Your company needs supplies to remain operational. Even with the best warehousing system, you don’t have infinite storage space and an unlimited acquisition budget to stock up and work on your supply indefinitely. Sooner or later, you’ll need a refill, and working with someone you already know is better. This is how a one-time supplier becomes a strategic vendor.
Now, as an enterprise, you’ll work with multiple vendors. You must learn to establish a relationship with them and leverage it to maximize your enterprise’s value. All of this goes under vendor management. Here’s what you should know about it.
1. Vendor selection
First, you need to pick the right vendors. Sure, there’s nothing wrong with just making a purchase and then discontinuing future collaboration if they don’t fulfill your standards; however, this is generally a step you want to skip. Even a single bad batch can set you behind, and you don’t want to go in blind even the first time.
You need to choose the right vendor based on their reputation and financial stability, as well as the quality of products. This requires quite a bit of research. While comparing review characteristics is logical, you want to do more research. Reach out to some of their other clients and ask for their opinion. If they don’t have prior clients, this doesn’t mean they’re bad or unreliable; however, this might not be the risk you want to take.
Most importantly, you want to look at the price and see how it fits your budget. Let’s be completely honest and admit that this factor determines 90% of these cooperations. Still, when doing so, you have to plan for the long run. What are their capabilities, and if your organization grows, will they be able to keep up?
2. Contract negotiation
Once you’ve selected your vendors, you want to start with the contract negotiations.
Before you even sit at the negotiating table, make sure that you undergo thorough preparation. Gather all the information you need, prepare it in an easily accessible form, and try to write an outline containing some of the most important talking points.
Next, you want to define your requirements clearly. Inquire about pricing, delivery schedules, potential scalability, and customer support. Firmly insist that this be written since your business’s future may depend on it.
Next, ensure that your vendors comply with all the relevant files and documents. Just remember that some of the certificates and documents you require may have an expiry date. With a tool like M-Connect, you can access their current insurance certificates, capability statements, and contract history.
Most importantly, you want to focus on the value instead of just the price. This is important because their reliability, reputation, and long-term partnership potential make more difference than just saving a few dollars immediately.
3. Building relationships
While this is a long-term process that goes naturally when everyone does their job (you pay on time, and they deliver what’s promised), a few things could facilitate the process.
As we’ve mentioned, the most important thing you need to do is pay on time every month. Setting up an AP automation is the simplest way to ensure you never miss a payment. If you have enough money in the account, the payment will be made automatically. Even if you don’t have enough money, you’ll receive a notification soon.
Next, you want to keep an active communication. Establish a desirable communication channel early on; just remember one thing – you don’t want to chat them up for no reason. Just like you, they’re busy. Usually, it’s better to just keep the coms quiet if you have no complaint or special request. They’re a strategic partner, not your buddy, so asking how their day’s going won’t always have the effect that you’re looking for.
4. Monitoring performance
You should never take the performance of your vendors for granted. Namely, just because they have performed well historically doesn’t guarantee that the same will hold true in the future. This may be the case, but it’s not a given.
First, you need to establish some key performance indicators (KPIs). Remember, this is your own internal thing (something they don’t have to agree to). This is not monitoring the contract; it is merely your assessment of whether they meet your standards. Just make sure not to lose sight of what’s fair and realistic.
You should conduct vendor performance meetings regularly and ask for a report. You can also perform a semi-regular audit.
Relationships that we’ve previously mentioned should be taken into consideration, as well. A difficult communication or issue you have difficulty resolving will escalate sooner than you think. Always be proactive about these issues. Speaking of which…
5. Resolving issues
First, you have to be effective at identifying the issue. This is often challenging since people just take any complaint at face value and approach it from this perspective. Just remember that, to ensure successful future collaboration, you can’t just hyper-fixate on who is right, either.
Next, it all depends on active and open communication, an issue we’ve addressed in the relationship-building segment. It’s much easier to resolve issues if you’ve established regular rapport while things are going well.
Approach these matters from the point of everyone’s best interest. Sensible parties are always more focused on the potential outcome than the current conundrum. In other words, you’re trying to solve this labyrinth puzzle easily – by starting from the finish and working your way toward the start.
Most important of all (and this will benefit you on every level and every basis), you need to learn how to listen actively. In other words, encourage open dialog, offer constructive feedback, and make sure that you always actively participate in the conversation.
Wrap up
Developing these skills and learning to handle these five crucial tasks will help you deal with all your business partners, not just your suppliers. In a way, it will also help you develop and nurture a healthier relationship with your customers. After all, in a way, you’re their strategic vendor, and by understanding what things are from the other side, you’ll learn how to provide a better service.
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