By Craig Nelson, Managing Director, Alsbridge, Inc.
Sean Halverson, Consultant, Alsbridge, Inc.
Vendor management is the nerve center for optimizing the value exchange between you and your provider(s). While nearly all organizations involved in a sourcing relationship have initiatives underway to better leverage the capabilities of their providers through vendor management, most have vendor management structures are still in their infancy.

Alsbridge research reveals that the highest amount of value lost during the course of a sourcing relationship takes place as a result of poor vendor management. Conversely, the key to optimizing the value of a sourcing contract is through effective vendor management and the use of a well-planned and well-executed Vendor Management Office (VMO).

Through our years of experience and research Alsbridge has been able to identify some best practices among high-performing sourcing relationships. The combined research conducted by Alsbridge and MIT’s Sloan School of Management, demonstrate that companies with world-class VMOs have 20% higher margins than their competitors.

Looking beyond the financials, you will see these companies are doing things differently from their competitors. To cash in on your outsourcing relationships and follow the example set by these world-class vendor management offices, your organization will need to change individual roles, modify organizational structures, and change some of the companies’ cultural norms.

This means governing not just the provider, but bringing discipline inside the organization. This is a fundamental business change, and thus, a challenge that requires leadership from within the organization. This leadership comes from the top, but it is executed, implemented and brought to life by a high-performing VMO.

This research paper further discusses, defines and provides examples of best practices among successful VMOs to help transform your own vendor management office into a living breathing thing of beauty.