6 Vendor Management Best Practices to Start Implementing Now

Vendor management entails all of the activities that an organization will undergo to ensure that they are getting the most out of their suppliers. A major aspect of vendor management is limiting the costs of inventory replenishment by exploring the market for the best and most cost-effective suppliers.

On top of reducing purchasing expenditures, organizations will also want to prioritize the quality of products and services they receive from the chosen suppliers. Businesses should carefully evaluate the products offered and the vendor's reputation before entering into an agreement.

There are various best practices organizations can abide by to reduce the chances of late deliveries, vendor risks, and excessive purchasing costs.

Importance of Effective Vendor Management

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Today, many businesses utilize inventory ordering software to reap the full benefits of effective vendor management practices. Replenishment software will track all payments, purchase orders, and invoices while increasing the visibility of vendor pricing fluctuations. These tools also allow users to easily search for more affordable suppliers by making local vendor catalogs readily available.

There are many reasons why effective vendor management is an important facet of business operations. Maintaining a mutually beneficial relationship with vendors can leave a positive impact on businesses in regards to both profits and efficiency. Other common benefits include-

  • Reduce Supplier Risk
Vendor management through the use of inventory software can give organizations better visibility of their current and potential suppliers. When companies search for new vendors, they can easily view all supplier information, including their prices and catalogs to determine whether it would be a good fit.

  • Track Performance
Tracking and measuring the performance of an organization's vendors is a great way to see if the supplier relationship is financially beneficial. A centralized system will allow companies to see if their needs are being met and can identify areas where improvements need to be made.

  • Minimize Costs
Having healthy and long term relationships with suppliers can allow the company to negotiate better rates and receive discounts, increasing profit margins while minimizing costs.

  • Loyalty
Strengthening relationships with suppliers will build loyalty and trust, and through this stronger bond, it will create better long term efficiency between the two parties.

  • Efficient Administrative Functions
Inventory ordering software provides a centralized hub where all the information about a company's suppliers and contractual agreements can be managed. This can also improve administrative efficiencies as businesses will be in a better position to track paperwork and other important documents.

Vendor Management Best Practices

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The vendor plays a vital role in maintaining customer satisfaction as they have the potential to expedite or delay shipments and provide high or low-quality products. The following are 6 best practices businesses can employ to ensure that they create long-lasting relationships with vendors to positively affect consumer experience.

1. Check-In Regularly

Checking-in regularly with vendors is a great way to show that companies care about the vendor relationship. Setting up meetings that take place weekly, bi-weekly, or even monthly can be a positive way to ensure that there are no communication gaps and all contractual obligations are clear.

2. Meticulously Review Details in Vendor Contracts

In the event that you can't regularly check-in with vendors, it's important for businesses to carefully inspect the details in their vendor contract. The details in these legally binding agreements should outline what's expected of the vendor in terms of delivery dates and quality, as well as any backup plans in the event that things go awry. Ultimately, the details in the contract are the perfect opportunity for businesses to address their needs and ensure the vendor can meet them.

3. Don't Get Distracted by the Up-Sell

At times, businesses may have more ambitious vendors that are willing to go above and beyond what's outlined in the contract. These suppliers may promote another service that can add more value to the agreement and the overall services they provide. However, as tempting as these up-sells can be, companies need to be focused on what their budgets are without getting distracted by additional offers.

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4. Speak with Management

As important as it is to regularly check-in with your vendors, it is also just as important to touch base with the management of the supplier organization. While this communication should be infrequent, 1-2 times a year at best, it is a great opportunity for the vendor and the company to share their feedback on performance. These conversations are meant to help strengthen and improve the relationship.

5. Focus on a Win-Win Relationship

A key aspect of great vendor management is ensuring that both parties win. Certainly from a cost perspective, it's in the company's best interests to secure as low of a price as possible. However, sometimes it is in the company's best interests to not always haggle for the lowest price as paying fair value to the vendor will reassure them that they are valued.

6. Conduct Project Debriefs

In any project that involves vendors, it's always important to take the time at the conclusion of the project and conduct a debrief. This is an incredibly important process to go through because it will help the company learn what went right and what could be improved for the next agreement.