A huge percentage of vendor relationship initiatives with organizations hit rock bottom simply because of the weak foundation of collaboration between the two parties. Not all vendors are the same. Hence, there can’t be a “one size fits all” approach to seamless vendor management. A strategic process involves continuous monitoring and improvement of this relationship to pave the way for smooth supply chain management in the long run.
Vendors and suppliers are often used as interchangeable terminologies in the business domain. Still, the fact is both are two different entities maintaining a defined position in the supply chain network. In contrast, a vendor buys products from manufacturers and distributors to sell them directly to consumers. Hence vendors tend to maintain a good B2B and B2C relationship in the supply chain.
On the other hand, suppliers are individuals or companies that provide foundational materials to manufacturers for building their products. It can be any raw materials, tools, services, etc. They are the first link in the supply chain and mostly have a strong B2B relationship with the organizations; they procure goods by providing them with enhanced quality products and services, thereby giving them a competitive advantage.
In this article, we will focus on the strategic vendor management process (SVM), for this first we need to get a grasp of the steps involved in this entire process:
- Sourcing your vendors: Sorting through the list of best players in the domain can be quite a task. A better way is to curate a list of vendors you feel are appropriate for the job. Request for a proposal document where they have their scorecards well explained in terms of their expertise, the prices they would offer, and their list of to-do’s. Narrow down on the one you find best fits your organization’s goal and objectives.
- Build a comprehensive contract: It is worth it to spend maximum time curating a contract agreement that includes all the guidelines related to the required task. Most importantly, mention of best practices in terms of cybersecurity and other data breach policies must be included to avoid future disputes, reduce potential risks and ensure a trusted partnership.
- Onboarding process: A seamless onboarding requires prior submission of all relevant documents and details in their authentic state, and organizations should also ensure to fetch details accurately for timely payment. If vendors need training on following the cybersecurity norms prevalent in the company related to payment automation and other activities, companies must provide it.
- Performance analysis: Once the vendor is onboarded, keep a keen eye on the initial outcome generated with this new partnership. Evaluating the performance on parameters like customer satisfaction, desired output, timeliness, etc., is crucial to gauge the overall performance. Working towards a predetermined goal, like an agreed metric of KPIs, can be essential for deciding whether organizations should consider renewing the short-term contract or proceeding beyond the trial period.
- Risk mitigation: Always be risk-proof before venturing out into any partnership deal with any vendor you encounter in the future because there has to be a robust risk assessment mechanism in case of any data breach, policy violation, or suspected malware. There should be a regular monitoring activity of performing cybersecurity risk assessment on vendors and their networks to eliminate the possibility of risk events, and it is a necessity not just for the manufacturers but the vendors as well.
Three-pointers to build rock-solid relationships with vendors if you believe in the long-term sustainability of enhanced partnerships:
- Communication is the key: Not being vocal about your expectations and requisitions can be the stepping stone for your business failure. There has to be a two-way communication channel between vendors and manufacturers to ensure clarity and clarity with the pertaining matters.
- Build relationships, not just partnerships: It is of immense importance that you foster a relationship with the vendors so that they feel valued and appreciated because only then do they think of your business as their project. Instead of just disclosing the pre-defined KPIs, let them participate in the strategic vendor management decisions to offer their expertise in related matters. They will also go the extra mile to keep up the trust and provide preferential treatment occasionally.
- Let there be a dual growth: Adapting strong-arm tactics. At the same time, negotiating prices may squeeze down your supplier’s willingness to cut the cost, but eventually, it will be visible in the compromised quality of their services. To offer the prices that work for the growth and profitability of both partners is the key to creating a win-win opportunity on both sides.
Nowadays, leading tools for undertaking vendor management processes are cloud-based procurement software that converts the entire hassle into a smooth and seamless glide. Not only do they perform the management task, but they also provide advanced insights into expense management and basic operational reporting.