A Vendor Management System (VMS) is an Internet often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.
Prerequisite to a successful Materials Management is the availability of a sound vendor base which is now rightly acknowledged as an extended arm of the business. One of main reasons of failure of many Supply Chains, in recent years, has been the inability to hold trusted vendors together.
Vendor management, therefore, requires careful planning and execution, over a fairly long period of time.
Vendor Registration
A vendor is literally a person or organization that vends or sells contingent labor. Specifically a vendor can be an independent consultant, a consulting company, or staffing company (who can also be called a supplier – because they supply the labor or expertise rather than selling it directly).
A VOP or Vendor on Premise its up shop on the client’s premises. They are concerned with filling the labor needs and requirements of the client The VOP does this either by sourcing labor directly from themselves, or from other suppliers, whom may be their competitors. Also, the VOP manages and coordinates this labor for the client.
A MSP, or Managed Service Provider sure their effectiveness in requisitioned according to the client’s standards and requirements. MSPs generally do not recruit directly, but try to find the best suppliers of vendors according to the client’s requirements. This, in essence, makes the MSP more neutral than a VOP in finding talent because they themselves do not provide the labor.
VMS is a tool; specifically software distributes job requirements to staffing companies, recruiters, consulting companies, and other vendors (i.e. Independent consultants). It facilitates the interview and hires process, as well as labor time collection approval and payment.
For ensuring continuous supply of right quality materials required, at the optimum cost, it is essential to have a dependable, competent & competitive vendor base. The Limited Tender Enquiry (LTE) is issued only when reliable manufacturers/ suppliers/ traders/ contractors are known and for this purpose, there is a need to maintain a list of registered vendors. So, Vendors are empanelled for the supply of various categories/ subcategory of items
For this purpose, the vendors interested to supply the specific category/sub-category of items are asked to submit the application along with all the documents required to establish their financial & technical capability. The application forms so received are scrutinized and the vendor capacity assessment is carried out through inspection department / technical experts to establish the technical capability of the vendors. These vendors are listed as registered after following up certain processes.
Vendor development
Many process industries like to search the alternative and less costly material as substitution of the currently used costlier materials. The less the procurement cost the more is the profit.
Also, there may be situations where the existing suppliers may not be willing to supply the items on various grounds, thus, necessitating, looking into different alternatives
An efficient Materials Manager would devote enough time to develop substitutes & sources of supply with a view to reduce cost of input materials and also to have reliable alternative source for foreign sources.
Normally, in large manufacturing organizations, a Vendor Development cell (VDC) remains engaged all through for the purpose. When the need to develop a Vendor for an item is felt the requisition for such items is made by concerned department indicating the trial quantity and the potential vendors. Trial Orders are placed on potential vendors and also necessary help is rendered to them to come up to the desired level.
Vendor Rating
The vendors also like to be given priority be the purchaser if it constantly improves its selling performance which from a purchaser point of view is mainly its offered price, quality and punctuality in delivery.
For Purchaser, there shall always be a need to continuously monitor and update its registered vendor base so that the organisation continues to have the most competent & competitive vendors in its list of vendors. For this purpose the efforts are made to monitor supply performance of the vendors and rate them objectively. The major factors usually considered for such vendor rating are competitiveness of vendor (price), quality of supply and delivery adherence.
Vendor rating may also be used for removing a vendor from registered vendor list and also in the Selection of vendors while issuing Limited Tender Enquiry.
Vendor Exploration
To have competitive & competent sources of supply, efforts are made to explore suitable vendors from various sources like internet websites, international bulletins, vendors list of other similar manufacturing organizations etc. This is known as vendor exploration and in the competitive environment it is taken as a serious activity.
In 1993, one such company recognized the contingent labor spend management niche as an immense opportunity – Geometric Results Inc. (GRI). At its origin, GRI was a wholly owned Ford Motor Company was GRI who developed one of the first significant VMS applications in the industry, People Net. Originally starting out as a manual process, some system automation was introduced in 1995. A year later, People Net became an automated VMS system. Overall, GRI managed nearly $200 million in spend at Ford. In 1997, MSX
International purchased GRI and continued its growth in the marketplace offering a vendor neutral solution to its clients within the automotive industry.
