2011

CFC Management Services (P) Ltd.

pravin Koyande

WINTER PROJECT: VENDOR

MANAGEMENT
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 PROJECT REPORT ON

“VENDOR MANAGEMENT’’

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE COURSE

MASTER OF MANAGEMENT STUDIES

UNIVERSITY OF MUMBAI

SUBMITTED BY

MR. MAYANK VILAS SANKHE

ROLL NO:- 200926

BATCH: 2009-2011

SPECIALISATION:- OPERATIONS

UNDER THE GUIDANCE OF

PROF. RITESH LAL

VISHWESHWAR EDUCATION SOCIETY’S

INDIRA INSTITUTE OF BUSINESS MANAGEMENT SANPADA,

NAVI MUMBAI
 Certificate

VISHWESHWAR EDUCATION SOCIETY’S

INDIRA INSTITUTE OF BUSINESS MANAGEMENT

SANPADA, NAVI MUMBAI

It is hereby certified that the Project Report on

“Vendor Management” has been successfully
completed in MMS Semester IV of the
academic year 2009-2011 by Mr. Pravin
Koyande under the guidance of Prof. RITESH
LAL.

PROF. RITESH LAL DR. SUBHASH KULKARNI

(Project Guide Internal) DIRECTOR
 Acknowledgement

I would also express my sincere thanks to our Director, Dr.

SUBHASH KULKARNI for enabling me to undertake such an
excellent project, which made me to acquire tremendous knowledge and
self- confidence.

I would also like to place on record my sincere thanks to Prof

RITESH LAL my guide, for her valuable guidance and inputs which
helped me to select and focus my work on this project.

PRAVIN DATTARAM KOYANDE

MMS: OPERATIONS
Table of Contents
ABOUT COMPANY ......................................................................................................................................... 6
Key principles for operational excellence ................................................................................................. 6
VISION ....................................................................................................................................................... 6
MISSION .................................................................................................................................................... 6
OBJECT ...................................................................................................................................................... 6
SERVICES ................................................................................................................................................... 6
OPERATIONS ............................................................................................................................................. 7
Online ............................................................................................................................................ 7
Calling Toll Free Number............................................................................................................... 9
SEARCH WORK TICKETS............................................................................................................... 10
INVOICE HISTORY. ....................................................................................................................... 11
PROCESSES FLOW-CHART ....................................................................................................................... 12
VENDOR MANAGEMENT............................................................................................................................. 13
Strategies to Strengthen Vendor Relations ............................................................................................ 13
The Successful Vendor Selection Process ............................................................................................... 15
Vendor Search: .................................................................................................................................... 16
Contract Negotiation Strategies ......................................................................................................... 17
Strategies for Planning Contract Negotiations ....................................................................................... 18
Preparation ............................................................................................................................................. 20
PROBLEMS FACED BY CFC ........................................................................................................................... 21
SOLUTIONS .................................................................................................................................................. 22
Categorized the services in two different types: .................................................................................... 22
Category A ........................................................................................................................................... 22
Category B ........................................................................................................................................... 22
CREATING QUALITY EVALUATION MATRIX FOR VENDORS………………………………………………………………….24
ABOUT COMPANY
CFC - Central Facility Channel is the first Facility Management Company having
teams in all Facilities Service Lines.

CFC is your best bet when it comes to resolving all home management
complaints so as to avoid any disturbance to your daily activities. We will send a
contractor at your doorstep once you have expressed your availability and
duration. Our services will be made available through a nominal fee for all the
callers for the requisite services.

Key principles for operational excellence:

Single point of contact
Single implementation process
Single application, local adaptation
Single dedicated account management team

VISION:
CFCs’” Vision is to be India’s Premier Facilities Service Providers. We will earn our
Customers’ Loyalty through Continuous Improvement driven by Enthusiasm,
Integrity and Hard-work of CFC Family."

