Operations · business glossary
What is Vendor management?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
The ongoing process of selecting, evaluating, and maintaining relationships with external suppliers.
Vendor management explained
Vendor management is selecting, negotiating with, monitoring and building relationships with suppliers.
example
Rating suppliers quarterly on price, quality and on-time delivery, and sharing the scores with them.
why it matters
Good vendors improve quality, reliability and cost; poor ones create hidden problems.
common mistake
Choosing vendors only on lowest price.
Frequently asked questions
What is Vendor management?
The ongoing process of selecting, evaluating, and maintaining relationships with external suppliers. Vendor management is selecting, negotiating with, monitoring and building relationships with suppliers.
Why does Vendor management matter?
Good vendors improve quality, reliability and cost; poor ones create hidden problems.
What is a common mistake with Vendor management?
Choosing vendors only on lowest price.
Related terms
Supply chain
The full sequence of steps and parties involved in getting a product from raw material to the final customer.
Accounts payable
Money you owe suppliers or vendors for goods or services you've already received but not yet paid for.
Outsourcing
Paying an external specialist to handle a function instead of doing it in-house.