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What is Supplier Management From an ITIL Perspective?

September 25, 2018

What is Supplier Management From an ITIL Perspective?

ITIL Supplier Management Process: From Design to Implementation

It is very difficult to overestimate the role that the ITIL Supplier Management Process, or IT Vendor Management, plays in effective Service Management. With an end goal of quality-ensuring cost effectiveness throughout the IT supply chain, as well as consistency and quality, IT Vendor Management—the management of third-party and internal suppliers and the services they provide—is key to effective Service Management.

Furthermore, the ITIL Supplier Management Process provides formal contract oversight, ensuring that service providers and the contracts that regulate them are serving the needs of the business. This process also analyzes and evaluates supplier contract fulfillment, ensuring that all suppliers are living up to their contractual commitments with the company.

IT Vendor Management

IT Vendor Management is the process by which an organization controls its costs while strengthening its level of service and mitigating risk by contracting with outside specialist vendors. Effective IT Vendor Management requires careful oversight of outside vendors throughout the contractual relationship to ensure that the most value possible is gained through outsourcing, without opening the company up to additional unforeseen risk.

IT Vendor Management is comprised of contract management and procurement, managing performance of vendors throughout the relationship, evaluating the vendor’s performance and translating that evaluation in terms of return on investment, and evaluating and doing as much as possible to mitigate the risk involved in working with outside vendors.    

The Lifecycle of a Vendor Relationship—From Need to Contract to Conclusion

Using external IT suppliers can be somewhat precarious. For this reason, it is imperative that a formal contract be drawn up to define and manage the relationship. In order to arrive at a viable working relationship, certain steps must be taken in the lifecycle of a vendor relationship. These steps include:      

  • Identifying the Needs of the Business and Preparing a Business Case
    • Investigate the needs of the business and prepare an initial business case. This business case should include costs, timescales, benefits, risks, targets, and options.
  • Searching for, Evaluating, and Procuring New Suppliers
    • After establishing your criteria for evaluating potential vendors, select your vendors, negotiate contracts, and codify relationships.
  • Establishing Your New Suppliers
    • Get your new suppliers set up in your accounting and other corporate systems, transition the service to them, and establish their contacts and reports internally and externally with other vendors.
  • Assessment
    • Ongoing assessment and reassessment of supplier performance and contract terms.
  • Supplier Management and Ongoing Evaluation of Contract Performance  
    • Manage the ongoing operation of your vendors, as well as their delivery of goods or services in accordance with their contract. Evaluate and manage vendor costs, and quality of product and service. Communicate with vendor to improve performance and review performance on a regular basis.
  • End of Term
    • Review vendor performance in relation to business needs and contract. Determine ongoing need, and either renew, renegotiate, or terminate the contract.

ITIL Supplier Management Process—The Takeaway

Designing and implementing an effective ITIL Supplier Management Process is one key to minimizing risks and maximizing the benefits associated with turning to an outside vendor for goods or services of any kind. For more information regarding each stage in the supplier management process, consult the Service Design section of ITIL V.3

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With nearly 15 years of experience in the IT industry, Matt Cox is a lover of creating technical solutions and successful customers. As the Senior Director, Technical Operations, ITSM, he leads the talented team of ITSM solutions engineering, on-boarding, and support teams, working with customers of all sizes and across many different industries to create tailored service management solutions using ITSM and ITIL best practices. Fun fact—he once went hang gliding off a cliff in Ecuador.