5 reasons why vendor and contract data needs to be managed together

For procurement and finance professionals, the challenge of managing vendors and contracts is often compounded by manual processes and siloed operational systems. These challenges can lead to inefficiencies, increased risk, and missed opportunities.

For example, when contract renewals are handled separately from vendor performance evaluations, there's a risk of renewing terms with underperforming vendors. This impacts both financial outcomes and operational efficiency.

This scenario is just one of many that underscore the need for a holistic approach to managing vendors and contracts. By the end of this article, you’ll know:

• What is Vendor and Contract Lifecycle Management? 
• The risks of managing vendors and contracts separately
• 5 reasons why vendor and contract data need to be managed together
• How NYCM Insurance improved its vendor contract management with Gatekeeper

What is Vendor and Contract Lifecycle Management (VCLM)?

At Gatekeeper, we’re leading a new category called Vendor and Contract Lifecycle Management (VCLM). It’s an integrated approach that encompasses the entire spectrum of managing vendor relationships and contractual agreements from inception to conclusion.

VCLM focuses on enhancing transparency, control, and efficiency in vendor interactions and contract management, which reduces risks and helps to safeguard compliance.

When you have full visibility and control of your vendor and contract management processes, third-party risk management (TPRM) becomes a natural next step.

TPRM is another crucial aspect of our VCLM approach, particularly for businesses operating in regulated industries.

TPRM involves identifying, assessing, and mitigating risks presented by third parties, such as vendors, to ensure they comply with regulatory standards and do not adversely affect the company’s financial and operational stability.

Watch the video below to find out more about VCLM.

The risks of managing vendors and contracts separately

When vendors and contracts are managed separately, typically in businesses relying on manual processes, several risks emerge:

• Compliance Risks: Disjointed management increases the likelihood of non-compliance with industry standards and regulations, potentially leading to legal penalties and fines.
• Inefficiencies: Manual, siloed processes often result in delays and bottlenecks, hindering operational efficiency and time-to-contract.
• Cost Overruns: Without a unified view of vendors and contracts, businesses may fail to identify cost-saving opportunities or could incur unexpected expenses due to missed renewals.
• Poor Vendor Performance: Separate management makes it difficult to correlate vendor performance with contract terms, potentially leading to continued collaboration with underperforming vendors.
• Inadequate Response to Market Changes: A lack of integrated information can slow down decision-making processes, hindering a business's ability to adapt swiftly to market or regulatory changes.
• Weakened Negotiation Leverage: Without comprehensive data on vendor performance and contract terms, businesses may lack the necessary insight for effective negotiation, potentially resulting in less favourable contract terms.
• Risk of Data Breaches and Security Issues: Inconsistent management of vendors, especially those handling sensitive data, can lead to gaps in security protocols, increasing the risk of data breaches.
• Challenges in Strategic Planning: Disconnected vendor and contract management can obscure the overall strategic view, making it difficult to align procurement strategies, legal workload and meet business objectives.
• Damaged Relationships with Suppliers: Inconsistencies in managing contracts and vendor performance can lead to misunderstandings and strained relationships with key suppliers, impacting long-term collaboration.

Five reasons why vendor and contract data should be managed together

1. Enhanced Visibility and Control

Contract and vendor data should be centralised as both sides tell the full story. Building a vendor contract repository provides a single source of truth for all key teams.

Having this integrated data also empowers procurement teams to proactively manage vendor relationships and contract lifecycles. They can easily track contract expiration dates, renewal terms, and vendor performance over time.

This level of insight is crucial for making informed decisions, such as whether to renegotiate contract terms, seek alternative suppliers, or leverage performance data for better contract terms in the future.

2. Improved Risk Management

A unified approach to managing contracts and vendor data enhances your organisation's ability to identify and mitigate risks.

A finance team that has visibility into both the contractual obligations and any changes to their vendors (such as a drop in credit score), can identify potential instances of non-compliance and take remedial action early on.

Manage vendors and contracts together before they escalate and potentially result in legal issues and costly penalties.

3. Optimised Vendor Performance

When contract and vendor data are integrated, your organisation benefits from a bird's-eye view of its external engagements.

A procurement department, by having access to both contract terms and real-time vendor performance data, can swiftly address service level discrepancies, ensuring that contract obligations are fulfilled as agreed.

Knowing where your contracts are in their lifecycle, how vendors are performing against agreed terms and being able to drive early action can improve overall outcomes.

4. Safeguarded Compliance

Managing contracts and vendors in tandem allows your business to monitor and enforce compliance clauses throughout a contract while putting the onus on the vendor to adhere to them.

When a new data protection regulation comes into effect, the legal team can efficiently evaluate both the contracts and the vendors' data handling practices to ensure comprehensive compliance.

A holistic approach means they can identify any gaps between what's stipulated in the contracts and the vendors' operational procedures, facilitating timely adjustments to meet the new standards. Penalties and costly legislative fines can be avoided.

5. Enhanced Third-Party Risk Management

Visibility of up-to-date vendor and contract data is the foundation of gaining and managing a comprehensive understanding of third-party engagements.

All teams can evaluate a vendor’s financial stability, security measures and ethical measures, compliance track record, and performance metrics in tandem with their contractual obligations.

This holistic view is vital for assessing the overall risk posed by third parties and implementing effective risk management strategies. 

Customer Success Story: NYCM Insurance and Gatekeeper

NYCM Insurance significantly benefited from managing their contracts and data together through Gatekeeper's VCLM approach.

Challenges faced by NYCM before working with Gatekeeper included:

• A lack of visibility into vendors and contracts
• Difficulties in finding approvals
• Inconsistencies in vendor onboarding processes.

By implementing Gatekeeper, NYCM streamlined their processes, created efficiencies using automation, and enhanced user experience.

This integration saved significant time and resources, allowing for better control and visibility of contract and vendor processes, improved workflow functionality, and enhanced version control.

“NYCM ultimately decided on Gatekeeper because it felt like they were headed in the same direction that we were, growing and on the doorstep of becoming a market leader” - says Darin Van Duser, Vendor Management Supervisor, NYCM

Read more about their vendor and contract management success.

Wrap Up

By centralising contract and vendor data - and managing them as part of the same approach - you can enhance visibility and control, and ensure compliance through coordinated management.

The adoption of a VCLM approach not only strategically positions your organisation to better manage risks, it allows you to comply with regulations, and make informed decisions, leading to stronger, more effective business relationships and outcomes.