Executive Briefings

The Lowest Cost Doesn't Always Serve Your Company Best

What internal customers really need from their purchasing organization is expertise in sourcing, a total cost of ownership approach and management of the entire vendor relationship lifecycle. Out of this need emerged an organizational trend, the vendor management office, or VMO, which takes an entirely different approach from that of traditional purchasing organizations and instead focuses on value, not price.
Squeezing vendors too much on price will result in the vendor's making it up somehow and somewhere, likely through marginal performance or lower quality. It's no secret that vendors are going to perform at a higher level, work more collaboratively and allocate more resources to those customers who permit them to make a fair and reasonable profit. The "value-for-money" approach taken by the VMO function results in lower total costs, improved vendor performance and decreased business risk.
Source: CIO, http://cio.com

What internal customers really need from their purchasing organization is expertise in sourcing, a total cost of ownership approach and management of the entire vendor relationship lifecycle. Out of this need emerged an organizational trend, the vendor management office, or VMO, which takes an entirely different approach from that of traditional purchasing organizations and instead focuses on value, not price.
Squeezing vendors too much on price will result in the vendor's making it up somehow and somewhere, likely through marginal performance or lower quality. It's no secret that vendors are going to perform at a higher level, work more collaboratively and allocate more resources to those customers who permit them to make a fair and reasonable profit. The "value-for-money" approach taken by the VMO function results in lower total costs, improved vendor performance and decreased business risk.
Source: CIO, http://cio.com