DotOne teamWhat is vendor management?
Vendor management is the process of selecting, onboarding, measuring and developing the suppliers who provide your materials and services. It covers everything from the first quotation to the long-term relationship.
Purchase raises the orders. Vendor management makes sure those orders go to the right vendors, on the right terms, and that each vendor's real performance is known, not guessed.
The vendor management process
- Identify needs. Decide what you buy, in what volumes, and what matters most for each category: price, quality, lead time or technical support.
- Find and evaluate vendors. Ask for quotations from several vendors, check samples, capacity, certifications and references, and visit critical suppliers.
- Onboard. Collect legal name, GSTIN, PAN, bank details and payment terms, verify them, and create a clean vendor master. See our guide on master data management.
- Agree terms. Prices, payment terms, delivery lead times, quality specifications and what happens when material is rejected.
- Measure performance. Track every delivery for timeliness, quantity and quality, and keep a scorecard per vendor.
- Review and develop. Share scorecards with vendors regularly, raise corrective actions for repeated problems, and give more business to the best performers.
Vendor scorecard: a worked example
A simple scorecard weights the things that matter most to your plant. Here, a manufacturer weights quality at 40 percent, delivery at 35 percent and price at 25 percent, and scores two resin vendors over a quarter:
| Measure | Weight | Vendor A | Vendor B |
|---|---|---|---|
| Quality (lots accepted without rejection) | 40% | 98% | 90% |
| Delivery (POs received on time) | 35% | 85% | 95% |
| Price (score vs lowest quote) | 25% | 90% | 100% |
| Weighted score | 91.45 | 94.25 |
Vendor A: 0.40 × 98 + 0.35 × 85 + 0.25 × 90 = 91.45. Vendor B: 0.40 × 90 + 0.35 × 95 + 0.25 × 100 = 94.25.
Vendor B is cheaper and more punctual, but has more rejections. The scorecard does not just pick a winner. It tells you what to discuss with each vendor: delivery with A, quality with B.
Vendor management KPIs
| KPI | How to measure it |
|---|---|
| On-time delivery | POs received by the due date ÷ total POs received |
| Rejection rate | Quantity rejected at goods receipt or in process ÷ quantity received |
| Actual lead time | Average days from PO to goods receipt, by vendor and item |
| Fill rate | Quantity received ÷ quantity ordered |
| Price variance | Price paid vs agreed or last price |
| Corrective actions | Number of open and closed corrective action requests per vendor |
Common vendor management mistakes
- Choosing on price alone. The cheapest vendor is expensive if material is rejected or arrives late and stops a line.
- Measuring from memory. "Vendor X is usually on time" is not data. Record every receipt against its PO.
- Depending on one vendor for critical items. Keep at least one approved alternate for anything that can stop production.
- Not sharing performance. Vendors cannot fix problems they do not know about. Share scorecards every quarter.
- Messy vendor masters. The same vendor created twice splits its history and hides its real performance.
Vendor management in DotOne
In DotOne, vendor performance is recorded as part of normal purchase work, not in a separate spreadsheet:
- Send RFQs to several vendors and compare their quotes side by side, with past purchase history in view.
- Receive material against the PO, record quantities and quality checks at goods receipt, and rate the supplier.
- Track vendor quality ratings and raise supplier corrective action requests through quality management.
- Vendor masters sync with Tally, so purchase bills and payments match in both systems.