MISSION:
We guarantee to our customers savings and process optimization through –
Single Point of Contact and Contract Management

OBJECT:
To capture the Navi Mumbai Market by end of 2011 and ensure timely delivery
of services as promised to the client. Ensure Vendor Satisfaction

SERVICES:
Electrician
Plumbers
Security
Janitorial
Carpenter
ApplianceRepairs
Paint
OPERATIONS
CFC has operations in Navi Mumbai. CFC makes Annual Maintenance Contract
with households with nominal subscription fees according to the size of the flat.
The subscription fees are as follows:

1BHK 2000/- INR

2BHK 3500/- INR
3BHK 4500/- INR
4 BHK 5500/- INR
RH 3500/- INR
2RH 4500/- INR
3RH 5500/- INR

Above 4BHK 1000/-INR are charged for each room and same for the Row
Houses.

After submitting dully filled form, Address proofs and fees (by Cash, Cheque or
Demand Draft) Welcome kit is send to him contains:

Customer ID
Login Password
User Manual
List of Services
Terms and Conditions Copy.
FAQ’s

After customer gets his Welcome Kit he can create WORK ORDER as many times
as he wants any services from the list of services. There are two ways to create
work order

Online: Customer can log in on web portal www.cfchannel.in using their

authorized credentials to create the work ticket on the web-portal.
Customer information page ill be displayed after logging into the portal.
Customer will then select the ‘CREATE WT’ tab to generate new work
ticket.
The next page will show up with customer’s details along with the fields
to be filled. Call date and time will be auto generated fetching it from the
PC time. Customer needs to enter the caller name, problem description,
comments (if any), choose the category if it’s a repair work or
maintenance work, select the priority if it emergency or non-emergency,
select the nature of work and click next.
WORK TICKET number will be auto generated.
When clicked ‘Next’, the appeared page will show the information fed in
the previous page and also show you the past history of relevant ‘Nature
Of Work’ done in last 3 months. You can select the ‘Not Exceeding
Amount’ as per you have budgeted for the work done. And click the
‘Submit WT’ tab to process the request.
On submitting the request the system will lead you to page where you
will get your ‘WORK TICKET NUMBER’ for all further communication of
that particular job.
When the work ticket is generated by default the system will send an
email to all the call center executives and account managers notifying
about the service request.
On receiving the notification email, troubleshooting call is made to the
customer by one of the customer service executives to understand the
problem in detail and if it can be resolved by troubleshooting steps.
If the problem is resolved by troubleshooting tips, CFC CSR will click on
edit button, ‘check’ dispatch avoided box and mention the reason for the
same and close the ticket.
If the problem is not solved by troubleshooting tips, CFC CSR proceed
with the work ticket after discussing the priority and understanding the
problem in detail and design the vendor for the job.
Call consultant will then do the follow up with the technician to make
sure the job is been take care as per the schedule date and time.
Vendor visits site with his authenticated identity as a proof that he is
authorized vendor of CFC.
Vendor will then proceeds with the work.
If ‘Parts in Order’ then vendor intimates the customer and the call
consultant if any chargeable parts are to be ordered. Then the WORK
STATUS of the ticket would go as ‘on hold’ and will be completed only on
the completion of the work. Part to be ordered can be purchased from
CFC provided appliances stores with discount or customers own
preferred store and brand. Once he parts are available customer will
intimate the call consultant about the same. Call consultant will then
follow up with the technician and schedule his visit to complete the work.
On completion of work vendor will have the work ticket paper work filled
by the customer for invoicing and mention all the costs involved in the
work and will also intimate the call consultant to close the
ticket.(Customer will NOT pay anything to the vendor on site.)
Call consultant will change the status of the work ticket and send it for
invoice process.
Accounts department will then raise an Invoice to the customer by noting
on the work ticketing and changing the status as ‘Invoice Processing’ as
well as send someone to the customer along with the status of the
Invoice to collect the payment.
Once the payment is received Accounts department will change the
status of the work ticket as ‘Invoice Paid’.
Calling Toll Free Number: Customer can call Toll Free Number 1800-22-
2329 and place request for work order. Call is received from the
customer care department. Call consultant will verify the identity of the
caller by his/her registration number and verify the details of the
customer available on the screen to make sure he/she is RPC.
After verifying the details call consultant will then precede with asking
and verifying the details of the issues and creating the work tickets. While
creating the work ticket, call consultant gives troubleshooting tips to the
customer if available.
If the issue resolved by troubleshooting WORKTICKET gets voided.
If issue is not resolved, then the call consultant proceeds with the
creation of work ticket and schedules the visit of the technician as per the
customer’s convenience.
Call consultant provides work ticket number to the customer to the
customer for their reference, follow-up and further documentation.
Call consultant provides work tickets number to the customer for their
reference, follow-up and further documentation.
Call consultant make outbound call to the technician of that area to
intimate the work and to make sure he reaches on time.
Vendor visits the site with his authenticated identity as a proof that he is
authorized vendor of CFC.
Vendor then proceeds with the work.
If ‘Parts in Order’ then vendor intimates the customer and the call
consultant if any chargeable parts are to be ordered. Then the WORK
STATUS of the ticket would go as ‘on hold’ and will be completed only on
the completion of the work. Part to be ordered can be purchased from
CFC provided appliances stores with discount or customers own
preferred store and brand. Once he parts are available customer will
intimate the call consultant about the same. Call consultant will then
follow up with the technician and schedule his visit to complete the work.
On completion of work vendor will have the work ticket paper work filled
by the customer for invoicing and mention all the costs involved in the
work and will also intimate the call consultant to close the
ticket.(Customer will NOT pay anything to the vendor on site.)
Call consultant will change the status of the work ticket and send it for
invoice process.
Accounts department will then raise an Invoice to the customer by noting
on the work ticketing and changing the status as ‘Invoice Processing’ as
well as send someone to the customer along with the status of the
Invoice to collect the payment.
Once the payment is received Accounts department will change the
status of the work ticket as ‘Invoice Paid’.
SEARCH WORK TICKETS: On the portal customer can search the work
ticket by selecting the option ‘SEARCH WT’ tabs.
The displayed page gives three options by which customer can search
their desired work ticket.
 Ticket Number
 Invoice Number
 Nature of Business

