Vendors play a key role in the success of your business. Without proper coordination and mutual understanding between you and the vendors, your business can be negatively affected. A well managed vendor relationship can result in smoother running of your business. It can also lead to reduced operational costs, better quality of service and increased customer satisfaction. Here are some best practices to optimize your vendor relationships.
Best practice: Cast a Wide Net
Any business must carefully select the vendors they are going to deal with. It all begins with floating a RFP (request for proposal) for provision of goods and/or services to multiple vendors. Update a list with the vendors that get back to you and go through each proposal carefully. You may also request financial statements and reports from the vendor to determine whether you will be dealing with a vendor with a solid financial background. You do not want to be caught in a situation where one of your vendors cannot supply or execute a contract you have signed with them for financial reasons. Calling existing customers for each vendor can also be helpful.
Best practice: Scrutinize the contract
Make sure you scrutinize the draft contract between you and the vendor. Overzealous vendors might come up with a contract that is exaggerated or that prohibits you from working with other vendors. Make sure the contract does not bind you or the vendor to terms that are not achievable. For new vendors its helpful to have shorter term contracts with an option of renewing vs. a longer term contract that will tie you down for many years. Let the vendors know that you are willing to work with them but under flexible terms.
Best practice: Monitor the vendor's performance
When you first sign the contract, most vendors will try their best to be as efficient as possible. They will execute the contact perfectly and efficiently. But that does not mean they will continue to perform well over a longer period of time. You need to consistently monitor their work and point out issues or any kind of inefficiency that might come up. That way they will know that you are monitoring their performance.
Best Practice: Be flexible
You should also be flexible with your vendors. If there are areas that need to be reviewed for the sake of efficiency, sit down with the vendors and negotiate fresh terms. This way both parties will know that they are in it for the long term and are not interested in squeezing every drop out of the other.
Best practice: Communicate
Communication is very important when it comes to vendor management. You should constantly be in touch with your vendors to ensure there are no issues on either side. Vendors can also have a lot of insight into the overall market. They may know about new technologies that are being developed, the direction the market is taking or may help make introductions to new customers. Issues should also be brought up as early as possible through regularly scheduled meetings to discuss operations.
Best Practice: Meet vendors needs
The same way you expect the vendors to execute the contracts efficiently, you should also strive to meet the vendor’s needs. Make payments as required and provide a user friendly working platform. You must structure the deal between you and the vendor in a way that provides mutual understanding and a win win relationship.