Vendor Compliance

Many years ago there was a television game show called What’s My Line?   In the show, a contestant with an unknown occupation faced three panelists.   Asking questions one at a time, the panelists tried to guess the contestant’s career.   

Together with our materials management customers across the nation we have been asking just that very question, “What is a vendor?”  How do you define a vendor?  Is it a company or a person?   It seems like an easy enough question to answer, especially in the eyes of many of our prospects and customers.   A vendor is simply defined as anyone they cut a check to (outside of payroll).  Not so fast, my friend.  

When we get the vendor files of our customers we are shocked with what we see. Municipalities, associations, periodicals, charities, hotels, medical device manufacturers, restaurants, contracted physicians, all bunched together.  Should they be treated equally?  Do they pose the same risks to the organization?  Are there some groupings of vendors that have common risk profiles? 

The vendor/customer relationship varies by vendor type.  Some of them sell products and services from call centers are never on the customer’s premise.  Others have armies of staff that are so entrenched in the customer’s operations that the vendor’s representatives are often mistaken for employees.        

Then, what about the people and companies who don’t sell you anything – yet?  The potential or cold calling vendors.  These folks fill up your voicemail and email boxes with that 30 second elevator pitch (I call it the “mini-mercial”), usually highlighting how they can save you time and/or money.  Who are these folks?  What should you know about them before you ever take an appointment from them?  Are they even a legitimate company? Everyone has to get a start somewhere but not at the expense of exposing your company to unforeseen risks. 

Having basic information available and screened about a company, as well as the principals and staff, even before meeting with potential vendors will eliminate the risk of getting egg on your face after you have signed a contract or PO only to discover that the company is nothing more than a couple guys with a good idea operating in the basement of a Marietta, GA neighborhood. ; ) 

So now you have this vendor who has been pre-qualified to work with your company.  Great…. But the screening process has been approached as an event.  Whereas applying a proactive method of managing and tracking vendors and their information in perpetuity is more appropriate for the ever-changing, contracting, expanding, pliable “thing” known as the vendor.    

One customer told us a story about their HVAC contractor.   At the end of the month, they received a bill for three days of service work on their units.   Purchasing and maintenance had no record of it because their badging system didn’t require contracted service workers to sign in.   They didn’t really believe that their HVAC contractor had taken advantage of them, but they would have been reassured by some impartial documentation. 

Another overlooked group of “vendors” that will never show up on your payables file are the partners that pay you.   I’m not talking about illegal kickbacks.   Nothing under the table.   But you probably have at least one vendor in this category.   Think about the vending machines at your facilities.   Here you have a situation where someone is on your property regularly, but virtually invisible in most records.   As you define your badging and vendor program, take groups like this into account.    

What about Fed Ex/UPS/couriers?   Are they visitors or vendors?   Unless you use them for outbound shipments, they won’t show up on your payables file.   

As you define your vendor management program, consider these questions: 

1.   Who needs access to areas that are restricted for security or safety reasons – regardless of their status as a traditional “vendor”?   How will your visitor access and badging program manage that? 

2.   How will you handle visitors that don’t require an appointment – photocopy servicing, vending machine stocking, routine maintenance?     

3.  If you’re implementing a vendor-funded credentialing program, how will you handle credentialing enterprises or organizations that you do not pay, (e.g., the vending machine contract, accreditation associations, etc.)?    

4.  How do you need to track independent contractors or workers from temp agencies?   What level of detail do expect from the person vs. agency?   

Each enterprise has unique requirements, and your program must be custom defined to your needs.  Take a moment to observe the sensitive areas of your facility.   Watch who goes in there.   See who comes out.   What information about those visitors would help mitigate your exposure?  What would help you make better decisions?     

Back to the What’s My Line? subject, if the contestant’s occupation wasn’t discerned within 10 questions, he walked away a winner and $50 richer.   I said this was “years and years ago”!  (If you are a night owl like me you can catch episodes at 3 AM ET on the Game Show Network.)   

Quality and safety concerns have affected just about everything from China recently – from pharmaceuticals to fish to toothpaste to dog food to Polly Pocket.  (Although anything that gets Polly Pocket off the floor is welcome to me.   Stepping on those little plastic toys is second only to LEGO bricks as torture to bare feet.)      

Knowing that exports are keys to their booming economy, China is responding aggressively.   They recently announced the blacklisting of more than 400 companies for export violations.   In addition, nearly 300 drug test vans will patrol rural China in search of counterfeit drugs.   They have worked with U.S. officials for a new framework of safety assurances.   But the ultimate counter to the quality crisis is that the former head of the Chinese State Food and Drug Administration was executed for accepting bribes in exchange for approvals.   

While the Queen of Hearts in Alice in Wonderland shouted, “Off with her head!” for a much lesser violation, I doubt we’ll see a response that extreme in the US.  What we could see is another layer in the “Know Your Vendor” movement from the government or from our own concern that we’re providing the best to our customers.   Another watch list against which we check our providers. 

Our Take:  Flexibility while being diligent in dealing with security and partners is key.  Issues arise and are cleared.      Regardless of how you do it, you need to track who you work with.   Know their people as well as you know their financials.  Oh, and stop chewing on your toys.