No business can work entirely alone. Whatever market segment you serve, it is unlikely that your establishment can fulfill its mission without at least some assistance. Nearly every business depends on a supplier in one form or another.
Whether you need a partner to source essential components, fill gaps in the knowledge base or provide additional capabilities, vendors are a vital part of your operations. Although the relationship can be efficient and easy when it works, any bumps or glitches could lead to even bigger problems.
Vendor management is similar to any other type of partnership: It requires an honest effort from both sides in order to make it worthwhile and successful. For your vendors, that means living up to their promises. For you, it requires hard work to ensure your partners understand what is being asked of them, and then doing what is necessary to help everyone succeed in the relationship.
However, all partnerships come with obstacles, and your connections with vendors are no exception. Continue on to learn more about the vendor management process, how it operates and what you can do to encourage progress and mutual benefit.
UNDERSTANDING THE PROCESS
There are three basic steps in order to establish positive relationships with your vendors. The first is to identify and prioritize your business goals. When you clearly and fully understand what the organizations wants to achieve, you will have a reliable baseline from which to compare providers who could be best suited to realize those goals. This phase also involves setting explicit, precise metrics to evaluate progress. If suppliers know and understand what success looks like to your company, they will be better equipped to meet or even exceed your expectations.
After you define your organization’s goals, the next essential step is to categorize them based on need. This will help you determine which areas require the most support from third parties and which can be deemed non-essential. You only have so many resources at your disposal, and sinking money and time into a partnership that does not contribute much value is often a bad idea.
Finally, after securing the necessary vendors to meet your company’s goals, the most vital step is to manage your interactions with those suppliers on a consistent basis. Spend some time evaluating how well they have performed — are they fulfilling their contractual obligations? If you see weaknesses of inconsistencies, consider whether your business is hindering or helping their efforts. Then, have an honest discussion with your partner to iron out the kinks.
Following the aforementioned steps can help put your business in a much better position with vendors. When these relationships are properly managed, you may reap benefits such as more leverage for future negotiations, a wider selection of vendors and possibly better rates.
Another benefit is that you can achieve a better understanding of which connections work for your establishment and which do not. When you recognize what you want and/or need from a vendor, it is much easier to pinpoint where they are coming up short and where they are succeeding. Additionally, you can learn from each relationship where you and your business could be more accommodating or forthright with communication.
Carefully managing your vendor base could ease the experience for all parties involved. Do not “set it and forget it.” If you pay close attention, you could avoid potential miscommunication and other sticking points that can ruin the relationships and ultimately hurt the company.
No matter how well you manage your vendor relationships, there are bound to be some bumps along the way. To help reduce the risks they pose to your operations, it is essential for you to identify these issues and prepare appropriate reactions.
For instance, keeping the lines of communication open could prevent a number of problems, including mistakes due to misinterpretation, frustration or a lack of clarity. Be sure to check in with your vendors on a regular basis and confirm that everyone is on the same page. In many cases, simply knowing that there is an open avenue for discussion can put people at ease and keep tensions from developing.
Another common concern that arises when dealing with outside parties is online security breaches. Allowing external access to your network, even occasionally, can open the door to further issues if proper measures are not put in place.
A small number of companies have the luxury of managing all aspects of their business in-house. Working well with your third-party providers, therefore, is absolutely critical in order to get the most value out of the partnership. For more information about the vendor management process and other challenges you may come across, check out the accompanying infographic. It offers a wealth of tips and statistics that can provide you with a solid foundation for your supplier relationships.
Author bio: Matt Brown is Vice President of Sales for American Transport Group, a freight brokerage company in Chicago. Brown has more than 25 years of experience in the transportation industry — in direct sales, sales management and marketing.