Six Vendor Management Best Practices for Strategic Value Creation
Modernize vendor management for real strategic impact.
by Ashley Poynter
Content Manager
PaymentWorksSix Vendor Management Best Practices for Strategic Value Creation
We’re well into the 21st century, and by now, it’s clear: vendor management isn’t just about paperwork and processes anymore. The role has evolved—and following best practices means shifting from purely administrative tasks to more strategic, analytical work. Turning your vendor manager into a strategic analyst not only boosts efficiency, but also helps drive bigger business goals. Ready to modernize your approach? Here’s how to make that shift happen.
Table of Contents
Building Business Value & Other Vendor Management Best Practices
Six Vendor Management Best Practices for Strategic Value Creation
— Strategy 1: Vendor Onboarding and Compliance: Setting the Stage Right
— Strategy 2: Advanced Risk Management: From Checkboxes to Crystal Balls
— Strategy 3: Cost Management and Value Optimization: Tackling Maverick Spend
— Strategy 4: Create a Culture of No Exceptions
— Strategy 5: Payment Optimization: Turning Spend into Gold
— Strategy 6: Elevate the Role to Strategic Analyst: The New Office MVP
From Admin to Analyst—The Evolution of Vendor Management Best Practices
Get Ready for Vendor Management Day 2025
Want Help Aligning Teams On Vendor Management Best Practices?
Interested in More Tips On Vendor Management Best Practices?
Want Personalized Guidance On Vendor Management Best Practices?
Building Business Value & Other Vendor Management Best Practices
Vendor managers traditionally handle the operational aspects of vendor relationships, such as collecting W9s, insurance documents, addresses, and payment preferences. While these tasks are essential, they focus on short-term, transactional activities related to vendor onboarding rather than strategic planning and analysis that can impact the entire organization.
As businesses increasingly rely on a complex network of global suppliers, the role of the vendor manager becomes more critical. They are uniquely positioned to influence cost management, risk mitigation, and innovation. Transitioning to an analytical approach allows vendor managers to contribute to these areas proactively, turning vendor insights into competitive advantages.
Six Vendor Management Best Practices for Strategic Value Creation
Strategy 1: Vendor Onboarding and Compliance: Setting the Stage Right
Vendor onboarding is more than just collecting info and filling out forms; it sets the stage for a strong vendor relationship. Here, vendor management best practices call for strategically assessing how a vendor fits into your business goals; this ensures compliance and sets the stage for a fruitful partnership. Automated compliance checks can speed up the process, reduce errors, and enhance security.
–>Action Item: Incorporate compliance checks into the vendor onboarding process, ensuring compliance compliance from the get-go.
Vendor Management Best Practices:
- Automated Compliance Checks: Use technology to automate and streamline compliance checks. This speeds up onboarding and reduces human error.
- Strategic Alignment: Ensure siloed departments join forces to ensure vendor capabilities and objectives align with your company’s strategic needs from the start. It’s like matchmaking but for business.
- Ongoing Monitoring: Continuously monitor compliance to maintain high standards and avoid any nasty surprises down the line. (This works best with an automated system of continuous monitoring.)
Strategy 2: Advanced Risk Management: From Checkboxes to Crystal Balls
Risk management isn’t just a checkbox anymore; it’s a full-blown crystal ball operation. Vendor management best practices means channeling your inner Sherlock Holmes and Nostradamus to spot potential risks from compliance traps and regulatory changes before they become real issues. This requires sophisticated analytical tools and a proactive mindset to keep the supply chain resilient against all odds.
–>Action Item: Equip your vendor managers with automated vendor onboarding and management tools to reduce reliance on manual tasks and free up time to focus on big-picture risk.
Vendor Management Best Practices:
- Risk Assessment Tools: Get software that continuously monitors vendor risk, including vendor change management, regulatory compliance, and vendor sanctions risks.
- Scenario Planning: Train your vendor managers in scenario planning techniques to prepare for various risk outcomes. It’s like having a contingency plan for your contingency plans.
- Collaborative Approach: Foster a culture where vendor managers work closely with the risk team to identify and mitigate risks proactively. Two heads are better than one, especially when one is looking out for hidden traps.
Strategy 3: Cost Management and Value Optimization: Tackling Maverick Spend
The name is cool, but the behavior is not. Maverick spend is when employees go rogue and buy outside of approved vendor agreements, draining resources, weakening your negotiations with strategic vendors, and eroding your bottom line. By centralizing vendor management and empowering your vendor management team to audit new vendor invitations, you can stop maverick spending before it starts.
–>Action Item: Include onboarding invitation approval in your vendor onboarding process, enabling your vendor team to stop invitations to non-strategic vendors.
Vendor Management Best Practices:
- Rout vendor onboarding requests through your vendor manager: Give veto power to the team to reject non-strategic vendors and direct spending to already approved (and negotiated!) vendors. Centralize Spend Data: Use a centralized platform to consolidate payment data, making it easier to analyze and manage. It’s like having all your ducks in a row but with spending.
