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5 Vendor Management Best Practices Automotive Industry Companies Must Follow

Jan 21, 2019

The automotive industry is undergoing a period of immense disruption like never seen before. Influenced by new manufacturing and procurement processes and innovative designs, neither vehicles nor auto manufacturing facilities look like how they did a decade ago. Automobile companies of today are facing challenges in effective category management, identifying and following vendor management best practices, and leveraging data and analytics for their benefit. Rapid innovations in the automotive industry are putting tremendous pressure on companies to look for vendors who are ready to evolve and innovate at a rapid pace. Therefore, automotive companies need better metrics for contract compliance, procurement ROI, process efficiency, contract life savings, and invoice accuracy to bring about best-in-class procurement and effective resource and vendor management capabilities.

At SpendEdge, we understand the impact that an effective vendor management system can have on your business. And to help automotive companies thrive in the competitive marketplace, our team of experts has highlighted four vendor management best practices that can help automotive industry players to become market leaders.

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Are you looking for more insights on vendor management best pracatices? Speak to our experts to gain an overview our procurement solutions that could suit your business needs. 

Vendor Management Best Practices for the Automotive Industry

Best Practice #1: Select your vendors smartly

One of the vendor management best practices for the automotive industry is smart vendor selection and an agile procurement process. For companies in the automotive industry, this is crucial since the amount of capital spent on the purchase of automotive parts is commonly regarded as the largest single cost for brands to support their business. Additionally, vendor selection helps in better allocation of orders for parts among several potential vendors or suppliers to satisfy the demands of consumers. Therefore, it can be safely stated that better vendor selection is one of the crucial vendor management best practices for automotive companies.

Best Practice #2: Define and set your expectations

For companies in the automotive industry, it is important to set realistic expectations while looking for a new vendor. Since automotive companies need to constantly update their technologies and manufacturing processes, it’s imperative that they communicate the changes in their goals and expectations to their vendors.

Risk assessment is a daunting task for most companies. Following vendor management best practices can help avoid risks to a certain degree.request proposal Want to know how? Request a free proposal now.

Best Practice #3: Provide insights into current and future needs

Vendors and organizations depend on each other to compete in the market. Therefore, it is crucial that they provide and share information on current and future trends with each other. Sharing of such information is one of the vendor management best practices for companies operating in this sector. Businesses in the automotive industry should also check if vendors have an in-depth knowledge of the industry, and then use these as inputs while optimizing and strategizing their vendor management system. As, vendors evolve and add more capabilities, services, or offerings, companies have to stay updated on what’s new in the market.

Best Practice #4: Balance competition and commitment

Gaining the commitment of the vendors and getting them to support business operations is one of the important aims of having a vendor management system. There is a certain level of commitment that the vendor tends to expect from the company. Companies should not blindly accept the prices vendors set. Gaining competitive bids is one of the key vendor management best practices that companies must follow to reduce excess spend.

Best Practice #5: Comprehensive procedures and policies

Developing written procedures and policies to provide a solid framework for the governance of vendors is considered to be one of the vendor management best practices for companies. These policies and procedures offer the framework for ensuring the company operates in compliance with regulatory requirements. However, the same level of due diligence is not required by every vendor. A risk-based approach creates better efficacy and efficiency in the vendor management system by requiring more effort and diligence to be devoted to higher-risk vendors than moderate and low-risk vendors.


Following vendor management best practices can help procurement organizations in developing robust procurement and sourcing strategies. Want to know how? Request a free demo below.

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