Vendor Relationship Management
Getting What You Paid For (and More)
Stephen Guth
VP, Vendor Management
• Case Study Company Intro
• Begin with the End in Mind
• Implementation Approach
• Vendor Management Fundamentals
• Tools
• Vendor Classification Model
• Vendor Risk Profile
• Vendor Relationship Management
Activity Responsibilities
• Property insurer “of last resort”
• Created by Florida Legislature in 2002 as not-for-profit,
tax-exempt, government entity
• Board of Governors: members appointed by Florida's
Governor, President of the Florida Senate, Speaker of the
Florida House and the state's Chief Financial Officer
• As of 12/2014, 661K policies in force with $229B total
exposure (PIF on a planned decline)
• Procurements conducted in compliance with Florida Statute
• Coherent and prudent approach to
vendor management
•
The “right” vendors
•
Ensure contract compliance
•
Attain beyond the contract value
• Support why we do what we do
Begin with the End in Mind
• Right organizational structure and right focus
• Success of vendor management (post-award) dependent
on pre-award activities
• Clear and concise scopes of work, deliverables,
milestones, performance measures, and solicitation
requirements
• Vendor onboarding, contract kick-off, contract monitoring,
relationship management
• Consider: policies / procedures; RACI; templates and
tools; and, communication and training
Vendor Management Governance Areas
Governance Area
Description
Program The Vendor Management Program is defined, communicated, followed, and
continuously improved
Demand Demand for vendor services is captured, planned, tracked and managed, with qualified
vendors being engaged through sound sourcing decisions
Contract Vendor relationships are defined by robust contracts with clear rights, obligations, and
remedies that are efficiently administered throughout the vendor lifecycle
Risk Vendor-related risks are identified, assessed, mitigated where possible, and tracked
Security Citizens’ data and intellectual assets accessible by vendors are protected and secured—
contractually, logically, and physically—as required by Citizens
Performance Vendor delivery and contract performance are monitored against measurable criteria to
achieve compliance-to-contract and managed to attain “beyond the contract” value
Financial In compliance with internal controls, vendor spend is approved, projected, tracked,
analyzed, and reconciled to ensure appropriate use of Citizens’ funds, realize expected financial benefits, and identify opportunities for spend reduction
Decentralized Implementation Approach
Enterprise Vendor Management Program Cl VMO
ai m s UW HR IA ERM F&A IT CA S C, L&E A Delivery
Vendor Engagement / Selection Close-Out
Business Need
BU VRM / CM
Vendor Management Center of Excellence
High-Level Roles and Responsibilities
• Identify VM “better” practices • Assist in standardizing work product
• Identify VM projects and initiatives (pipeline)
• Promote use of work product • Contribute to / review enterprise VM policy, standards, processes, and
procedures (work product)
VMCoE
• Facilitate VMCoE • Consolidate and distribute enterprise
metrics and reports
• Resource pipeline • Fulfill VM Policy functions
• Develop and maintain work product • Fulfill other VM functions TBD
VMO
• Utilize work product • Fulfill VM Policy functions
VRM / CM
Plan
Prioritize
Promote
Run
Leverage
Build
Support
Aggregate
Vendor Management Fundamentals
• Classification + risk = relationship management
• Vendor spend analysis
• Getting what you paid for
• Robust requirements
• Responsible vendor review
• Service levels
• Contract non-compliance procedures
• Above and beyond
Vendor Classification Model
3 4 5
Vendor Spend Analysis
•
Process of collecting, cleansing, classifying, and analyzing expenditure data from all
sources within the organization (e.g., purchasing card, eProcurement) for the
purposes of ensuring contract compliance, reducing costs, and improving
operational performance
•
Analyzes the past, current, and forecasted expenditures to allow visibility of data by
supplier, by commodity or service, and by department within the organization
•
Answers:
•
Who is spending?
•
What am I really spending?
•
With whom am I spending it?
•
What did I buy?
•
When was it bought?
•
Where was it bought?
Vendor Spend Analysis (Example Reports)
Type Contains this Data Answers these Questions Category • Same / similar products or services
spend by vendor, with drill down to line item price detail
• Total spend by category and subcategories
• Total spend by category and total vendors for each category
• Are we being charged appropriately and consistently for a product or service?
• On which items do we spend the most?
• Are we buying same / similar products or services from too many vendors?
Vendor • Spend with vendor
• Spend by vendor classification • Spend by contract (including
variances, change controls) • Frequency of purchases
• If we’re spending more than we anticipated with a vendor, what benefit—such as additional discounts—are we getting in return? • How much are we spending with a particular vendor across all
categories of spend?
• Of our total spend, which vendors receive the greatest share? • Of our total spend, what vendor classifications receive the greatest
share?
• What’s our total spend under a particular contract?
• How much are we spending under a contract compared to what we thought we’d spend and when?
• Are we spending more or less with a vendor year-over-year?
Top Ten • Top ten vendors by spend • Top ten categories by spend
• What vendors do we spend the most with? • What do we buy the most of?
• Terms and Conditions Catalog
• Service Level Catalog
• Solicitation requirements validation
• Evaluation Team and Negotiation Team qualifications,
roles and responsibilities
• Contract compliancy
• Contract kick-off meeting
• Contract monitoring tool
• Contract non-compliancy
• Work suspension
High-Level Roadmap
2015
Getting What We Paid For
Build Out VM Program VM Lifecycle RACI
Solicitation Requirements Validation Responsible Vendor Review Vendor Performance Scorecard
Contract – Vendor Profile Terms and Conditions Catalog Evaluation Team Member Criteria
2016
The Year of Automation
Build Out ERP Identify Point Solutions Vendor Spend Analytics
Refine Operations Cost Containment
2017
Above and Beyond
Strategy Sharing Access to Innovation Solve Scalability / Risk Mutual Focus on Cost Drivers