- Policy Enforcement: Leverage the data from electronic payments to enforce spending policies. With real-time insights, you can quickly address maverick spending and bring it back in line with your strategic goals.
Strategy 4: Create a Culture of No Exceptions
Encourage a culture that follows best practices and focuses on improving efficiency. Often, organizations are navigating a culture where higher-ups play by their own rules. Automation can inherently address this problem by standardizing processes. However, the vendor desk can still spearhead an effort to get everyone on the same page about the goals of the organization’s vendor management operation and what is required to meet them.
–>Action Item: Vendor managers should document their process so everyone’s on the same page. They should also log exceptions to the process. Vendor managers should own the process, finding ways to foolproof, future-proof, and improve it.
Vendor Management Best Practices:
- Get Leadership Buy-In: Hold a vendor management town hall meeting to demonstrate to management the importance of documented policies and processes. Don’t forget to walk through how that documentation (and avoiding exceptions to it) helps you get – and keep – insurance coverage.
- Standardize Processes: Document your vendor onboarding and management process from top to bottom and ensure everyone is on the same page about roles and responsibilities.
- Bonus: get sign off on both of the above so that no one (especially those who signed off on it!) asks to circumvent the process
Strategy 5: Payment Optimization: Turning Spend into Gold
If your organization wants to get off check (and you should!), then use your vendor managers to play a key role in optimizing payment processes. This isn’t just about cutting costs—it’s about turning payments into a strategic advantage. Electronic payments and virtual cards can reduce costs, increase transaction speed, and improve security. Plus, payment methods that offer rebates or incentives can turn spending into a revenue stream.
–>Action Item: Incorporate your organizational payables strategy to start with vendor onboarding.
Vendor Management Best Practices:
- Electronic Payments: Use vendor onboarding and change management to leverage the adoption of your preferred payment type and transition vendors to electronic payments like ACH and virtual cards. They’re faster, cheaper, and more secure.
- Rebate Programs: Use payment methods that offer rebates or incentives. It’s like getting cash back on your groceries but on a much larger scale.
- Payment Terms: Optimize payment terms to improve cash flow and take advantage of early payment discounts. Because who doesn’t like saving a little extra? (This only works if your organization can execute on those payment terms!)
Strategy 6: Elevate the Role to Strategic Analyst: The New Office MVP
Vendor managers aren’t just admin wizards anymore; they’re strategic analysts. Vendor management best practices have changed alongside the evolving business landscape. Today’s vendor managers are not just overseeing onboarding; they’re orchestrating business growth and innovation through savvy supplier partnerships.
–>Action Item: Redefine the vendor manager’s job description to include strategic responsibilities such as auditing, implementing payment strategy, and general decision-making responsibilities.
Vendor Management Best Practices:
- Role Redefinition: Clearly define the vendor manager’s role as a strategic analyst within your organization. Make sure everyone understands their value.
- Empowerment: Provide the necessary tools, training, and authority for vendor managers to make strategic decisions. Give them the power to flex their analytical muscles.
- Recognition: Recognize and reward vendor managers for their strategic contributions, not just their administrative prowess. Celebrate their wins and make them the office MVPs.
Bonus Tip
Measure Success
Don’t forget to measure success! Define key performance indicators such as vendor onboarding velocity, DPO, cost savings, improvement in vendor performance scores, rebates earned, and enhancement in procurement strategies. Regularly review these metrics to assess progress and adjust strategies as needed.
From Admin to Analyst—The Evolution of Vendor Management Best Practices
Once upon a time, the vendor administrator was hidden away behind stacks of paperwork, managing contracts and invoices. Those days are gone. Today, vendor management best practices require strategic players who can use data and technology to drive business outcomes and safeguard the company against risks.
Elevating your vendor manager from an admin to an analyst is not just about changing a job title; it’s about recognizing their strategic value. It also doesn’t happen overnight. It requires strategic planning, investment in development, and a supportive culture. However, the benefits of having a strategic analyst on board—capable of navigating complex vendor relationships and driving business value—are immense and well worth the effort.
Get Ready For Vendor Management Appreciation 2025
Yes, we wrapped our second annual Vendor Management Appreciation Day (VMAD)—and YES, the party’s far from over. We’re already making plans for 2025… are you in?
Because let’s be honest—vendor management doesn’t get nearly enough love for the critical role it plays in keeping organizations running smoothly (and safely). That changes here.
🎉 Mark your calendar. Stock up on snacks. VMAD 2025 is coming—and you won’t want to miss it.
VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.
Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.
In the meantime, learn more here, and grab some free vendor management goodies.
Want Help Aligning Teams On Vendor Management Best Practices?
Explore our blogs below. They’re filled with action items you can implement right away.
Nacha’s Upcoming Rule Change: What You Need to Know
Making “Business Identity Verified” the Standard
Vendor Management Best Practices for the Government Sector in 2025
The New Face of Vendor Fraud Cases
Interested in Regular Tips On Vendor Management Best Practices?
Want Personalized Guidance On Vendor Management Best Practices?
