7 essential steps for successful vendor management
What is Vendor Management and do you need it?
Vendor management is a discipline that lets you control costs, drive service excellence and mitigate risks while gaining increased value from your vendors throughout an agreement’s life cycle. This process can be done in-house or by using a vendor management company with tools and software dedicated to strengthening, tracking and keeping third-party vendor relationships cost-effective.
When looking for ways to achieve vendor management success, here are some pointers:
- Share your goals: Although vendors may not need to know your entire business plan, they do need to know your expectations regarding their involvement in helping you achieve your goals. Through key but limited access, appropriate vendor management practices include providing your vendors with information needed to achieve milestones. Some of these instances may involve new product launches, brand changes and mergers, relocations, limited forecast information, etc.
- Balance Commitment and Competition: The goal of your vendor management process is to secure the commitment of vendors who pledge to assist and support the operations of your business as if it is their own. This also requires a certain level of commitment from you, which necessitates due diligence in reviews of competitive bids, vendor reputations, cost and service comparisons, so you can make an informed choice about who is the best fit for your organization.
- Strategize with Key Vendors Regularly: Certain vendors are critical to the service of your operation (think third-party IT suppliers), host monthly or quarterly meetings focused on a strategic review of the products or services they provide. You partnered with this vendor because they support for business operations your company needs. Use that vendor’s knowledgebase to help you become more efficient and competitive.
- Build Partnerships for the Long Term: Constantly changing vendors to save a penny here and there could cost you more! Vendor management can strengthen the relationships between the parties by helping each other understand various roles and responsibilities.
- Negotiate a Win-Win Agreement: Responsible vendor management requires good faith negotiations. Bully tactics or penny-pinching just don’t work! Stick to your main objectives and don’t partner with any vendor you are not 100% sure can meet your requirements.
- Come Together on Value: More than just securing the best price, vendor management is relationship management. Lower prices can often mean lower quality. Negotiate the value; i.e., the money paid for the quality of the services performed. If a vendor is confident about the quality they deliver, they will not have any problem stating these terms in a contract.
- Vendor Management Best Practices: Best practices apply to any company of any size. Moreover, vendors play a key role in the success of your vendor from the lawn service to the core processor. Build mutually strong relationships to strengthen your company’s overall performance in the marketplace and create a five-star reputation for quality.
Time, money and energy used to nurture the relationships you have with your vendors will result in increased customer satisfaction, reduced costs, higher quality of goods/services, and better employee engagement. The well-managed vendor is quick to remedy any problematic situation and takes ownership over the work they do for your business.