You expect certain things when you have a business relationship with a vendor, such as quality, cost-efficiency, customer service, timeliness, professionalism, and reliability. However, any vendor relationship has the potential to disappoint and negatively affect your business outcomes. Here are a few vendor management tips to create beneficial relationships.
1. Understand how vendor relationships are governed.
Some industries are heavily regulated by state and/or federal governments. For example, companies in consumer reporting must ensure the security and confidentiality of shared information. If you share sensitive data with vendors, understand your company’s responsibility in protecting that data. Know the consequences associated with data breaches under your vendor management.
2. Hammer out the details of your business partnership.
Detail the policies, standards, and procedures that will be followed by your company and vendor management. Will you be able to advertise your business relationship? Will you want to? How long do you plan to maintain the relationship? Do you have an exit strategy? Consider what you can reasonable expect from your vendor, as well as what you may be able to request that adds value.
Describe your expectations in a contract and include any consequences for failing to meet standards. Ask your legal professional or team to go over the contract in detail and make suggestions for improvement. Your vendor may redline pieces or sections of your proposed contract, so make sure you have a plan for negotiating the terms of your relationship.
3. Keep your vendor in the loop.
Effective vendor management will ensure that your vendor has all the information they need to effectively serve your company. This doesn’t mean you have to share company secrets, but your vendor will be more effective if they can accurately anticipate your needs. Telling your vendor about an anticipated sales bump can mean the difference between success and failure.
If you’re planning a massive expansion or taking on a new client that will significantly impact your vendor needs, for example, make sure your vendor knows how your relationship might change and evolve. If you take them by surprise and demand increased or faster service without forewarning, you’ll likely be disappointed.
4. Measure all the things!
You’ll never know how effective (or ineffective) a vendor is for your particular company without measuring both successes and failures. For example, service vendors should be able to provide consistent processing/turnaround times, inquiry response times, availability, and results. They should also be reliable in their communications with you, especially if there’s a problem.
5. Examine your results.
Were you expecting better? Worse? Do you see any gaps or areas for improvement? If your vendor consistently fails to innovate, deliver, or communicate, take a look at vendor management and determine if improvements can be made. Together, the relationship flow and your vendor’s performance can help you determine whether the business impact is positive or negative.
6. Test again.
All business is a science, now, and finding the best match for your organization is a process. If your business tends to make more sales during a certain time of the year, measurements during that time may be higher or lower than normal. Make sure your measurements and results are consistent with, or close to, what you expect.
New business relationships require adjustment on both sides, and that can be particularly difficult for the vendor. That’s why it’s so important to be explicit in your contract so that, even in the beginning, you won’t be utterly disappointed. Your vendor should strive to meet your expectations from the first contract, and improve as time goes on.
- Measure success and failure.
- Improve or replace.
Vendor management can be overwhelming when you have a lot of vendors, and downright frustrating if you only have a few that aren’t meeting your expectations. Continuous assessment of your relationship and diligent vendor management can help you get the best bang for your bucks. After all, you may write big company checks to your vendors. Make sure you’re getting the returns that justify the cost.