Search by ‘Ticket Number’: If customer already has the ticket number and
want to view the particular service request, then enters the available
work tickets number in the field and press ‘find’. The desired work tickets
will appear and you can view, edit or add notes as per the status
permissions.

Search by ‘Invoice Number’ once the work is completed, the accounts

department changes the status of the work ticket to ‘Invoicing’. If you
already have the invoice number customer can directly enter the same in
the fields and press ‘Find’ button. Depending on the status of the Invoice
the permissions are set to view, edit and add notes on the invoice work
ticket.

Search by ‘Nature of Business’: If you wish the view the entire service
request by its category of work for the reference you can select the
nature of business from the options and press ‘Find’ button. All the
services request open till Invoice Paid will be available to customer.

INVOICE HISTORY: There are three ways to search the Invoices.

 Process Invoice
 View Approved and Paid Invoices
 Nature Of business
Process Invoice: There are various options given to modify your search in
this category. You can check the invoices based on their level of category,
priority, WT number, Invoice Status, Date Range, and Invoice Amount.
Customer can search and with combinations as well.
After filtering customer can search the report.
Complete list of invoiced work orders will populate which best fits your
search criteria. Customer can also download the result on the excel sheet
or pdf.
View Approve and Paid Invoices: Customer can simply click on the view
and approved tab to see those invoices, he can also download it as per
his requirement.
Nature Of Business: Selecting particular nature of business from drop
down list customer can view the Invoice work ticket.
PROCESSES FLOW-CHART
VENDOR MANAGEMENT
It is just as important to communicate with your suppliers and vendors as it is to
communicate with your customers. Establishing the proper communication
channels and information flows between you and your suppliers can lead to
increased efficiencies, reduced costs and better customer service. This section
will cover the simple communication methods (i.e. telephone) and other ideas
that will allow your company to build a win-win relationship with your suppliers
and vendors.

Strategies to Strengthen Vendor Relations

Vendor management allows you to build a relationship with your suppliers and
service providers that will strengthen both businesses. Vendor management is
not negotiating the lowest price possible. Vendor management is constantly
working with your vendors to come to agreements that will mutually benefit
both companies.

Share Information and Priorities The most important success factor of vendor
management is to share information and priorities with your vendors. That does
not mean that you throw open the accounting books and give them user IDs and
passwords to your systems. Appropriate vendor management practices provide
only the necessary information at the right time that will allow a vendor to
better service your needs. This may include limited forecast information, new
product launches, changes in design and expansion or relocation changes, just to
name a few.
Balance Commitment and Competition One of the goals in vendor management
is to gain the commitment of your vendors to assist and support the operations
of your business. On-the-other-hand, the vendor is expecting a certain level of
commitment from you. This does not mean that you should blindly accept the
prices they provide. Always get competitive bids.

