How to Create the Best Vendor Management Strategy
You likely already work hard to manage relationships with your customers, and hopefully, you give equal attention to your employee relationships as well. Both of these factors are key to long-term growth and success. Unfortunately, there’s another set of relationships that businesses fail to nurture. That the relationship between business and vendors.
The business’s partnership with vendors is one of key importance. Instead of creating mutually beneficial relationships, and developing positive vendor management strategies, these connections are often ignored. Worse, business professionals even treat these relationships as being adversarial. That’s a shame because the business’s partnership with vendors is one of key importance.
The Benefits of Mutually Beneficial Vendor Management Strategies
Before delving into ways to create good vendor management stories, check out some of the benefits of doing so in the first place:
- Improved Efficiency: When vendors and businesses communicate, vendors learn to better understand their needs, even anticipate them.
- Business Practice Accommodation: Better understanding can also help vendors and businesses to identify places where the supply chain can be streamlined. This includes reducing the overall numbers a business must deal with.
- Operational Improvement: Businesses with mutually positive relationships often exchange information and ideas that can lead to improvements in the operational process.
- Cost Savings: Not only can maintain an ongoing vendor relationship be less costly than sourcing new vendors, but most vendors will also work to provide you with the best possible prices if they have a good relationship with your company.
Vendor Management Strategies
Be Loyal, But Not Too Loyal
One of the top goals in the vendor management process is to get your vendors to commit to working towards your best interest. In return, it’s expected that you’ll reciprocate loyalty as well. This approach to a vendor management system helps to guarantee better outcomes for everyone involved. However, that should never cause you to act against your own interests. For example, you should always be open to receiving bids from competitors.
Prioritize Term Over the Quick Buck
While you can gain some short-term financial benefits by switching to and from vendors that allow you to get the most from your purchasing dollars at any given moment, the value of long-term relationships far outweighs that. It can also have negative effects on the quality of the goods you receive. After all, why should a vendor prioritize your procurement needs if you’re just going to ditch them over a few dollars?
There are other benefits to building long-term relationships with vendors. You’re more likely to receive priority treatment, you’ll foster a sense of mutual trust, and vendors will be more likely to commit to your success and longevity. This is a worthwhile approach to take if you opt to maintain a vendor-managed inventory, and really need a supplier that you can count on in the long run.
Make Deals Where Vendors Win as Well
Of course, you want to make deals that benefit your business. However, you simply cannot approach vendor relationships as competition. If you’re constantly trying to come up on top in the deals that your broker and your vendors feel as if they don’t stand to gain anything from their relationship with you, they’ll eventually walk away.
Damon Miller, a managing director at Trust My Paper says, “Understanding that another business needs to make a profit isn’t just common sense. It’s a matter of respect. You have to bring that to every negotiation, or else your long-term strategy is doomed to fail.”
Create a Communication Strategy That Works
Good vendor management software can help with several aspects of vendor relationship management. It can automate processes such as approval routing, expense tracking, and cost allocation. However, the software can never eliminate the need for people to communicate with one another. Good vendor management best practices will always include a solid communication strategy.
It’s imperative that you meet with vendors regularly. This is your chance to share your goals and upcoming plans with them. It’s also their opportunity to share information with you. By staying in communication, both sides can create strategies and draw up agreements that help all involved.
Get to Know Your Vendor’s Business
You want your vendors to get to know your business. This helps them better understand your struggles and your needs over time. In the same way, it can also benefit you to learn more about your vendors and their needs. Develop an understanding of each of your vendors’ business models. Learn how they become profitable and any roadblocks they may be facing at any given time. With this, you’ll have a better understanding of what they can and cannot do for you.
A good vendor management strategy benefits your business in the long run. It also helps your vendors to reach their goals as well. By developing a cooperative relationship, you’ll be able to count on your vendors to act in your best interests.
Marie Fincher is a digital content director at Trust My Paper company with a background in marketing, technology, and business intelligence. She frequently writes about data science, BI, new marketing trends and branding strategies. Marie gradually changed her focus from working in marketing to writing about it.