Maximize efficiency with a vendor management framework

SaaS Management

A well-designed vendor management framework enables you to manage your expenses more efficiently, optimize your buying process, and ensure you get the best possible deals from your vendors. In this guide, we'll outline everything you need to know about your vendor management framework.

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Vendr Team
Published on
December 18, 2022
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A well-designed vendor management framework allows you to manage expenses effectively. It also streamlines the purchasing process and secures the best possible deals from vendors. Having a solid framework in place improves every aspect of your vendor management.

This guide explains vendor management frameworks, why they are essential, and how to use them in your business.

What is a vendor management framework?

The vendor management framework, or VMF, is the company's set of processes, policies, and procedures to select, assess, onboard, and manage vendors.

A well-designed vendor management framework, or vendor governance, helps

  • Improve vendor performance
  • Reduce security risk
  • Stay compliant with laws and regulations
  • Maintain positive relationships with vendors
  • Track performance metrics
  • Eliminate vendor management bottlenecks

Why is vendor management critical? It’s how you ensure optimal vendor management relationships maximize value.


Benefits of creating a vendor framework

Establishing a vendor governance framework that guides how internal teams manage vendor relationships has plenty of benefits, including:

Performance management

A vendor governance model allows you to hold vendors accountable for meeting specific performance standards.

Your standards are supported by a framework using vendor performance data to improve productivity and supplier management.

Better vendor relationships

An established vendor framework makes for better vendor relationships. This text outlines contracts, assists in software contract negotiations, and establishes clear expectations for vendors.

Additionally, better vendor relationships lead to less spending on managing vendors, which helps teams avoid unnecessary costs.

Cost savings

Vendor management frameworks can help businesses reduce costs when purchasing SaaS. Frameworks give directions to choose valuable vendors, make buying faster, and monitor vendor performance, leading to savings.

Better contract administration

A robust vendor governance framework and management system allow your team to maintain contracts, organize documents, and record changes. In addition, your company ensures due diligence when managing contracts, which is key to upholding internal compliance, guidelines, and best practices.

Controlled risk management

A vendor management framework helps manage risk when buying SaaS through structured evaluations, contract negotiations, and performance monitoring. Putting these controls in place reduces the chances of toxic vendor relationships, like cyber attacks, performance issues, and PR snafus.

The three vendor management frameworks

Most companies run on one of these frameworks:

Centralized vendor management

A centralized vendor framework keeps most vendor activities, tasks, and records in one dashboard, simulating a central vendor management office. As a result, either one person or a small group makes vendor management decisions.

With a centralized vendor management program, communication happens quickly, and you complete complex projects faster. In addition, procedures and guidelines are standardized because the vendor management process isn’t as complicated.

Decentralized vendor management

In a decentralized vendor framework, different areas of businesses contact vendors directly without a centralized office to manage this communication. Each line of business is responsible for the entire vendor management process, including budgeting, expenses, contracts, and vendor relationships.

A decentralized vendor management approach gives each business department more control over its vendor dealings. As a result, approval processes aren’t as long, and in some cases, vendor transactions can happen on a faster timeline.

However, a decentralized approach can quickly become costly, taking up more resources than necessary. It can also result in expensive business practices, like maverick spending. Therefore, a decentralized management approach is rarely the optimal route.

Hybrid vendor management

As the name suggests, a hybrid approach to VMFs combines the best aspects of centralized and decentralized systems with vendor management. A centralized vendor management team oversees compliance and ensures your team follows vendor management best practices. At the same time, a hybrid approach allows the business to pursue vendor relationships with internal autonomy.

Hybrid vendor management is popular with large enterprises.


Components of a vendor management framework

The specific components of a VMF will differ based on company size. In addition, it will adjust based on long-term and short-term goals and supply chain complexities.

Procurement leaders should optimize the vendor framework to fit the company’s needs while staying compliant with laws and regulations.

