Vendor Management

Prerequisite to a successful Materials Management is the availability of a sound vendor base which is now rightly acknowledged as an extended arm of the business. One of main reasons of failure of many Supply Chains , in recent years, has been the inability to hold trusted vendors together.
Vendor management, therefore, requires careful planning and execution , over a fairly long period of time.

Management of Vendors is attempted through the following three ways :

  • Vendor Registration

  • Vendor Development

  • Vendor Rating

  • Vendor Exploration



Vendor Registration :


For ensuring continuous supply of right quality materials required , at the optimum cost, it is essential to have a dependable, competent & competitive vendor base.

The Limited Tender Enquiry (LTE) is issued only when reliable manufacturers/ suppliers/ traders/ contractors are known and for this purpose, there is a need to maintain a list of registered vendors.

So, Vendors are empanelled for the supply of various category/ subcategory of items.

For this purpose, the vendors interested to supply the specific category/sub-category of items are asked to submit the application along with all the documents required to establish their financial & technical capability. The application forms so received are scrutinized and the vendor capacity assessment is carried out through inspection department / technical experts to establish the technical capability of the vendors. These vendors are listed as registered after following up certain processes.

Vendor Development :


Many process industries like to search the alternative and less costly material as substitution of the currently used costlier materials. The less the procurement cost the more is the profit.

Also, there may be situations where the existing suppliers may not be willing to supply the items on various grounds, thus, necessitating ,looking into different alternatives.

An efficient Materials Manager would devote enough time to develop substitutes


& sources of supply with a view to reduce cost of input materials and also to have reliable alternative source for foreign sources.

Normally, in large manufacturing organisations,  a Vendor Development cell (VDC) remains engaged all through for the purpose. When the need to develop a Vendor for an item is felt the requisition for such items is made by concerned department indicating the trial quantity and the potential vendors . Trial Orders are placed on potential vendors and also necessary help is rendered to them to come up to the desired level.


Vendor Rating :

The vendors also like to be given priority be the purchaser if it constantly improves its selling performance which from a purchaser point of view is mainly its offered price, quality and punctuality in delivery.

For Purchaser ,there shall always be a need to continuously monitor and update its registered vendor base so that the organisation continues to have the most competent & competitive vendors in its list of vendors. For this purpose the efforts are made to monitor supply performance of the vendors and rate them objectively.


The major factors usually considered for such vendor rating are competitiveness of vendor (price), quality of supply and delivery adherence.
Vendor rating may also be used for removing a vendor from registered vendor list and also in the selection of vendors while issuing Limited Tender Enquiry.

Vendor Exploration :
To have competitive & competent sources of supply, efforts are made to explore suitable vendors from various sources like internet websites, international bulletins,

vendors list of other similar manufacturing organisations etc. This is known as vendor exploration and in  the competitive environment it is taken as a serious activity.