often the centerpiece – these platforms allow you to store vendor information, track performance metrics, manage contracts, and facilitate communication in one place (Kodiak Hub’s platform is one example, among others). Beyond full-suite platforms, companies also use tools like procurement software suites (which include vendor modules), Contract Management systems (to automate renewals and compliance checks on contracts), and Procure-to-Pay systems (which can automate purchase orders and invoice matching with vendor data). Additionally, specific point solutions exist for things like third-party risk management (to automate risk scoring and monitoring of vendors) and compliance management (to track certificates and regulatory requirements). Even emerging technologies like AI and machine learning are being embedded in these tools to predict vendor risks or recommend optimal order allocations. The key is to choose tools that integrate well with your existing processes and address your biggest pain points – whether that’s automating scorecard reporting, centralizing communication, or ensuring no step in your vendor management process falls through the cracks.

How does a vendor management system work?

A Vendor Management System (VMS) works as a centralized digital hub to manage all aspects of vendor interactions and data. Imagine a single application where you can do the following: approve a new vendor, store their contract, track their delivery and quality performance, flag any risk issues, and even message the vendor’s account manager – all in one interface. That’s essentially what a good VMS offers. Here’s a quick rundown of how it works:

NEW - Supplier Map - slanted laptop_3x2_3x

  • Database & Record Keeping: The VMS maintains a database of all your vendors. Each vendor has a profile with key details (contact info, product offerings, contract terms, pricing, certifications, etc.). This becomes the single source of truth for vendor data, replacing scattered documents.

  • Workflow Automation: The system can automate workflows like onboarding approvals (route the new vendor request through finance, legal, compliance checks), or performance reviews (automatically send surveys to internal stakeholders every quarter, compile the results). It ensures that the vendor management process steps are followed consistently.

  • Performance & Risk Monitoring: A VMS often integrates with other systems (ERP, supply chain, financial systems) to pull data like delivery times, defect rates, spend, etc. It then presents these as dashboards or scorecards. If a metric goes out of range (say a surge in late deliveries), the system might trigger an alert. Some VMS also integrate external data (e.g. credit scores, news feeds) to monitor vendor risk in real-time.

  • Communication & Collaboration: Many VMS include portals or communication modules where you can send RFPs, share forecasts or designs, and vendors can respond or update information. It’s like having a direct line of communication that’s logged and tied to the vendor record. No more fishing through emails for “what did supplier X say about that spec change?”

  • Reporting & Insights: Finally, a VMS provides reporting tools. You can slice and dice vendor data to see, for example, total spend by vendor, performance trends over time, or which suppliers are not meeting compliance requirements. These insights support strategic decisions – such as which vendors to consolidate, or where to invest in relationship development.

In summary, a vendor management system works by digitizing and integrating all vendor-related activities into one platform, making the management of vendors more efficient and data-driven. It’s like having an extra team member whose sole job is to keep an eye on your suppliers and hand you the information you need when you need it. Check out this blog which covers the ins and outs of what a Vendor Management System is and why you need it. 


By now, we’ve covered the definition of vendor management, why it’s critical, and how to execute it effectively from beginning to end. We’ve also tackled challenges, modern solutions, and best practices – all to help you build a stronger, smarter supply base. Remember, whether you’re dealing with one key supplier or a network of hundreds, the principles of good vendor management apply. Start small, stay consistent, and leverage the tools and tips available. With a bit of effort (and maybe a robust platform like Kodiak Hub as your sidekick), you’ll turn vendor management into one of your organization’s secret weapons for success. Happy managing!