The document discusses best practices for establishing and operating a Vendor Management Office (VMO). A VMO can help bring governance, structure, and strategic focus to global spend, savings, and vendor management. Key points include how a VMO can deliver scorecards, dashboards, and templates to provide visibility into spend; prioritize strategic vendors; and act as a central point of governance, policy, and escalation. The VMO leader requires experience managing vendors, contracts, finance, and driving change at an executive level.

1. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Best Practices Procurement
And Sourcing:
Ed Kerbs
March 2015
 How Vendor Management Offices (VMO)
helps by adding governance & structure
around global spend, savings and
reporting.
 Bring the right management skills
process & tools around contracts,
vendor performance, finance and
administration to maximize profit.

2. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Introduction”
• Vendor Management Office (VMO) - Why bother?
• Purchasing & Sourcing departments may be unjustified source of discontent.
• They have “good / best ” people, connected, hold high ground
• Can be perceived as competent but inflexible and time consuming bureaucrats
• May be managed as a cost center (no “spend to save” mentality)
• Can be the results of years of decentralization - best effort delivers suboptimal results
• Be effected by weak management (internal, external, upper & cross divisional)
• Not always viewed as strategic in times of change or duress - no bandwidth, fire fighting
• Purchasing & Sourcing departments may not be staffed & chartered to focus on
• Global portfolio reporting & management of
• Strategic vendors, Spend, Savings
• Policy, Tools, Process, Archives
• Interface to upper management for
• Contracts, Vendors, Performance, Finance
VMO – Why?
 Successful VMOs proactively manages global spend as a visible portfolio.
 VMO governance is a cornerstone of fact based management around spend & savings.

3. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Introduction”
• Vendor Management Office VMO – Why bother?
• VMO can help when:
• Too many fire drills, “band aids”, out of control perception
• Poverty of specific experience or category management
• Beginning of a new strategy like outsourcing, vendor consolidation, volume/enterprise
• Beginning of a new strategy like business process re-engineering (challenging)
• Desired evolution to metrics based management across the spend
• Need to put laser focus around global cost savings
• Lack of existing governance bandwidth to implement policy and reporting
• Lack of accurate measurement systems or financial data confounding reporting
• Lack of proactive governance to rationalize productively and profitably
• Political issues between users, finance, purchasing
• Lack of mentor to “train the trainer”
• Over reliance on management consulting in multiple procurement contexts
VMO – Why?
 VMO provides guidance, evaluates suppliers, helps in negotiations, consolidates for leverage
 VMO supports objectives without bias or emotion, provides legal and contractual best practices

4. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Goals and objectives”
• Vendor Management Office (VMO) - Why bother?
• VMO can complement and create synergy with Purchasing & Sourcing
• Goal: Global alignment of spend to an increasing shareholder / owner wealth
• Strategic Objectives:
• Deliver global financial synergies around contracts (save money)
• Deliver global operational innovation synergies around contracts (increase quality and agility)
• Optimize specific contract deliverables & SLAs to meet requirements at lowest TCO
• Bring common governance, visibility, tools, process and order around the global spend portfolio
• Deliver i) global spend reporting and ii) rationalized strategic vendor reporting
• Give management the opportunity to rationalize & prioritize for profit
• Proactively maximize satisfaction around the global spend
VMO - Goal
 Successful VMOs proactively manages global spend as a visible portfolio.
 VMO governance is a cornerstone of fact based management around the spend.

5. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverables”
• Vendor Management Office VMO - What might it do?
• Be the central point of governance around the global spend
• Deliver on global cross functional strategic leadership to optimize spend
• Manage Executive Level interface Vendor / Buyer / Contracts / Performance
• Deliver Strategic Vendor Scorecards (monthly?)
• Deliver Strategic Spend Dashboards (monthly / quarterly?)
• Deliver Strategic Vendor Templates (Bi-annual / quarterly?)
• Create, implement and communicate policy
• Facilitate competent constant service level management (SLAs)
• Mine for cost savings, deliver cost savings and operate as a profit center (CSO)
• Facilitate escalation, visibility and resolution for suboptimal business arrangements
• Facilitate escalation, visibility for optimal business arrangements
• Facilitate rational interface between upper management, vendor, contracts & data
VMO – Deliverables
 VMO can prioritize strategic vendors & deliver scorecards, dashboards, templates.
 VMO can be global point of escalation.
 VMO can be funded as a profit center (CSO) to deliver >100% ROI in annualized hard $ savings

6. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Scope”
• Vendor Management Office VMO - What might it do?
• Facilitate global Policy:
• Policy generation, implementation & communication
• Policy compliance management
• Facilitate global Artifacts
• Contract file and sourcing records
• Templates, scorecards, dashboards
• Savings Pipeline
• Governance meeting minutes, Retention management
• Facilitate Global Tools
• Portfolio Management, Contract Management
• Finance & Business Intelligence, E-Procurement
• Facilitate global VMO Process
• Develop, document and implement clear consistent processes
• Cross functional & cross geographical reporting scope and project scope
• Manage strategic relationships with vendors, management, users
• Managed Service Providers
VMO - Scope
 VMO can deliver global centralized policy, artifacts, tools and processes.

7. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Templates”
• Vendor Management Office VMO – Templates
• Best Practices in Creating Templates
• Page 1 – Company Information
• Stock price chart
• Use D&B for private company, Yahoo Finance for public (mind copyrights)
• Vendor name, location, market value, revenue, of employees,
• General paragraph
• Page 2 - Total spend
• Chart 1 going back as far as practical
• Chart 2 breakout current year spend by logical category
• Be clear with sources and assumptions, mark FY or CY
• Page 3 - Breakdown vendors offerings by reported structure,
• Highlight areas of Firm’s spend
VMO - Templates
 Data and information held in template gives upper management leverage

8. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Templates”
• Vendor Management Office VMO – Templates
• Best Practices in Creating Templates
• Page 4 - Strengths and weaknesses,
• Internal and external sources
• There are always some dig hard
• Page 5 - Executive team
• Vendor and Firm alignment including name and function
• Verify to highest level
• Page 6 - Operational team
• Vendor and Firm alignment including name and function
• Page 7 - Vendor Pipeline
• Name, description , Vendor owner, Firm owner, value, status
• Page 8 - Vendor Importance
• Strategic, Tactical, Commodity, Boutique (can I swap – how deep is relationship)
• Page 9 - Calendar of executive level events,
• Participants and major takeaways
VMO - Templates
 Data and information held in template gives upper management leverage

9. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Templates”
• Vendor Management Office VMO – Templates
• Best Practices in Creating Templates
• Every number, every fact has one or more sources.
• All must be documented and dated
• Textbook high quality look and feel
• Creates credibility
• Highest possible level of accuracy and precision
• Creates credibility
• Use the highest relevant executive as your sponsor
• Support is needed to get meaningful results
• Get buy in from all relevant senior management
• Avoid blindsiding and being pressured to publish suboptimal templates
VMO – Best Practice Templates
 Maintaining credibility in this highly visible document is essential
 Accurate and precise deliverables are a must
 Strong “optics” are also very important

10. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Templates”
• Vendor Management Office VMO – Templates
• Best Practices in Creating Templates
• Data sources will be inconsistent and require reconciliation
• Competent financial analysis is needed – “political”
• Any and all assumptions must be clearly displayed
• Finesse needed to make them terse across the portfolio
• Professional result takes far longer than you think
• Especially the first one – complexity in overlap, merger, mis-coded spend
• Use 10K and web as beginning point for public companies,
• D&B and web for others – Gartner, Forrester etc..
• Make appointments immediately with internal and external contributors
• These are highly proprietary
• Mark them as such
• Hand deliver paper only to known list (for executive consumption)
• Lock desk and do not e-mail
• Deliver disk / FOB only if necessary
VMO - Best Practice – Templates
 Templates are proprietary, confidential, take significant time & effort to create
 Provides management with the opportunity to rationalize and prioritize the spend

11. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Templates”
• Vendor Management Office VMO – Leaders needed
• VMO Leader requires competency in management of
• Vendors, Performance, Finance
• Contracts, Project Portfolios
• Sourcing Strategy, Tools, Process
• VMO Leader must have experience dealing with:
• Legal, HR, Finance, IT, operations, sales/marketing
• Sourcing, procurement, purchasing, supply chain
• Internal & external communications, complex analysis
• Upper Management
• VMO Leader must have executive level ease and facility with:
• End user technology, Decision making, Negotiations
• Communications, category competency, mentoring & leading people
• Time Management, planning and analyzing
VMO - Leadership
 VMO leader must be an executive experienced in driving change

12. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Dashboard”
• Vendor Management Office VMO
• Total Spend Dashboard
• Increase / Decrease ~ +/-
• All suppliers in descending order by spend
• Spend by operating unit
Dashboard
 Data from vendor, G/L, A/P, Sourcing and others will vary
 Dollars in the green are compliant and under optimal control
 Dollars remaining white represent leakage and opportunity to improve leverage
PO’s Contracts
Total Spend

13. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Dashboard”
• Vendor Management Office VMO
• Purchase Order Dashboard
• What is the total spend month over month and year over year
• Increase / Decrease ~ +/-
• Top 10 - suppliers by spend, categories by spend, purchases
• Spend by operating unit
• PO / Invoice matching percentage
• PO / Invoice matching trend
Dashboard
 “PO leakage” is when i) A/P invoice ≠ PO or ii) things that should’ve been on a PO
 Different challenges cause different shades of green and white
 Opportunity to optimize existing or new suppliers or purchases
PO’s Contracts
Total Spend
PO
Leakage

14. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Dashboard”
• Vendor Management Office VMO
• Contract spend
• What is the total spend month over month and year over year
• Increase / Decrease ~ +/-
• Top 10 - suppliers by spend, categories by spend, purchases
• Spend by operating unit
Dashboard
 “Contract Leakage” is when A/P invoice ≠ Contract or should’ve been on a contract
 Different challenges cause different shades of green and white
 Opportunity to optimize existing or new suppliers or purchases
PO’s Contracts
Total Spend
Contract
Leakage

15. KERBS
Proprietary and Confidential
© 2009 Ed Kerbs
Vendor Management Office:
“Operational Deliverable - Dashboard”
• Vendor Management Office VMO
• Percent contracted spent in non contract venue (Maverick/Rogue)
• Percent PO/Contract spent in non PO/Contract venue (Maverick/Rogue)
• What is the total spend month over month and year over year
• Increase / Decrease ~ +/-
• Top 10 - suppliers by spend, categories by spend, purchases
• Spend by operating unit
Dashboard
 Always challenge colleagues in a rational and consultative way
 Look to significantly reduce and not totally eliminate rogue and maverick spend
 Be careful not to get in the way of mission critical business – offer a hand, not a foot
Total Spend
Maverick
&
Rogue
Spend
PO’s Contracts