8 Tips to Create Strong Vendor Relationships
As a business owner, you know that working with vendors is essential to keeping your company running smoothly. But managing all those vendor relationships can be tricky. Vendor management is about so much more than just getting the lowest price. It’s all in how you act and what kind of company you want to be, ultimately affecting the bottom line. Fortunately, some tried-and-true best practices can help make vendor management a breeze. Here’s what you need to know!
Build long-term vendor relationships.
Building partnerships for the long-term is priority number one. Vendor management will prioritize keeping your business happy and satisfied over cutting costs here or there because it’s not just about saving some money. When you switch vendors too frequently, quality can go down and pricing may eventually go up! You can often rely on a long-term partner in a crunch when a newer relationship or price-driven partner may not be there for you. Plus, businesses that have been loyal to a company already know they can rely on them no matter what happens with economic shifts around them.
Understand your vendor’s business.
Knowing your vendor’s goals and objectives is important for managing them. Understand their structure and how they make money. Know their strengths and weaknesses. Understanding their business helps both parties work with each other better. Additionally, if you start seeing concerning trends, have a conversation with them. If you know their business you won’t be surprised by changes that might impact your business.
Share business plans and priorities.
It’s important to share information with your vendors. That doesn’t mean giving them user IDs and passwords, but it does entail providing some key data points on what will be coming up so they can better serve you as a customer-business relationship progresses. For example, impending product releases or expansion plans might require early notice before these changes are made publicly available via social media channels like Facebook, etc. Additionally, if you plan to cut back on a product or service that will impact them, give them a heads up so they don’t continue to produce their product as if you will need it.
Be committed but remain competitive.
The goal is to find that happy medium where you can get all the commitments from your vendors without feeling like they’re giving away too much. It’s essential for both parties involved in this partnership, customer/vendor and company management alike, to make sure there are competitive bids and to hold firm ground when it comes time for negotiations on prices or other terms. Be transparent if you are comparing options.
Strategize with vendors.
You are not the only one who can make a product or service. If a vendor supplies vital parts to your operation, invite them into strategic meetings with other products they work on so that their expertise is available for everyone’s benefit – yours included! Can they help you produce your product in a better, more cost-effective way? They may be a resource for you to make changes that help both of you move forward.
Negotiate so both sides win.
The art of good vendor management is knowing when to negotiate and how. Look for negotiation points that can help both sides accomplish their goals. A strong-arm tactic will often result in one party walking away from the deal because it’s not worth their time. If you constantly ask for cost cuts, quality may decline, you may lose the relationship, or their business may suffer as a result. Instead, ask questions about their business, goals, and needs and understand their costs. Maybe it’s not simply a lower cost, but a different payment plan or ordering structure. Be open to the discussions about issues on both sides of the relationship.
Agree on Value.
Managing vendor relationships means ensuring that you’re getting what your money deserves. Usually, when vendors offer a lower price for the same quality – it’s because they cut costs anywhere possible to maximize profits without caring too much about how poor these products will be in terms of performance or durability; but this should not happen! As soon as one party knows more specifically where those savings come from (usually by cutting corners somewhere), then everything changes, and buying becomes an informed decision instead of just picking something at random off a shelf thinking “that’ll do.”
Managing your relationships with vendors can be a tricky business. But, by following these simple tips, you can make the process smoother and less stressful for everyone involved. And you will have strong relationships to rely on as you grow your business.