by Angela Sarno

VP Marketing

Risky Business With PaymentWorks: E14–Top Trends in Vendor Management

Strap in as we explore the top trends in vendor management. In case you’re new here, let’s get you up to speed: Vendor management is not a static function. It’s a dynamic, always changing, and increasingly strategic function that is critical to the operational efficiency of an organization.

In our latest episode of Risky Business, we sat down with Tom Rogers of Vendor Centric to discuss the evolution of vendor management and where it’s headed. We dig into the progression from an administrative focus to a strategic one, and we delve into the impact of AI and other technologies.

Let’s get to it!

Listen to the Episode

About our Guest

Top Takeaways on the Top Trends in Vendor Management

#1: Vendor risk mitigation is moving from compliance to value creation

#2: Vendor management has evolved from admin to strategic quarterback

#3: The importance of a strategic vendor “analyst” is growing

#4: Jobs (and salaries) in vendor management are changing

#5: AI may help create value in vendor management

Must-Read Episode Quotes About the Top Trends in Vendor Management

How Vendor Management Appreciation Day Can Help

Want Help Aligning Your Teams According to the Top Trends in Vendor Management?

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Listen to the Episode

Listen to the full episode here.

Welcome to the latest episode of Risky Business with PaymentWorks!

Tom Rogers, founder and CEO of Vendor Centric, discusses the importance of supporting a strategic vendor management function – and how the top trends in vendor management are causing organizations to redefine this role.

About Our Guest

Tom Rogers is the CEO and founder of Vendor Centric, a boutique consultancy based just outside of Washington, DC, in the Maryland suburbs. Vendor Centric helps companies establish and optimize their end-to-end vendor management operations. This includes everything from policies and procedures to helping organizations find and implement systems, providing training, and getting folks ready to do all the stuff that they need to do on a day-to-day basis.

Vendor Centric takes a holistic approach to vendor management, helping clients create or fine-tune their policies and procedures. This includes contract management within procurement, third-party risk management, and every other aspect of the end-to-end vendor relationship.

Episode Takeaways on the Top Trends in Vendor Management

#1: Vendor risk mitigation is moving from compliance to value creation

Tom points out that vendor management often grows out of regulatory compliance, especially for financial services, healthcare, and other heavily regulated industries.

Even nonprofits that are federally funded find they must abide by mandates from the federal government and other federal regulations.

In short, vendor management is largely driven by regulatory compliance.

As a result, it’s a natural progression to build out vendor management from the standpoint of compliance with regulations.

However, more mature vendor management programs look at the risk mitigation component as a value creation initiative. Tom discusses below:

The differentiator, Tom says, is looking at vendor management as a strategic initiative.

Organizations need to shift their mindset:

“Hey, we’ve got all these different vendors and suppliers we work with,” Tom says. “Yes, we need to be compliant with them. We need to manage risk, but we need to optimize what they’re doing for us. We need to make sure we’re spending our money the right way.”

The current trend, as Tom and his colleagues see, is that organizations are really embracing vendor risk management more as a strategic initiative business function than just purely compliance-driven (HURRAH says everyone at PaymentWorks!).

While there are still organizations that remain very compliance-focused, the future of vendor management (and risk management) is strategic value creation (Hurrah again!).

#2: Vendor management has evolved from admin role player to strategic quarterback

Vendor management has seen a dynamic evolution over the past decade. Tom notes that vendor management as a role looked different as recently as five years ago. In other words, vendor managers have historically been relegated to administrative paper pushers with an eye for compliance and box-checking. Today, that is not the case.

Today, Tom says, formal vendor management roles are “responsible for that end-to-end relationship and all the overarching policies and procedures.”

In short, the role has evolved significantly from a clerical role to a more strategic one. Is there still a tactical component? Yes. Of course, it will involve getting contracts across the desk, getting due diligence done, and making sure all risk assessments are completed. But the key difference, Tom says, is now “we’re really looking to optimize the ecosystem of vendors that a company works with.”

So yes, it’s more strategic.

Vendor management professionals are evolving by helping to formulate strategies for working with vendors across the entire vendor ecosystem, which includes procurement, contract management, and risk components.

Above all, they’re quarterbacking and orchestrating these aspects via the overarching policies and procedures. They’re responsible for getting different silos to work together, aligning teams, and making sure they’re managing those relationships the right way. Tom says it best below:

Tom is also quick to point out that more responsibility – and a more strategic focus – can be tough for vendor management teams who are very often still operating as teams of one or two people. Even organizations that have a formalized vendor management function (yes, even multi-billion dollar companies) have one or two folks who are responsible for managing everything from soup to nuts.

Toms says, “There’s a lot of pressure on these folks to do their day-to-day work and keep up while also some of these additional pressures to find ways to save money or reduce risk across their vendor ecosystem.”

We see it every day at organizations in all industries and of all sizes. The one or two-person set up is certainly no easy feat, to be sure.

#3: The importance of a strategic vendor “analyst” is growing

While the importance of vendor management as a strategic function is accelerating, we’re still in the early innings, according to Tom.

But the need for a strategic vendor analyst is growing, without a doubt. Tom notes that he’s seen these types of roles formalizing across industries – including industries and organizations that didn’t even have this function just a few years ago.