Here are the overarching components of a vendor management framework:

Vendor selection

Software vendor selection is essential for businesses looking to purchase new SaaS solutions. One approach to selecting a software vendor is strategic sourcing. This process involves identifying the best options for meeting a firm’s specific needs and objectives.

Before beginning the process of sourcing software, it is essential to establish guidelines and criteria for evaluating potential vendors. These guidelines may include factors such as the vendor's track record, software capabilities, and level of customer support.

Clear criteria will help ensure that the selection process is objective, fair, and valuable.

Include all stakeholders in the software buying process, as their approval is needed to continue with any vendor.

Stakeholders may include individuals from different departments or teams and external stakeholders such as customers or partners. By getting "yes" responses from all necessary stakeholders, SaaS buyers can ensure they have the support needed.

Risk assessment

Companies need a vendor risk assessment framework to protect themselves from potential risks when buying and managing SaaS.

A company can protect itself from a wide range of risks by evaluating potential vendors carefully and managing vendor relationships effectively. This security governance helps companies identify ad mitigate security risks.

Evaluating vendors' security practices ensures they have the necessary safeguards to protect sensitive data. This evaluation is especially important for companies that handle confidential information or operate in industries prone to security breaches.

Choosing reliable and trustworthy vendors can help a company avoid disruptions to its operations or damage its reputation. This assessment can be done by evaluating vendors based on their track record, reputation, and capabilities.

Contract management

SaaS contract management is essential for getting the best deal from vendors. Centralizing contracts with a vendor management system is an effective way to make the process smoother.

A dedicated system helps businesses easily track and manage vendor relationships. It ensures all contracts are current and follows the firm’s vendor management policies and procedures.

In addition to managing existing vendor relationships, contract management is also essential regarding supplier onboarding and offboarding.

SaaS contract management is essential for maintaining strong supplier and vendor relationships. Planning and managing contracts carefully can help businesses get the best value and terms from vendors, resulting in improved performance.

Monitoring and reporting

First, set up a vendor framework with KPIs for your business. Then, monitor and report on what the framework reveals.

Your framework allows stakeholders to establish vendor management governance and ensure service providers perform to standard. But your team must oversee the framework to ensure it’s applied and adjusted when necessary.

Vendor management software comes into play here as a powerful governance tool. It helps keep a finger on your most crucial vendor framework metrics—often in real-time.

Additionally, it saves management teams time they can use to focus on higher-ROI tasks.

How your vendor management framework informs your project management organization

Vendor management frameworks can play a vital role in the project management process. These frameworks help organize procurement and IT projects to ensure their successful completion. These frameworks often use traditional project management techniques, such as the waterfall methodology, to define project goals and milestones.

A vendor management framework can help project management by promoting continuous improvement and increased efficiency. Frameworks can involve updating project plans and adjusting project team goals.

In addition to helping with project planning and execution, a supplier management framework can also assist with project progress tracking.

A system that centralizes vendor relationships helps team members monitor project progress and detect potential problems that could delay delivery. These systems allow projects to be completed on time and within budget.

How Vendr enhances your company’s vendor management framework

Vendr helps you find, buy, and sell SaaS. Vendr will partner with your team to implement and manage your vendor management framework.

Working closely with finance, IT, and procurement teams, Vendr effectively manages your software vendor relationships.

With Vendr, companies can reduce the time and effort spent on tasks like SaaS sourcing, contract negotiation, and vendor performance monitoring. By working with Vendr, you save money on your SaaS stack. Then, you free up resources so your teams can focus on other business areas.

Vendr is a valuable partner for finance and procurement teams looking to level up their vendor management processes. Vendr helps businesses grow by providing tools and services to manage their vendor frameworks better, increasing efficiency and reducing costs.

Vendr helps businesses manage their vendor frameworks better, which leads to greater efficiency, lower costs, and growth.


Vendr Team
Vendr's team of SaaS and negotiation experts provide their curated insights into the latest trends in software, tool capabilities, and modern procurement strategies.

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