Allow Key Vendors to Help You Strategize If a vendor supplies a key part or
service to your operation, invite that vendor to strategic meetings that involve
the product they work with. Remember, you brought in the vendor because they
could make the product or service better and/or cheaper than you could. They
are the experts in that area and you can tap into that expertise in order to give
you a competitive advantage.

Build Partnerships For The Long Term Vendor management seeks long term
relationships over short term gains and marginal cost savings. Constantly
changing vendors in order to save a penny here or there will cost more money in
the long run and will impact quality. Other benefits of a long term relationship
include trust, preferential treatment and access to insider or expert knowledge.

Seek to Understand Your Vendor's Business Too Remember, your vendor is in

business to make money too. If you are constantly leaning on them to cut costs,
either quality will suffer or they will go out of business. Part of vendor
management is to contribute knowledge or resources that may help the vendor
better serve you. Asking questions of your vendors will help you understand
their side of the business and build a better relationship between the two of you.

Negotiate to a Win-Win Agreement Good vendor management dictates that

negotiations are completed in good faith. Look for negotiation points that can
help both sides accomplish their goals. A strong-arm negotiation tactic will only
work for so long before one party walks away from the deal.

Come Together on Value Vendor management is more than getting the lowest
price. Most often the lowest price also brings the lowest quality. Vendor
management will focus quality for the money that is paid. In other words: value!
You should be willing to pay more in order to receive better quality. If the vendor
is serious about the quality they deliver, they won't have a problem specifying
the quality details in the contract.
The Successful Vendor Selection Process
The vendor selection process can be a very complicated and emotional
undertaking if you don't know how to approach it from the very start. Here are
five steps to help you select the right vendor for your business. This guide will
show you how to analyze your business requirements, search for prospective
vendors, lead the team in selecting the winning vendor and provide you with
insight on contract negotiations and avoiding negotiation mistakes.
Analyze the Business Requirements Before you begin to gather data or perform
interviews, assemble a team of people who have a vested interest in this
particular vendor selection process. The first task that the vendor selection team
needs accomplish is to define, in writing, the product, material or service that
you are searching for a vendor. Next define the technical and business
requirements. Also, define the vendor requirements. Finally, publish your
document to the areas relevant to this vendor selection process and seek their
input. Have the team analyze the comments and create a final document. In
summary:

1. Assemble an Evaluation Team

2. Define the Product, Material or Service
3. Define the Technical and Business Requirements
4. Define the Vendor Requirements
5. Publish a Requirements Document for Approval

Vendor Search: Now that you have agreement on the business and vendor
requirements, the team now must start to search for possible vendors that will
be able to deliver the material, product or service. The larger the scope of the
vendor selection process the more vendors you should put on the table. Of
course, not all vendors will meet your minimum requirements and the team will
have to decide which vendors you will seek more information from. Next write a
Request for Information (RFI) and send it to the selected vendors. Finally,
evaluate their responses and select a small number of vendors that will make the
"Short List" and move on to the next round.

o Compile a List of Possible Vendors

o Select Vendors to Request More Information From
o Write a Request for Information (RFI)
o Evaluate Responses and Create a "Short List" of Vendors
Request for Proposal (RFP) and Request for Quotation (RFQ) The
business requirements are defined and you have a short list of vendors that you
want to evaluate. It is now time to write a Request for Proposal or Request for
Quotation. Which ever format you decide, your RFP or RFQ should contain the
following sections:

o Submission Details
o Introduction and Executive Summary
o Business Overview & Background
o Detailed Specifications
o Assumptions & Constraints
o Terms and Conditions
o Selection Criteria

Proposal Evaluation and Vendor Selection The main objective of this phase is to
minimize human emotion and political positioning in order to arrive at a decision
that is in the best interest of the company. Be thorough in your investigation,
seek input from all stakeholders and use the following methodology to lead the
team to a unified vendor selection decision:

o Preliminary Review of All Vendor Proposals

o Record Business Requirements and Vendor Requirements
o Assign Importance Value for Each Requirement
o Assign a Performance Value for Each Requirement
o Calculate a Total Performance Score
o Select a the Winning Vendor

