Vendor Validation

What is Vendor Validation?

Vendor validation is a somewhat complex process of confirming a vendor’s legitimacy and assessing their capabilities. The key function is to ensure third-party providers are financially stable and in good legal standing. The validation process also includes evaluating a supplier’s performance history as assurance that the vendor can meet their contractual obligations and the client’s quality standards. In facilities management, vendor validation is critical for mitigating risk and establishing trust in the vendor’s ability to deliver the proper goods and services in a timely manner.

Key Aspects of Vendor Validation

Understanding your vendor’s capabilities and confidence in their ability to perform is crucial. The process involves a comprehensive review of several critical vendor validation items to help ensure the client can live up to their promises to their customers.

Business Credentials

Any client/vendor relationship begins with knowing the service provider or supplier is legally allowed to deliver their product or service. By confirming business registration, licensure, bonds, and relevant certifications, companies can begin their relationship with some certainty that they’re dealing with a legitimate vendor and are less likely to experience vendor fraud.

Financial Health

A financially stable vendor is more likely to remain in business and provide your business with essential goods and services. By assessing a supplier’s financial statements and credit ratings clients are able to evaluate their financial stability and risk of insolvency.

Operational Capacity

It’s crucial that providers and suppliers are able to promptly meet your company’s needs. Evaluating the vendor’s workforce, technology, facilities, and processes ensures they have the capacity to fulfill contracts and deliver scheduled shipments on time.

Reputation and History

Late delivery or substandard goods can have a significant impact on a company’s own ability to deliver its goods and services to its customers. Researching a potential supplier’s reputation and reviewing their track record with other clients goes a long way in avoiding potential risks and ensuring you’re entering into an ongoing business relationship with the right provider. 

Compliance with Standards

Substandard goods and services can mean potential fines and legal issues for client companies. It’s important to verify that vendors adhere to industry standards, regulatory requirements, and an organization’s quality management specifications. Research into possible past legal cases or regulatory agency action involving a potential vendor can reveal most of the information you need to confirm vendor compliance.

Importance of Vendor Validation in Facilities Management

Though it’s a complex process, vendor validation is crucial to facilities management teams for securing long-term relationships with quality providers. Identifying poor vendor data early and acting accordingly can save significant time and money in the future. Vetting potential suppliers and evaluating current vendors serves many important functions for facilities management efforts, including: 

Quality Assurance

Vendor validation ensures that providers can perform the quality of work that the facility needs. Vendor vetting also helps ensure facilities receive the appropriate materials required to maintain effective operations and deliver quality output for the company’s customers.

Risk Mitigation

Vendor validation is an effective risk-management tool, reducing the chances of engaging with vendors that may not deliver on their promises which may force a company to spend additional resources to correct. This helps avoid the risk of project delays, budget overages, and potential quality or legal issues due to non-compliance with regulatory agencies.

Regulatory Compliance

Preliminary validation and ongoing regular audits help confirm that vendors adhere to regulatory requirements and relevant laws. Compliance is especially important to companies with federal contracts, as well as private and public sector industries that involve environmental efforts, healthcare, and safety.

Consistency 

Vendor validation helps establish a basis for consistent performance by beginning the relationship with clear company expectations and verification of a vendor’s capabilities.

The Vendor Validation Process

Every supplier and service provider is different, and your process may vary based on the type of goods or services offered, your familiarity with existing vendors, and your company’s available resources. Whatever the circumstances, the vendor validation process typically includes the following steps:

Documentation Review 

Collect relevant documents from the vendor, such as certifications, licenses, and insurance verification. Thoroughly review all records and credentials provided to reduce the chance of unwelcome surprises in the future. 

Reference Checking

Contact the vendor’s past and current clients, customers, and others that have interacted with them in the past. More established corporate suppliers should have a diverse pool of references to draw from. Gather feedback on the vendor’s performance, reliability, and quality of the product or service they provide.

Site Visits

Conduct a visit to the vendor’s facilities. If they’re a legitimate entity they should be perfectly fine with a potential client inspecting their operations to verify their claims.

Audits and Assessments

Perform formal audits to evaluate their financial stability and quality management system. Other elements to assess also include sustainability efforts and overall ethical practices. 

Certification Verification

While a documentation review is a good first step in the vendor validation process, it’s vital that you confirm the validity of certifications and accreditations. Validate vendor credentials through the authorizing body.

Challenges in Vendor Validation

Proper validation steps are essential in providing assurances that a vendor can legitimately deliver the desired product or service. However, you may encounter certain obstacles in the validation process that slow down or interrupt your vetting efforts, such as:

Resource Limitations 

Thorough validation can require significant time and expense. 

Information Verification 

Confirming the accuracy and authenticity of vendor-provided information can take a lot of time and requires diligent effort in contacting credentialing bodies and references.

Global Considerations

When dealing with vendors who operate internationally, you may encounter additional complexities related to different legal systems and business practices. It’s vital to ensure the vendor isn’t hampered by limitations that could interfere with your company’s operational efficiency.

Strategies for Effective Vendor Validation

While it can be a lengthy process, facility managers can employ these strategies to effectively and efficiently confirm the viability of potential and current vendors:

• Standardize the process: Develop a uniform checklist and set of procedures to ensure thorough vendor validation and build improved efficiency through familiarity with the process.
• Leverage technology: Many organizations use specialized tools such as vendor management software or a computerized maintenance management software (CMMS) system to streamline vendor data collection and analysis.
• Professional assistance: Engage third-party firms for in-depth financial audits, background checks, and credential verification when necessary.
• Continuous monitoring: Implement a system for ongoing vendor performance tracking and compliance evaluation.

Vendor Validation in Conclusion

Validation is vital to facility management procurement processes, providing a structured approach to evaluating all potential third-party business partners, from third-party preventive maintenance providers to secondary supplier services. Thorough due diligence enables facilities managers and organizational leadership to make informed decisions and reduce procurement risks. 

Vendor relationships can have a tremendous impact on a company’s performance. The goal of vendor validation is to secure partnerships with vendors who can consistently meet the needs of an organization. The vetting process helps ensure productive ongoing relationships with quality vendors and weeds out suppliers that don’t have an acceptable track record.