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There are predictable stages in how companies go about selecting and managing vendors, says Bart Perkins, former CIO at Dole Food Co. and Tricon Global Restaurants Inc. who is now managing partner at Leverage Partners Inc., a consulting firm based in Louisville, Ky., and Washington. Leverage Partners helps companies acquire IT products and services.
The first step in improving your approach to vendor selection is to honestly assess where your company stands. The majority of Fortune 500 companies are currently at Levels 1 and 2, he says. A few have reached Level 3. Level 4 is still a distant goal for most.
Level 1: Ad hoc procurement. Every deal is a one-off—an immediate reaction to a problem. You just find a piece of hardware, software or professional service and negotiate. You're not thinking about how the pieces fit.
Level 2: Supplier management, one at a time. You're starting to get more formal in your way of approaching this. You have some processes in place. You're beginning to have a sourcing strategy.
Level 3: Supplier integration. You have multiple suppliers around a business program. For example, you put in SAP and you need SAP software, servers, new desktops and systems integrators to help get it installed, and you might have to re-engineer some business processes. You're trying to figure out how to integrate them so that they all push the project forward rather than elbow one another for a bigger piece of the pie.
Level 4: High-performance supplier management. Your supply chain is optimized and integrated with e-business. You can track the status and capability of any vendor, product or service along with its relationship to other components. But it's a Holy Grail for most IT departments. "We just don't see people there," Perkins says.
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