Tom adds, “That strategic piece is really going to start to flush out more and more as these organizations adopt this vendor management function [and] hire the right people internally.”

It’s important to get the day-to-day right, but once those details are nailed down, organizations will start to focus on how to improve procurement across categories, not only to save money but to reduce risk downstream.

Tom adds that there will be numerous opportunities for folks with these skill sets. That said, it’s important to remember that the role is still being formalized, and there will be ways to go in terms of bringing a strategy, and then integrating it within the organization.

#4: Jobs (and salaries) in vendor management are changing

We also discuss an interesting job posting at a medical device company in California. The role is “supplier master data management analyst.” Or what you might currently call “the vendor desk.” But the title alone suggests that organizations are truly starting to shift how they view these roles. And that title comes with a six-figure salary, to boot. This makes sense when you think about the ask. This role will ultimately manage the master file as a strategic asset for the entire company.

We’ve come a long way from organizations that don’t even know who they are working with, that have no master file, or that have no visibility into contracts. Undoubtedly, many organizations are crawling before they walk. But we’re crawling in the right direction.

The other consideration is that you have to have the right infrastructure in place to support this type of strategy. Strategy requires visibility, and true visibility requires the right set of tools.

More importantly, it requires the right skill set. A recent PaymentWorks webinar discussed the shocking wages that many vendor managers are paid (hint: they’re equivalent to fast food wages).

Organizations are finally awakening to this critical skill set – and the strategic value of the supplier file – and beginning to assign salaries to these roles accordingly. Many are also formalizing departments like a vendor management office and assigning the leaders of these departments director-level titles (Would a third HURRAH be too much? No? HURRAH!).

#5: AI may help create value in vendor management

The conversation also covered some interesting trends in vendor management, which naturally led to a discussion about the role of AI. Tom notes that AI is one of the big trends, especially as more companies invest. It has a place in vendor management, and many already leverage the technology as part of their operations.

In some cases, generative AI tools like ChatGPT can be used to write contract clauses, create RFPs, or remediate specific risks that arise. Tom says that organizations may be able to fill out a due diligence questionnaire where AI capabilities can return the top 10 risks to address. In that regard, AI actually does the analysis and offers suggestions for remediating risks.

AI may also have the ability to analyze spending, pointing out redundancies in vendors and reducing costs for an organization. Over time, AI will get smarter and better, helping organizations with answers to problems they didn’t even know they had.

What’s more, platforms are starting to integrate AI directly into the platform. This offers immediate value as AI is embedded in platforms that vendor management folks are using on a day-to-day basis. This also ties into operational resilience, which is another one of the top trends in vendor management for 2024:

Tom points out that policies and procedures underpin the effective use of technology. While it can feel groundbreaking to implement the top tech trends in vendor management, you have to make sure the organization has the right infrastructure in place. Most importantly, you have to be able to separate the hype from true value creation when it comes to implementing new technologies and following trends in vendor management.

Must-Read Episode Quotes About the Top Trends in Vendor Management

“I think there’s still a lot of tactical that’s involved in it. It’s getting contracts across the desk, it’s getting due diligence done, making sure all the risk assessments are completed, things like that. But now as we’re really looking to optimize the ecosystem of vendors that a company works with, I think the folks that are coming into vendor management today and where it’s headed is a much…more of a strategic role.” (13:53)
“The strategic piece, I still think we’re early in that for a lot of companies. The larger organizations have been doing this for a while and are able to fund that and have folks sitting at the top. They’re probably doing a little bit more of that, but mid-market, emerging enterprise – I mean multi-billion dollar companies all the way down to $50 million – they’re still just getting going on a lot of this. They want to get to the strategy part. I think that’s where, if you have the skill sets, you bring those skill sets to the table, you’re going to stand out as you’re looking for opportunities in the space. But there’s still a little ways to go in terms of really bringing that strategy and integrating it within the organization.” (17:11)
“A lot of companies couldn’t tell you who they’re working with, right? There is no master file, right? That’s master file and no visibility into contracts where all the contracts, when do they expire… So while I’m talking strategy up here, there’s still most organizations are in the crawl… You know, crawl, walk, run, they’re in the crawl stage. They’re still trying to get a lot of the infrastructure in place like having visibility into who are all the folks that they’re actually working with.” (18:25)
“Operational resilience is a big one. So if you think about COVID and supply chain issues and all the problems that brought up, we are seeing organizations focus more around their higher risk, really critical vendor relationships. Those that impact their ability to be resilient and deliver their products and services, do financial reporting, manage their sales pipeline, all these different vendors and tools that they work with that impact their day-to-day operations. They want to make sure that they’ve identified who they are, they’re managing them the right way, they’re doing the appropriate due diligence, and they’re doing the ongoing risk monitoring.” (29:59)

How Vendor Management Appreciation Day Can Help

Vendor management is dynamic, which is why our celebration of vendor managers is ongoing.

We celebrated our inaugural Vendor Management Appreciation Day (VMAD) in 2023, but the party continues. We won’t stop saluting one of the most important, sometimes under-recognized roles across industries: vendor management.

Interested? Join us in observing Vendor Management Appreciation Day (VMAD) 2024.

Cartoon graphic of how to improve vendor management by celebrating Vendor Management Appreciation Day