Top 30 Vendor Management Interview Questions and Answers in 2022

Top 30 Vendor Management Interview Questions and Answers in 2022

The job interview is not an interrogation. However, it is better to be prepared to answer all the questions that you may be asked. To do this, sharpen your arguments, always thinking about the position you are aiming for. Whatever the exact wording of the question, recruiters always lead you on the same grounds: studies, background, experience, skills, suitability for the position, motivation, and personality. That is why we prepared the top 30 vendor management interview questions. This article can help you prepare for your interview methodically, leaving nothing to chance and finding answers that show you are a good fit for the job.

1. What Is Vendor Management?

Effective vendor management optimizes a company’s value chain by transparently comparing vendors. The aim is to build up and maintain a permanent base of vendors who stand for continuity, performance, and delivery readiness. Vendor management refers to the sum of all measures that make it possible to develop, manufacture and procure products more efficiently, better, faster, and more cost-effectively through better cooperation with vendors and their upstream vendors. This definition makes it clear that it is not just the strategic procurement process that benefits from the software. But the entire company can and should improve its competitive position in the long term.

2. Describe The Methods In Vendor Management As Well As Tools Used

There is a wide range of instruments, tools, and methods to manage vendors effectively.

  • Vendor requirement profile: Quality standards, prices, and costs, adherence to deadlines, adherence to quantity, service, quality loyalty
  • Vendor Guide: vendor Requirements, Quality Policy, and Purchasing Program
  • Vendor evaluation: delivery quality, delivery reliability, ability to deliver, price discipline
  • Vendor classification: ABC analysis
  • Vendor scouting: the sighting of new competitors (prices, quality, adherence to delivery dates, innovation)
  • Risk management: price risks, currency risks, quality risks, logistical risks, political risks, legal risks, default risks, financial risks, environmental risks
  • Purchasing controlling: control of internal and external processes, analysis of procurement potential, detection of weak points, cost monitoring, cost-effectiveness control
  • Vendor development: Six Sigma strategy, value stream analysis, SWOT analysis, QAM (Quality Assurance Matrix), process audit method

3. List Which Competencies Are Important For Effective Vendor Management

In addition to specialist knowledge and industry knowledge, certain characteristics, skills, and competencies are required:

  • hands-on mentality
  • solution orientation
  • negotiation skills
  • assertiveness
  • cooperative assets
  • IT affinity
  • technical understanding
  • resilience
  • willingness to change
  • structured way of working
  • entrepreneurial thinking
  • strategic thinking

4. What Is Successful Vendor Management?

Even if the core team of a vendor management department has the required qualifications, the question arises as to how success is defined. Good employees often place high demands on leadership and remuneration. Appropriate instruments such as target agreements are required here. It cannot always be a profit-sharing factor in the conclusion of a favorable contract when viewed from the perspective of a total cost of ownership (TCO). A vendor should bring in about five to seven times their job costs. And not just about negotiating successes when concluding contracts. The successful work of vendor management also includes minimizing running costs, creating security of supply with simultaneous flexibility, and constant monitoring of core vendors and vendor markets.

5. Describe The Process Of Documentation And Monitoring In Vendor Management

Good vendor management documents transparently and gives its internal customers timely information about important dates. They actively inform other parts of the company about new contracts and their validity, so that, for example, subsidiaries can also take advantage of favorable deals. If this follow-up is not carried out or not carried out carefully, there is a risk of duplication of work and higher procurement costs. Vendor management is then included in delivery monitoring (daily business) if there are significant changes to content, quantities, dates, or prices that are beyond the contractual agreements. It is their responsibility to redefine the factual and content framework with the supplied departments and to protect the company’s interests towards the vendor. If a vendor is noticed due to declining quality, defects, or circumstances relevant to liability, fast and smooth cooperation with the purchasing department is a prerequisite for reacting adequately as early as possible and averting damage to your company.

