Many organizations use contractors, suppliers and vendors to provide them with essential products and services, which helps them achieve organizational goals. For this arrangement to be successful, it is important for companies to select vendors carefully. Learning how to develop and maintain good relationships with vendors can help you ensure the success of this type of arrangement.
In this article, we define vendor management and provide 16 vendor management tips to help you maintain a company's positive relationship with vendors.
What is vendor management?
Vendor management refers to developing and maintaining relationships between businesses and their suppliers and service providers. It focuses on creating agreements that benefit both parties and aim to develop mutual trust and respect. This allows organizations to fulfill their core missions and remain competitive within their respective industries.
The main goal of vendor management is building, maintaining, and strengthening mutually beneficial supplier relationships that drive company success. This success can have multiple definitions, such as; lowering business costs, increasing output, or driving product innovation.
16 vendor management tips
Here are some tips to help you improve vendor management for a company:
1. Be flexible
It's important to maintain flexibility with vendors and be reasonable with what they ask of you and your expectations for them. For example, be cautious about vendors who ask you to sign restrictive contracts, agree to exclusive relationships or pay high penalties for relatively minor incidents. If a vendor asks you to sign a long-term contract immediately, as a compromise, consider asking them if you can sign a shorter contract with renewal options.
2. Choose vendors carefully
Research and select vendors carefully. You can begin this process by reviewing business requirements to determine what you may need from a vendor, and research prospective vendors based on these qualities. As you review each vendor, consider the company's budget and the benefits the company and the vendor may offer each other. Ask vendor representatives difficult questions to help you identify which may be the best option for an organization. When negotiating a contract, ensure that the vendor compromises and that you reach an agreement that's mutually beneficial.
3. Collaborate to develop a strategy
Include the company's vendors in collaborative processes, especially when developing new strategies. They're experts in their respective products or services, so consider inviting them to participate in strategic meetings that relate to their offerings. The expert insight from vendors may provide you with an alternative perspective that helps make the company more competitive within its industry.
4. Communicate effectively
Consistent and effective communication is essential for successful vendor management. Share information and updates with vendors often. Focus on sharing necessary information that may help them better understand the business for which you work so they can serve it more effectively. Some examples of things you may share limited details about include:
Changes in design
Expansion plans
Forecast information
New product launches
Relocation plans
5. Identify in-house tasks
It's possible an organization may succeed without hiring external services. Evaluate the current staff of the company you work for and their tasks to determine which aspects of the business you may keep in-house. This may help you avoid overspending and identify potential talent gaps and resource limitations.
6. Develop a centralized network
It's important to develop an efficient, well-aligned vendor management process. Aim to centralize all vendor communication and management into one system. This may help you streamline communication effectively and prevent miscommunication and confusion.
7. Establish expectations
Establish clear and realistic expectations for the company's partnership with the vendor, and be sure to explain them in your contract. This helps prevent miscommunication and ensures everyone has the same understanding of the partnership. Some things to establish include:
Communication methods
Decision-making contingencies
Measurement process
Quality standards
Scope of work
Timeframe for deliveries
8. Focus on long-term partnerships
Focus on building long-term partnerships rather than short-term relationships that may provide small, brief gains and cost savings. Long-term partnerships often provide benefits such as access to expertise, preferential treatment and trust. You may also save time by working with the same vendor and receiving high-quality products.
9. Have a backup plan
Be sure to prepare for potential issues with the vendors with whom your employer works. Create plans for contingencies in case of disruptions or issues, such as those caused by natural disasters or mechanical failures. It's important for both you and the vendor to agree on how you will respond to and act in these situations.
10. Monitor performance
Track the performance of the vendor, especially at the beginning of the partnership. It's important to ensure their actions align with what you agreed upon in the contract. Some examples of things you may monitor include:
Call answer times
Order completion
Quality of services performed
Shipping times
11. Negotiate in good faith
Approach your negotiations in good faith. Focus on points that may benefit both companies, and maintain a positive attitude. Participating in aggressive negotiation tactics may create a negative environment and motivate the vendor to pursue other opportunities.
12. Pay on time
It's important to provide timely payments to your employer's vendors. Submit payments by following the schedule and methods established in your contract. This helps reinforce your respect for the vendor and ensure that the company for which you work doesn't accumulate debt.
13. Prioritize value over savings
Focus vendor relationships on connecting with the vendors that provide the highest quality rather than the most opportunities for saving. This may help you receive better products and services. It's also critical to specify your quality expectations in your contract to ensure everyone has similar expectations.
14. Promote commitment
Develop good long-term relationships with vendors. Aim to help them understand the business and commit to its operations and success. Similarly, it's important for the organization you work for to commit to the long-term success of its vendors.
15. Research your options
While it's important to maintain good relationships with vendors, it's also important to ensure you're receiving the products and services required for your employer's organization. Consider seeking or writing competitive bids from other vendors to ensure you're receiving fair pricing. You may be able to use these bids during negotiations with vendors to receive a better pricing package.
16. Understand the vendor's business
It's essential to learn about vendors and understand more about them. Think about their business goals and concerns, and avoid asking too much of them and possibly affecting their stability. Consider supplying them with resources to help them better understand how to serve you and ask for the same from them.
