Vendor Management Strategies for Businesses

Vendor management enables you to cultivate positive relationships with your suppliers and service providers, which will benefit both businesses. It’s not about squeezing the vendors for the lowest possible price when it comes to vendor management. Vendor management entails the back-and-forth of a successful partnership for the good of both the supplier and the buyer. With that in mind, let’s take a look at seven vendor management best practices for success.

Communicate Regularly and Frequently

Sharing information and priorities with your vendors is the most important success factor for vendor management. There is no other way to have a firm understanding of a vendors’ outlook on business, their compliance practices in a sector, or their employees’ view of the contract. Establish a routine and schedule for mandatory vendor meetings. Because virtual meetings are now so simple to set up and use, this doesn’t have to be a face-to-face meeting. Both sets of priorities will be understood and respected if regular communication is maintained. The objective of the meetings should be to drive accountability and monitor performance.

Understand Your Vendor’s Business

The vendor you selected is in business to make a profit, just like you are. As a result, if you keep squeezing them to save money, either quality will suffer or they will go out of business. Contributing knowledge or resources that can help the vendor better serve you is an important part of vendor management. Understanding the vendor’s business and profitability model will help you understand their side of the partnership and foster a stronger relationship between the two companies.

Invite Vendors to Collaborate and Strategize

If a vendor provides a critical component or service to your business, invite them to strategic meetings involving the product they work with. Remember, you hired the vendor because they could provide a better product or service at a lower cost than you could. They are experts in that field, and you can benefit from their knowledge to gain a competitive advantage.

Strong teamwork on both sides will result in a more productive workflow and higher overall output. Vendors should hold your company to high standards, so make sure you understand their plans and strategies. Once you’ve worked out the details with your vendor, go over the strategy again and again. If you are all committed to the same goals and are aware of the collaborative resources available, you should be able to make painless changes.

Build Partnerships for the Long Term

Long-term relationships are prioritized by vendor management over short-term gains and cost savings. Changing vendors frequently to save a buck here and there will cost you more money in the long run and have an impact on quality. Trust, preferential treatment, and longer-term shared accountability for the business’s success are all advantages of a long-term relationship. Switching vendors in the middle of a project has a monetary cost, but it also has broader implications for the product lifecycle and the ability to stay on schedule with product launches and updates.

Align on Value With Vendors

In most cases, contract negotiations begin with a focus on pricing. However, as you narrow down your list of potential vendors, you can find new ways to succeed by providing long-term value to your company and paying a fair price for it. Finding a vendor who can strengthen your team and compensate for your weaknesses will make paying a little more worthwhile. If you’re working on a contract with a collaborative product, you should also present value and express it in your pricing. And remember, you get what you pay for; this is something both parties should understand.

Monitor Performance

Building off of the collaborative strategy, focus on performance standards that are regularly monitored by both parties. Performance checks that keep both teams in check. They also act as referrals for new employees or auditing will make life much easier for you and the vendor throughout the contract. Whether you’re a small business working with a large Software as a Service (SaaS) firm or vice versa, it’s critical that both parties are held accountable. It should be easy to see who is keeping their end of the bargain if the goals and milestones along the way are well-defined.

Work towards a Win-Win

Negotiations must be completed in good faith. Look for points of agreement that will help both parties achieve their objectives. A negotiation tactic that strong-arms the other party will only work for so long before one party withdraws. While in the process of collaboration, you should have access to metrics that tell you if you are trending towards long-term success. Make sure to clearly communicate what a victory looks like for you and listen to your vendor’s version of success.