4 Top Tips to Improve Vendor Relationship Management
Managing suppliers and those crucial relationships is key to ensuring supply chain success. While vendor management involves the overarching system of that relationship, vendor relationship management focuses entirely on the people. Understanding the difference between these two all-important terms is vital to ensuring supply chain operations continue to run smoothly.
In essence, vendor management spans the ins and outs of all vendor relationships, including contract management, workflows, and even the tools or strategies utilized to work with suppliers. Vendor relationship management, on the other hand, refers directly to fostering strong connections with partners while also monitoring compliance and pricing negotiations.
2 Approaches to Managing Vendor Relationships
Managing vendor relationships requires tried and tested strategies to ensure a company can maximize its connections with all suppliers and create an ongoing beneficial relationship that will boost business operations.
There are two main strategies that can be adopted to manage supplier relationships.
This technique allows companies to be hands-off and passive with vendor relationships until attention is required. This means stepping in only when a problem arises or a difficult situation comes up, thus forcing the company to begin managing the vendor relationship in a reactive manner.
As this approach relies on connection and problem solving only when there is an issue to fix, it can be time-consuming and counter-productive.
Alternatively, companies that employ the strategic approach will work hard to foster beneficial relationships with their suppliers before that first vendor agreement is even signed.
This approach has a wealth of benefits, including the ability to generate a competitive advantage in the supplier realm. It further allows a company to be proactive rather than reactive with all suppliers while focusing on building strong relationships in the early stages.
By creating long-term partnerships, businesses can positively impact everything from the supply chain to consumer experience.
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Top 4 Tips to Nurture Strong Vendor Relationships
Vendor relationship management is a game of strategy. There is a variety of best practices available to assist companies in generating strong connections from the beginning to pave the way towards long-lasting, communicative, and highly functional relationships. Explore the 5 top tips below on how to achieve strong vendor relationships.
1. Be In It For the Long Haul
Short and sweet vendor agreements are simply not conducive to good business. Instead, devising a long term relationship can orchestrate a raft of benefits that last well beyond tempting short-term perks such as sign-on discounts.
Looking at a vendors' long-term prospects, such as their expansion capabilities, is also a great strategy as it is a key ingredient to not only finding a vendor that works well in the present but someone with the ability to grow in conjunction with a company's inventory needs.
2. Devise a Contract That Benefits Both Parties
Good relationships are all about an equal exchange, which means creating contracts that benefit vendor and businesses alike. A fair agreement will lay the vital groundwork for a strong relationship in the months and years to come.
Creating and signing a contract that is workable and fair over a long timeframe means minimizing the risk of disputes that could jeopardize the working relationship. A good tactic is to ascertain the suppliers' needs and then agree to a handful of contractual points that won't harm the company - thus showing an ability to listen and compromise.
3. Place Communication At the Core
Meaningful communication beyond a regular working contact is the beating heart of all highly functioning supplier relationships. Putting in the time to organize regular meetings with all vendors that are geared towards gauging the partnership progress will give both parties the opportunity to provide feedback. The groups can discuss what changes or improvements they believe need to be implemented, as well as any issues that need to be ironed out.
These regular meetings will not only give suppliers a chance to feel heard and air any potential problems but also give the company the chance to pounce on any potential issues that could harm the relationship further down the road.
As suppliers possess a wealth of industry knowledge and skill, these meetings can ultimately yield crucial information that can be utilized to great effect by a company that's willing to listen and work with their vendors on a meaningful level.
4. Embrace KPIs
KPIs (key performance indicators) can work wonders when generating strong vendor relationships, as they will deliver ongoing clarity on the partnership while outlining clear expectations to assist in resource management. Be sure to regularly review and communicate those KPIs and welcome any and all objective feedback.
How Digital Procurement Tools Can Solidify Vendor Relationships
Efficient vendor relationship management practices seek to delve well beyond the database to view suppliers as an integral part of the business and collaborate with them as such. This means discussing more than just products and orders, but factoring in everything from vendor onboarding, performance reviews, and risk mitigation.
Traditionally, these extensive supplier relationships were managed manually via paper forms and spreadsheets. But with manual management strategies inviting a host of disruptions and inaccuracies that could lead to late payments and lost opportunities, those all-important vendor relationships were in constant jeopardy of disintegration.
Instead, a range of digital procurement tools is now available to smooth out that supplier management process while delivering accurate insights on all facets of the relationship, including expenses, contract compliance, and overall operational performance.
Additional advantages to incorporating digital procurement tools include far-reaching visibility, easy supplier screening, ability to instantly confirm goods receipt notices and returns, instant access to vendor payment information, and the ability to take quick proactive action against poor supplier performance.
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