Effortless Vendor Relationship Management in 10 Easy Steps
Without your vendors, your business cannot function. You need a steady, reliable supply of quality goods and services. You also need to be certain that your vendors are the best fit for your company. That’s where vendor relationship management comes into play.
Building mutually beneficial, lasting relationships with your vendors takes time, effort, and the right approach.
Done wrong, and it can leave you with an unreliable supply chain that negatively impacts your customers and puts your business at risk. Done right, and you can secure the support you need to overdeliver on customer expectations, remain competitive, and increase your bottom line.
What’s the best approach?
You need to follow these 10 steps to manage your vendor relationships and develop long-term, strategic partners.
1. Select the Right Vendor
You need the right partner to form a strong relationship. Your vendor’s goals should match your company’s goals. They need to charge the best price and be the best fit for your team. Also, ask yourself if your customers will approve of your relationships.
You should also evaluate your vendor’s business. Do they lack transparency? Struggle with communication? Have inefficient processes in place? These are clear signs of vendors you need to avoid as their systems will limit what they can do for your business.
2. Invest in Vendor Management Software
You need the right tools to build the best vendor relationships. Vendor management software allows you to streamline communication with all your vendors. You can easily store their data, track their performance, and pay their invoices on time. Even better, you can provide a self-servicing portal to make it easy for vendors to manage their relationships with you.
While there are many vendor relationship management solutions, they're not always the best (or most affordable option for your business). For those organizations looking to stay lean, leveraging low code to build these vendor portals is a better alternative.
3. Establish Clear Expectations
Without clearly established expectations, your vendor will be forced to assume what you need. This can lead to problems quickly. Instead, build out your expectations clearly in your vendor contract. That way, you have a reference point in case you have any issues with vendor performance.
4. Communicate Challenges Quickly
It’s important to have open lines of communication with your vendors, especially when problems arise. If your team notices an issue with a vendor, it should be discussed quickly. That way the issue can be resolved and the relationship remains strong.
5. Focus on Collaboration
Problems happen even in the strongest vendor relationships. Some things are simply out of our control. Fight the urge focus on the source of the problem. Instead, collaborate with your vendor to overcome the challenges and find solutions.
Remember: your vendor relationship is mutually beneficial. The adversarial vendor approach of the past will only harm your business.
Any interaction between the vendor and the business should work to benefit both parties. When both parties collaborate together, you’ll get better performance and results.
6. Automate Processes
Manual processes ruin productivity, waste money, and put your business at unnecessary risk. Manually processing invoices, for example, means that your vendor will have to wait longer to get paid. That means potentially missing out on vendor discounts. (This hurts both parties.) Don’t be the bottleneck. Identify slowdowns in your processes and automate them.
7. Reevaluate Relationships
There are a lot of reasons your vendor relationship can change. Businesses are constantly growing and changing. As you grow, you need a vendor that can scale with your company. You also want to make sure you’re getting the best deal out there. But also, some relationships simply deteriorate over time.
Whatever the reason, you need to revisit your vendor relationships regularly. Your goals and values should be in alignment. Their performance should increase over time. And their rates should remain competitive. By reevaluating your vendor relationships, you ensure they’re your best long-term partner.
8. Share Your Roadmap
Keep your vendor informed on the direction your business is heading. Sit down with them and share a brief overview of your roadmap. This way, they’ll be on the same page. If you have any major changes in your future needs, see if the vendor can fulfill them. Or, see if you’ll need to adjust your roadmap to avoid any delays.
9. Support Your Vendors
There are plenty of ways you can give back to your vendors that aren’t financially based. Refer business to them. Offer to share a testimonial. Act as a reference for their future prospects. Leave reviews. Look for ways you can support business growth for your vendors and they’ll readily repay the favor.
10. Diversify Vendors
Don’t keep all your eggs in one basket. If you rely too heavily on one vendor, you’ll have less room for negotiation when the market shifts. This means they can drive up prices, change the quality of your orders, and deprioritize you.
Instead, you should use a range of vendors and avoid overdependence on any one vendor. This ensures your partnership stays balanced and mutually beneficial.
Benefits of Effective Vendor Relationship Management
Any project your business undertakes will likely require vendors to help complete it. And while you can control a lot of variables within your organization, the moment you need a third party, you expose your business to risk. Slowdowns, missed deadlines, miscommunications, poor performance, defective products, and subpar results: a lot can go wrong when relying on vendors.
Vendor relationship management ensures your business works with vendors that will help them remain competitive. By keeping costs affordable, providing high-quality products, and ensuring customers stay happy, businesses can outperform their competitors.
Building long-term, mutually beneficial relationships with your vendors keep your supply chain strong, so you can keep your customer happy while increasing your bottom line.
What to Avoid in Vendor Relationship Management
Excessively focusing on cost reduction in your vendor relationships can ultimately harm your business.
Cheaper isn’t necessarily better and can cost you more in the long run. Cheaper goods may break down faster. Cheaper service may fall short of your needs.
Instead, vendor relationships need to benefit both parties. Focus on a partner who can provide the goods and services you need at the best prices for your business.
You also want to avoid any situation where there’s a lack of transparency in the relationship. Your supply chain can be a complex network of vendors depending on the size of your business and your needs. The more partners you have, the harder it is to track vendor performance.
Rather than rely on your vendors to improve their communication, it’s better to have a vendor management system in place. A self-service vendor portal works best because it empowers vendors to supply their own data while giving them a platform for clear communication.
Plus, you can easily track vendor data to evaluate pricing, performance, and competitors.
See how we've helped our clients improve their businesses and get insane ROIs by checking out our case studies below.