Contract Negotiation Strategies The final stage in the vendor selection process is
developing a contract negotiation strategy. Remember, you want to "partner"
with your vendor and not "take them to the cleaners." Review your objectives
for your contract negotiation and plan for the negotiations be covering the
following items:

o List Rank Your Priorities Along With Alternatives

o Know the Difference Between What You Need and What You
Want
o Know Your Bottom Line So You Know When to Walk Away
o Define Any Time Constraints and Benchmarks
o Confidentiality, non-compete, dispute resolution, changes in
requirements
o Do the Same for Your Vendor
Contract Negotiation Strategies
The final stage in the vendor selection process is developing a contract negotiation
strategy. The worst contract negotiation objective is to bleed every last cent out of the
vendor for the lowest price. Remember, you want to "partner" with your vendor so that
both of you will meet your corporate goals and objectives by signing the contract.
Successful contract negotiation means that both sides look for positives that benefit
both parties in every area while achieving a fair and equitable deal. A signed contract
that benefits both parties will provide a firm foundation to build a long lasting
relationship with your vendor.

Objectives of Contract Negotiations The following contract negotiation

objectives can be use to evaluate the contract on each of the following items:

Explain clearly all essential prerequisites, terms and conditions

Goods or services to be provided are unquestionably defined
Compensation is clearly stated: Total cost, payment schedule,
financing terms
Acknowledgement of: Effective dates, completion/termination dates,
renewal dates
Identify and address potential risks and liabilities
Define and set reasonable expectations for this relationship currently
and into the future

Strategies for Planning Contract Negotiations

List Rank Your Priorities Along With Alternatives As you develop your contract
negotiation strategy, you may keep returning to this area to add additional
items. You will not be able to negotiate effectively all areas of the contract at
once. You want to be sure that what is most important to you is discussed and
agreed upon before you move to less important items. In addition, you may
want to refer to the least important items if you have to give up something to
get your top items.
Know the Difference Between What You Need and What You Want Review your
priorities frequently throughout the contract negotiations planning process and
one final time at the end. Be sure to ask the hard questions: "Is this really a
priority for our company, or is it a 'nice to have'?" "Was this priority a result of
some internal political jockeying, or is it for real?"
Know Your Bottom Line So You Know When to Walk Away is there a cost or
hourly fee that your company cannot exceed? Have you come to realize that one
or two of the top priorities are truly non-negotiable and you will be better to
walk-away from this contract if the vendor does not agree to it? List these along
with the rationale so they are not forgotten.

Define Any Time Constraints and Benchmarks In any substantial project you
will want to set performance measurement standards that you will expect from
your vendor. If these are essential to your business, then you will want negotiate
a fair and equitable penalty when they are not meet. For example: project
completion dates, delivery date for first batch of parts, start date for the service,
lead times, etc.
Assess Potential Liabilities and Risks What is the potential for something to go
wrong? What if unforeseen costs are encountered? Who will be responsible if
government regulations are violated? Whose insurance will cover contract
workers? These are just a few of the more common questions that must be
addressed in any contract.

Confidentiality, non-compete, dispute resolution, changes in requirements

These are other items that could be a potential negotiation stumbling block or
deal closer. For example, if the vendors (or an employee) have the possibility of
being exposed to confidential information, you will want to be sure a
confidentiality clause is put into the contract with the liability assumed by the
vendor.

Do the Same for Your Vendor (i.e. Walk a Mile in Their Shoes) Now that you
have completed the contract negotiations planning process for your business,
repeat the same process as if you were the vendor. What area do you think is
most important for them? What risks or liabilities will they want you to assume?
Your list won't be perfect, but it will succeed in putting you into a frame of mind
to look at things from their perspective. This is how great partnerships between
client and vendors are built.
Preparation

Before the actual contract negotiations begin, make sure the following items are reviewed and
confirmed:

Determine If You Will Need Legal Counsel Negotiating a contract for one year of
janitorial services in a small office is vastly different than negotiating a contract to
outsource a fairly large call center. If you feel the least bit uncomfortable reviewing
contract "legalese", do not hesitate to retain a lawyer specializing in contract
negotiations.

