The aim of the Vendor Management process blade, sometimes called procurement, is to:
- Help source/identify and procure the right products and services from other organizations.
- To negotiate and then manage contracts with partner organizations.
- To oversee relationships and partnerships so as to ensure partner excellence and increase overall value of partnerships.
- To address the risk associated with external partnerships.
To do this your vendor management team will collaborate with other parts of the organization to help them understand their needs (if any), identify potential vendors that can fulfill those needs, and work with Legal to develop appropriate contracts. Organizationally your vendor management team is part of, or at least closely related to, your legal team.
There are several reasons why organizations require a Disciplined Agile® (DA™) approach to vendor management:
- Complexity and competition are increasing. Simply put, we can't do it alone anymore.
- Effective partnering reduces overall risk. Effective vendor management can help our organizations to reduce risk several ways. First, we address skills-related and capacity-related risks through hiring contractors or outsourcing some aspects of our work to organizations with greater expertise in it. Second, by partnering with other organizations to bring a new offering to market we spread the risk of that venture across organizations. Yes, there are inherent risks to working with partners, risks that are mitigated through effective governance strategies and adoption of the DA mindset for vendor management. Third, by purchasing big-ticket or specialized items via sourcing specialists we reduce the risk of making inappropriate purchases.
- We deliver more, and do so quicker, to our customers. By working with external organizations we extend our ability to deliver new or enhanced offerings to our customers, thereby providing greater value to them. As you see in Figure 1, working with external partners expands the potential number of people we can collaborate with.
- We can expand our market reach and impact. By working with vendors, either via a customer-supplier relationship or through a true partnering relationship, we can expand our value streams or even create new ones. We do this through building more robust offerings – products and services