6. How Closely Related Are Vendor Management And Risk Management?

Core vendors are particularly important for the company’s success because the delivery volume is high or there is a strong dependency on the vendor products. The dependency means a risk for the company and makes vendor management and risk management necessary. Essential delivery parameters are regularly collected, reported back, and improved. Qualified risk management in connection with vendors is also crucial. Purchasing can determine which risks are involved in terms of content together with specialist departments using checklists. In the next step, good purchasing will link the possible consequences of the occurrence of a risk with its probability of occurrence, for example with portfolio techniques, to identify the main fields of action. An overall entrepreneurial approach then leads to optimal hedging of the identified risks in terms of costs. It is a management decision whether money is subsequently taken to take out insurance, to set up a second vendor alongside a monopolist, or to adapt needs by changing the product.

7. How Do You Evaluate Vendors?

Vendors’ evaluation is performed using transparent criteria throughout the procurement process. We differentiate between different vendor classes, performance dimensions, and phases, which result in a final rating. In the target/actual comparison, we evaluate the deliveries and services provided about the contractually agreed agreements – qualified vendors within a product group are evaluated.

As part of the evaluation, the vendors are divided into classes. The scope of the evaluation varies depending on the vendor class. We evaluate quality, costs, and deadlines along the entire procurement process – from the offer, delivery, and service phase to the product trial phase. The result of the vendor evaluation is a rating with the following gradations:

  • Outstanding, meaning the vendor exceeded the requirements
  • Good, meaning the vendor met the requirements
  • Restricted, meaning the vendor partially met the requirements
  • Poor, meaning the vendor did not meet the requirements

8. What Is Rating In Vendor Management?

The vendor evaluation criteria are the individual building blocks of your purchasing performance – your vendors receive the money for this. You have to decide which performance components you want to evaluate and whether you also want to weigh them. If there are more than ten evaluation criteria, clarity and practicality are lost. If you can get by with seven or even just five criteria, that is ideal. The seven most common criteria for vendor evaluation in practice are:

  • delivery quality (rejection rate)
  • delivery reliability
  • ability to deliver
  • reliability
  • price behavior and discipline
  • customer focus
  • flexibility, quick shots

9. Is There A Possibility For Vendor Development

Start purchasing initiatives. If you challenge your vendors properly they will deliver top performance – i.e. more than usual. Do not leave it up to the vendors to define the content of the business relationship on their own. The same applies to purchasing: Standing still is a step backward! Most medium-sized companies have no other choice because the demands from their customers are there and will not decrease in the future either. It is practically unavoidable, that the purchasing department is formally forced to pass on the demands of their customers to the vendors. Some customer requirements can only be met with the help of sub-vendors.

10. How Do You Do Vendor Search/Scouting?

Today, no purchasing department can be satisfied with the average performance of its vendors. This raises the question of how you can find new, high-performance top vendors quickly, safely, and cost-effectively, nationally and worldwide. Medium-sized purchasing departments have to review and expand their procurement radius. Modern companies use current market information to monitor and motivate their regular vendors and thus ensure the best know-how and top conditions. At the same time, you noticeably reduce the purchasing costs through professional vendor market exploration.

11. How Do You Select Vendors?

Finding new vendors is one thing. Selecting the right vendors is another. The starting point for effective vendor selection is a company-specific vendor requirement profile. There it is described in detail which specific requirements the “ideal vendor” should meet in terms of quality standards, quality reliability, adherence to deadlines and quantities, prices and costs, service and reliability as well as additional services. A clear picture of these points is the prerequisite for a functioning vendor selection and evaluation.

12. How Can A Company Encourage Vendor Management?

I like the practice of vendor awards. Achievements are evaluated and rewarded. It is the same in sport as it is in business. There are winners and losers. Evaluate your vendors systematically and regularly. Determine which vendor belongs on the podium and which vendor does not. It is very motivating for vendors to receive an award in front of the entire team on a vendor day. The vendor award always works. The main advantages of a vendor award are:

  • The cooperation and commitment of the vendor are strengthened.
  • In negotiations, claims can be enforced more easily.
  • The mutual know-how and innovation gained are considerable.
  • Your key figures and operating results are improved.
  • The vendors are shown a high level of appreciation.