On-Site or Teleconference Agree upon where the negotiation session(s) will take place.
If you think you have the upper-hand by negotiating at the vendor's site, then propose
up front that you will travel to them. If the distance is too far to travel cost effectively,
set up a teleconference to accomplish the negotiation session. Make sure it is a video
conference because body language speaks louder than words.

Make Sure the Person Representing the Vendor Has Authority to Negotiate Before
your people travel to the vendor's site or the vendor travels to your site, make sure the
person/people representing the vendor have the authority to negotiate on behalf of the
vendor's company. It would be a huge waste of time to hear at the end of a long
negation session "Well, let me get back to you after I hear what my boss has to say
about this."
PROBLEMS FACED BY CFC

CFC is offering Annual maintenance Contract to houses in Navi Mumbai. They offer several
range of services from Electrical Equipment to the Janitorial total seven trades with more than
100 services. It is always been challenge that to decide between outsourcing or in-house
vendors.

The cost of services is very high. Other major issue is people currently working and servicing
customer charges according to the financial status of the customer. There are no standards
about the costing of services. These things are hurdle to outsource the operations.

Services like plumbing, painting or electrical the labor rates changes according to the make and
brand of the material. Take an example of flooring if someone wants to make floor of simple
kadappa the labor rates are very low, while if the material to be used is premier brand in the
vitrified tiles then the labor rates are different.

The service rates or labor rates are not only depending on the financial position of customer
and materials used but also depend on the total amount of work and who is providing material.
If customer is providing material then labor rates are little more that if the material is
purchased from vendor. Single point fixing in 4BHK flat is around Rs. 120/- while for 1BHK its
above Rs.150/- per point.

There are many other parameters which change the labor rates. Some vendors charges Rs.20/-
per sFt for wall tiles where as others charges Rs.35/- the difference between two is the quality
of work. Vendors those charge less just scrubs the surface of the wall and then fix the tiles and
this is not the right method to do work.

So finding the right vendor and negotiate on the charges is always a difficulty. Unless we don’t
inspect his work we cannot guarantee the vendor is right to appoint for further work.
SOLUTIONS

Categorized the services in two different types:

Category A: Services that extensively used man force and material

Electrician
Janitorial
Carpenter
Paint

These services need more than 3 people to work at site. These always take more than a
weak to complete the work. Also the material used is very costly and normally the total
cost goes in one lack and above. Frequency occurrence is very low not more than once a
year.

Category B: Services that used less manpower and material

Plumbers
Security
Appliance Repairs

These services need less than 2 people to complete the work. The work normally
finished within a day. The material required is very less and not more than Rs5000/-.

Now ‘category A’ services are less frequency occurrence and utilizes extensive manpower the
best way is to out-source these services. And make long term contract with the vendor.
Negotiating for the lowest rates are possible as we can offer them bulk orders.

‘Category B’ services occur frequently like appliance repairs, Plumbing. Out-sourcing will not be
the good idea as those vendors’ charges high visiting charges. Recruiting in-house vendors for
fixed salary will save the cost of the customer and CFC.
CREATING QUALITY EVALUATION MATRIX FOR VENDORS
After we create two different categories and appoint all vendors its very important now to
evaluate their performance. We will use performance evaluation matrix based on different
criteria and grade all our vendors.

QUALITY EVALUATION started from the day we start interacting vendor. Considering the way he
behaves, his body language and communication skills.

The Evaluation matrix is as follows.

Communication Body Labor Quality Availability Customer

Skill Language Charges Of on time. Satisfaction
Service
A:Weightage 0.08 0.07 0.20 0.25 0.15 0.25
B:Marks Out
Of 100
C=AXB
TOTAL OF
ALL “C”

Quality Matrix is used to evaluate the performance and then to decide whether to continue
with vendor or remove him and find the better vendor.
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http://www.supplychainmanagement.in

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http://www.sap.com/solutions/business-suite/scm/index.epx

http://www.indianmba.com/Faculty_Column/FC461/fc461.html

http://logistics.about.com/

http://www.wisegeek.com/what-is-supply-chain-management.htm