Tips for Effective Vendor Management

business owners working on laptop

Vendors allow organizations of different types and sizes to run their businesses efficiently and successfully. Companies will usually outsource requirements and business needs that are outside their core competencies, but are still essential to their operations; depending on the business, this can include anything from IT services and insurance, to office supplies purchasing and catering services.

To get the most out of vendors, you need to have a vendor management process that works well in assessing vendors’ reliability, affordability, and performance. What can you do to optimize this process? Here are some tips.

Establish clear goals and metrics

You should first understand what your company needs from your vendors, and how these qualities drive your success. Do you need large quantities of supplies from a single vendor, or would it be better to get them from different sources?  The former strategy might be more convenient and net your more savings on your supplies budget, while the latter might provide you more specialized features and in-depth functionality. Selecting which to prioritize will be crucial to meeting your company’s overall goals.

Focus on value

Of course, you would not want to squander resources on unworthy vendors. However, you should not aim only for the lowest price. Cheap labor may seem like the economical choice, but it might come with lower quality which could prove detrimental to your business in the long run. The vendors you hire should give you the best value for your investment. They need to have ample experience and knowledge to provide true value-adding services and products.

Keep in mind that you are outsourcing to a vendor who provides a product or service better than you could on your own. Since the vendor you are getting would, ideally, be an expert in their industry, you could also tap into their expertise to gain competitive edge.

Communicate well

supplier talking to business owners

Your vendor should know what you want from them and how you wish to work with them. In any form of communication with vendors, ambiguity should have no place. The partnership with your vendor has to be clearly defined and understood by both parties.

Having a thorough understanding of their business makes it easier to communicate with your vendor. Do not hesitate to ask them questions about what they do and consult with them about related endeavors and past experience.

Select the right tools (and team!)

An effective vendor management system should be consistently evaluating vendors. In your process, you should regularly monitor vendor performance and output, provide feedback, and make sure that contract terms are constantly upheld. When starting your vendor management program, it is best to assemble a reliable and competitive team to evaluate and manage your vendors. There are also software tools designed to help businesses with vendor management, such as Connecteam, Conrep, and ServiceNow vendor management systems.

Building a great, mutually beneficial relationship with your vendors should be one of the goals for your vendor management process. If you keep on changing vendors to save costs, it could impact the consistency of your business performance and cost you even more. Also, having a well-established partnership builds up your reputation, which goes a long way in ensuring your company’s success.