13. What Are The Advantages Of Digital Vendor Management Software For Your Supply Chain Solutions?

Vendor management software has gained enormous importance for purchasing departments from all industries and today represents one of the most important components for maintaining the competitiveness of companies. With vendor management software, you can proactively counter risks such as delivery bottlenecks and thus prevent delays or missing deliveries from causing damage. The success of using vendor management software can be seen directly in faster market access, more innovative processes and products, cost-reducing and goal-oriented selection of vendors and materials, and last but not least in falling error costs.

14. What Does Vendor Management Software Do?

Vendor management software allows to access all vendor data quickly and, thanks to the clear presentation, captures all important information at a glance. This makes it easier for you to monitor costs and make decisions that increase profitability. Intelligent algorithms make your work easier by recognizing and aggregating related data so you can quickly access the information you need without having to compile it yourself. In addition, vendor management software offers you simplified and accelerated communication, as it optimizes processes through automatisms and thus reduces the communication effort. The time and money spent on searching for errors in the processes and flows of goods are also reduced to a minimum, which frees up time for processing tasks that are relevant to decision-making.

15. What Are The Advantages And Possibilities Of Vendor Monitoring?

Powerful vendor monitoring not only offers transparency about your company but also serves as an important tool for controlling and improving the entire supply chain. By knowing the internal, own business processes as well as the external, market-specific process factors of the vendors, these can be made more profitable, costs can be reduced and risks minimized. Comprehensive supply chain monitoring requires the collection of process-oriented information about the internal and external supply chain elements. This starts right at the beginning of the business relationship with the qualification, assessment, and classification of potential business partners, the vendor evaluation of existing, active vendors, the ongoing measurement of quality data, complaints, inventory figures, and process data along the value chain through to distribution logistics and customer satisfaction at the end of the process chain.

16. What Exactly Does The Term Lead Buyer Mean?

The term is to be understood in the sense of the leading purchasing department for a specific product or a specific, previously defined group of materials. The normal case today is still often that several buyers in an organization without a concept, independently of each other and unfortunately often without coordination, take care of the purchase of the same material or the same material group.

The main goal of lead buying is to improve your market position by bundling purchases and the associated economies of scale. This must result in a direct cost reduction, i.e. a purchase price reduction, and indirect procurement cost reduction due to the bundling of the process (transaction cost reduction).

17. What Is The Correct Way For You To Address Suppliers?

Treat your e-mail communication as you would with good friends: the more personal, the better – but without exaggerated confidentiality. Address your business partners the way you would like to be addressed. Use sentences and formulations of your everyday language, so you are always right. After all, at the other end of the electronic line is a person like you and me.

18. Tell Me One Way To Cut Purchasing Costs

Have your accounting department determine the annual purchasing volume of your company. This includes all regular expenses for raw materials, consumables, and services, including costs for business trips, hospitality and telephone costs. Put the purchase volume to the turnover and, if necessary, to the profit. In both cases, the following applies: the smaller the proportion of the purchasing volume, the cheaper you buy. Your goal must therefore be to reduce the purchasing costs concerning sales and profit or to keep them as low as possible. Consider the development of purchases over several years and also try to look into the future. In this way, you can see in which direction the costs are developing and in which areas you urgently need to reduce costs or where not all savings opportunities have been exhausted.

19. What Are The Factors And Criteria When Comparing Offers?

Depending on the goods and services to be purchased, each company sets different criteria that are compared in the offer comparison. Above all, the price and factors such as delivery reliability, payment deadlines, and discounts play a decisive role in most comparisons of offers. To determine which factors are important for an offer, companies can use the following questions:

20. How Important Is It To Get The Best Price For A Product?

It depends on several aspects:

  • Are we willing to pay a higher price for a higher quality product?
  • How can the quality of a product be measured?
  • With what additional costs, e.g. transport costs or packaging costs must be calculated?
  • Which delivery times have to be taken into account?
  • What payment deadlines must be observed?
  • Does the supplier grant rebates, discounts, or other benefits?
  • Do you have a good business relationship with the supplier?
  • What is the rating or creditworthiness of the supplier?
  • Are the company and its products certified? Is sustainability valued?

These and other specific questions provide information about which factors must be compared when comparing offers.

21. What Are The Reasons To Phase Out Vendors?

In principle, phasing out should always be the last step in a vendor relationship – i.e. if nothing works anymore and you have already tried everything to save the relationship with your vendor. In the run-up to this, you should have had various problem sessions with your partner. For example in terms of:

  • fluctuating level of quality
  • declining ability to innovate
  • repeated negative supplier ratings
  • failure to meet agreed-on targets
  • lack of willingness to cooperate and communicate

22. How Do You Negotiate With A Difficult Vendor?

Difficult vendors must be approached carefully during a negotiation. Circumstances should be considered when deciding on negotiation techniques. The more vendors are available as alternatives, the more the procurement department can employ “hardball” style negotiation tactics. The fewer available alternatives require the vendor management department to use more sales-style persuasion techniques.

23. What Are Appropriate Remedial Actions For Vendor Failures?

There are a variety of remedial actions you can take to resolve a vendor’s non-performance. The key is to know which remedy is appropriate for each situation and to use that remedy correctly contractually. For example, two available remedies are coverage losses and contract termination. In the case of cover losses, you receive from your contracted vendor all the premiums that you had to pay to another vendor so that you could claim the failure of the contracted vendor. Termination allows you to completely terminate a contract with a vendor. If there was a small glitch in the middle of a massive and important five-year contract with a major vendor, would you want to terminate that contract entirely? Probably not. In this case, a cover loss would be a more appropriate remedy as your organization would be able to recover financial losses without jeopardizing the entire future of a project while you switch vendors.

24. How Can We Reduce Our Risk Through Better Contract Language?

Poorly written vendor contracts either do not or do not clearly, deal with what happens in situations that can be described as a risk. Well-written contracts reduce risk by detailing what will happen in the event of certain disruptive events. For example, a well-written delivery item with a liquidated damages clause may provide sufficient incentive for a vendor to avoid the possibility of late delivery entirely. A well-written indemnity clause can provide legal protection when damage, injury, or death occurs and the cause is related to a vendor’s performance.

25. What Would You Do If A Department Wanted To Order Equipment That Was Over Budget?

There are many options for processing a request to make a purchase that is over an internal customer’s budget. Refusing to order is just one – and possibly the least professional – approach. One option to explore with the internal customer is leasing the equipment instead of buying it.

26. How Do You Keep Records Of Deliveries?

Whether or not records of deliveries are kept depends on some factors, such as the cost of supplies, the use of supplies (for consumption versus use in the manufacture or billable services), the cost of maintaining records of poor supplies versus the cost of maintaining records, and so on further. However, for higher value, higher volume shipments that are considered a direct cost, a computerized inventory management system should be used to track shipments. This is important for many reasons, including accounting accuracy, replenishment efficiency, and other reasons.

27. How Do You Create A Vendor Management Strategy?

The first step in creating a vendor management strategy is to create an outline of the savings strategy. A savings strategy overview lists all of the tasks that you want to perform during a procurement initiative. For each of these tasks, list the target start dates, actual start dates, target completion dates, actual completion dates, annual target savings, and actual annual savings. Of course, at the beginning of your procurement initiative, your savings strategy overview only contains target data. However, as your sourcing initiative progresses, you add actual data.

28. What Is Your Weak Point?

I have often spent so much time looking for information on presentations that I ended up having to work a night shift to finish the presentation. Because that is of course very stressful, I have been working on this problem and can now organize my time and tasks much better. Sometimes I even finish everything a week before the presentation.

29. What Kind Of Work Environment Do You Like?

The type of professional environment that I like is casual but planned. Since I like to be close to my colleagues and bosses, but within a controlled and organized environment. Then everyone knows their role and there is no confusion when executing the tasks.

30. Why Do You Want To Work Here?

I want to work for this company because it is a benchmark in the sector with a mission that goes beyond the business and with which I feel very identified. Also because I have a lot to contribute to making it go ahead. Furthermore, I admire the fact that you are conscious of the environment through the entire product cycle.

Conclusion

Preparing for an interview can always seem scary, no matter how extensive your experience is, but preparation will certainly help things flow more smoothly. It is important to have the answers to some questions ready, such as the most common ones that we have presented in this article since in this way you will not waste time thinking about what to answer at that moment.